Unusual telephone call from IRS

[OtisMozzetti]

our clients enjoy a limited privilege of confidentiality with us. I did hear from a speaker at a conference this past May that the IRS can still make us answer questions about return prep and that only audit defense and tax planning are protected from this disclosure. However it seems prudent in such a situation to make sure that the IRS jumps through every hoop you can make it jump through and at the very least consult a tax lawyer before the meeting and maybe even pay the person to attend the meeting. I mean would you go to a tax adviser who the IRS described as cooperative in talking to a reporter?

We had an audit representation client who got advised that our privilege of confidentiality was limited; so before he disclosed whatever was on his mind he decided to get represented instead by a lawyer. Fast forward a year or so and the IRS auditor comes by with an administrative summons.

I had no issue with the substance of the questions that the auditor had about that representation client, BUT WHAT REALLY BOTHERS ME is that the auditor wrote up "my statement" in the auditor's own words and directed me to sign it. I said "no" that I don't sign statements written in someone else's words.

enrolled agent in California

[dodgedipduck]

You can not give the IRS (or anyone else) any information about a client or former client without either: (1) that client's express permission, or (2) a legally enforceable summons.

I don't believe that is true.

Read Treasury Circular 230, section 10.20

"(1) A practitioner must, on a proper and lawful request by a duly authorized officer or employee of the Internal Revenue Service, promptly submit records or information in any matter before the Internal Revenue Service unless the practitioner believes in good faith and on reasonable grounds that the records or information are privileged."

Nothing about any summons. Nothing about requiring a client's permission.

The only possible exception is "reasonable grounds." If you're going to try to use that skyhook, you'd better have an authoritative citation.

Before you put on your lawyer's hat and try to convince the IRS representative of your rock-solid privilege on legal grounds, consider the 7th Circuit court decision in Frederick, referring to the supposed new "privilege" for tax preparers enacted by IRC section 7525.

"...nothing in the new statute suggests that these nonlawyer practitioners are entitled to privilege when they are doing other than lawyers' work."

According to 230, you need to provide information upon request from the IRS. You can take a stand if you want, but considering the power of the IRS and the fact they'll get a summons anyway, probably not a good idea.

[Jiggers]

My ex-client's 2005 and 2006 returns and related files are history by way of the shredder.

How do you respond to the IRS?

If the IRS was really checking up on the preparer, they can call up any returns prepared by the preparer, not just this one client.

I think that the IRS is after this ex-client for whatever.

[JohnH]

" I mean would you go to a tax adviser who the IRS described as cooperative in talking to a reporter?"

Sorry, I don't understand who you mean by a reporter. I will and do protect my clients as much as I legally can but I wouldn't want to get a reputation with the IRS as being uncooperative to the point of them thinking I am using delay tactics. Do this and one may lose their cooperation when needed.

You know, we have this conversation from time to time on this forum, in all sorts of contexts and from various posters. I still have mixed feelings about the issue. If I had a tax problem, I wonder what I would want the IRS to say to me about my representative (if it were possible for them to give me their honest opinion).
1) "We really dislike dealing with your rep - he/she won't give an inch and holds our feet to the fire. Often wears us down." or
2) "We really like your rep - he/she can be counted on to do things our way. Very cooperative and almost seems like one of us."

[dodgedipduck]

You know, we have this conversation from time to time on this forum, in all sorts of contexts and from various posters. I still have mixed feelings about the issue. If I had a tax problem, I wonder what I would want the IRS to say to me about my representative (if it were possible for them to give me their honest opinion).
1) "We really dislike dealing with your rep - he/she won't give an inch and holds our feet to the fire. Often wears us down." or
2) "We really like your rep - he/she can be counted on to do things our way. Very cooperative and almost seems like one of us."

Or how about...

3) Unfortunately, your tax preparer has been suspended after being found guilty of disreputable conduct by willfully violating section 10.20 of Treasury Circular 230.

[JohnH]

It's a fine line, isn't it?
And IRS is doing everything they possibly can to box us in.
We are already their data entry clerks - the goal seems to be making us their unpaid auditors.

[Bees Knees]

Or how about...

3) Unfortunately, your tax preparer has been suspended after being found guilty of disreputable conduct by willfully violating section 10.20 of Treasury Circular 230.

I agree that we have to cooperate with IRS when they ask for information. However, since we are not attorneys and may not understand our client's legal issues with IRS, it is advisable to notify the client that IRS is going to talk to us about their tax return. We DO NOT have to get our client's permission to talk with IRS about their return, but the client may want to get an attorney and try to squash a third party summons. If we cooperate with IRS without giving the client the chance to do so, our client could file suit against us claiming we harmed him/her in some way.

Bottom line is if we don't know what is going on, we should call an attorney if IRS calls us and wants to talk with us about a client's return without the client's knowledge. In fact, that would be the first thing I ask IRS if they call: "Does my client know you want to talk to me?" If they say no, they don't want my client to know, my very next step would be to call my own attorney.

[joanmcq]

First things first; contact your E&O agency. They should have attorneys on hand that will give you counsel. This is the sort of thing you pay for with E&O.

[Kram BergGold]

Update

Today the Agent came to my door and handed me a summons and left. I guess this resolves most issues.

[Jiggers]

Today the Agent came to my door and handed me a summons and left. I guess this resolves most issues.

Depends. Are they asking for information on your client or on you?

Like I said earlier, those older files have been destroyed.

[Dusty2004]

What was the summons for?

Today the Agent came to my door and handed me a summons and left. I guess this resolves most issues.

What specifically did they ask for?

I could contact my E&O insurance and lawyer for reviewing this.

Dusty

[Kram BergGold]

What they want

In a nutshell they want records in my possesion from 2004 to 2010. I have contacted my E & O company but they have not gotten back to me.

[Dusty2004]

For one client or all clients?

In a nutshell they want records in my possesion from 2004 to 2010. I have contacted my E & O company but they have not gotten back to me.

Were they looking for all your client records or just one? If all that could be some work involved.

Dusty

[Kram BergGold]

Just one

The IRS is clearly investigating the one client and wants those records.

[OtisMozzetti]

We had an audit representation client who got advised that our privilege of confidentiality was limited; so before he disclosed whatever was on his mind he decided to get represented instead by a lawyer. Fast forward a year or so and the IRS auditor comes by with an administrative summons.

I had no issue with the substance of the questions that the auditor had about that representation client, BUT WHAT REALLY BOTHERS ME is that the auditor wrote up "my statement" in the auditor's own words and directed me to sign it. I said "no" that I don't sign statements written in someone else's words.

enrolled agent in California

Any comment? Am I required to put my signature onto a statement written by the auditor in her words, not in my words?