Cp 25

[snowbird]

I didn't keep notes because I know that any notes I keep can be used against my client.

I am a little confused by this statement. Is it in the context of preparing the tax return or responding to the CP 25 correspondence audit? Documents for preparation of the tax return are not privileged, but documents for representation (as an EA, or CPA) for noncriminal tax matters are privileged. See IRC 7525 If you are the tax preparer and are representing the client on the audit, it is a good reason for keeping separate files.

[erchess]

Notes

Before I went out on my own I worked for two different firms. Both stressed keeping notes of the information from the client to a bare minimum and shredding these along with anything else that demonstrably pertained to the client and was not required to be kept as soon as you were done and before taking your next client. The distinction drawn at both firms was that if I wanted to keep research notes with nothing written on them to say that I had made them while doing research on a particular client, that was marginally acceptable but really any tax theory notes at all beyond highlighting passages in written materials was discouraged. One boss explained that if it was obvious that an entry on a return was wrong it was best for the firm, me, and my client that there be no paperwork and no memories on my part to show whether I had say done any research or gotten particular facts from my client or just where the error had come from. I have always followed that policy but this changes from now on.

Starting now I or my client will write down every material fact a client tells me that is not supported by some document I get to keep a copy of and I am going to get the client's signature that this is all true and represents all they have told me about the facts of their lives. I am going to keep this statement in my files. I am also going to keep notes of any tax theory information I use on a return that does not come either from my memory or my preparation software. In other words if I stop writing the return and look something up I am going to keep a note of where I looked and what I found. I estimate that this will add 20% to the time it takes me to do a typical return so I will have to do some combination of increasing my form fees and doing a time charge for the interview and any research.

After all, if the return is correct there is no harm to anyone in any notes and if the return is incorrect my first priority should be to see that I am not blamed for the mistake unless I did in fact make the mistake without being led into it by misinformation from the client or a mistake in some source I consulted.