Streamlined Filing Tax Preparation & Attorney-Client Privilege
Streamlined Filing Tax Preparation & Attorney-Client Privilege: International Tax Law is extremely complicated and Streamlined offshore disclosure submissions are deceptively difficult. The reason why legal representation is crucial in all phases of the tax submission, is because the IRS tax and legal complexities are hopelessly entwined with one another.
For example, the legal complexities of PFIC (Passive Foreign Investment Companies), GILTI (Global Intangible Low-Taxed Income), and Foreign Trust Reporting cannot be easily parsed out from the tax preparation portion of the submission.
Using an outside CPA or relying on Kovel puts the taxpayer at great risk.
US v Abrahams & Tax Return Preparation Privilege
When it comes to tax return preparation in tax/legal matters, the Abrahams case helps explain how the process works, and the limited reach of the IRS in legal issues pertaining to tax preparation.
In Abrahams, the Attorney also handled Tax Preparation for his clients.
“Abrahams is an attorney who prepares income tax returns for his clients, and also represents many of them in disputes with the Internal Revenue Service before the Tax and Claims Courts.
The IRS wanted lots of his documents.
“The summons demanded that Abrahams produce “[a]ll documents relating to the preparation to income tax returns for others for [1978 to 1984],” and included a nonexclusive list of six categories of materials.Abrahams’ protestations at a hearing before the district court exposed two ambiguities in the language of the summons.
First, if “relating to” is read very liberally, the summons covers all the material for Abrahams’ Tax and Claims Court litigation, since these cases “relate to” what was claimed on clients’ tax returns.”
The Attorney Claimed Privilege, and the IRS disagreed.
“Abrahams asserted below that all the information demanded by the IRS was protected against disclosure by the attorney-client privilege.
The government claimed that none of it was.”
Court Held Legal Communications could be protected.
“For its part, the IRS argues that the questionnaires information is automatically unprotected because the clients completed the questionnaires in order to allow Abrahams to prop rare their returns.
We cannot fully accept that contention. Although communications made solely for tax return preparation are not privileged, communications made to acquire legal advice about what to claim on tax returns may be privileged.”
5 Risks to Streamlined Filing with an Outside CPA
Here are some of the common issues we find when a Streamlined Offshore Filing has been referred to an outside Tax or CPA Firm.
Most CPAs and Tax Professionals are not International Tax Specialists
The majority of CPAs and EAs do not specialize in International Tax and instead handle various different areas of tax.
If you find a good accountant that specializes exclusively in this area of tax, their fees are usually comparable with the Attorney, but it does not include the attorney-client privilege.
Legal Complexities of PFIC and Foreign Trust Reporting
PFIC (Passive Foreign Investment Company) and Foreign Trust Reporting is very complicated.
Oftentimes, when a CPA receives a Streamlined Case with these issues, they will immediately refer the case out to a legal specialist team to protect the client.
If your Attorney is doing the opposite, and referring you to a CPA for these types of matters, your privilege and confidentiality is now at risk.
Kovel provides no protection for tax return preparation.
The lack of Attorney-Client Privilege
There is no Attorney-Client Privilege with a CPA for tax preparation matters, whereas information you tell the Attorney in accordance with tax preparation that supports a more complicated tax disclosure (such as a streamlined filing) can be covered under the privilege.
Anything you tell the CPA can be discovered by the IRS.
The Attorney Misrepresented Kovel
Kovel is not statutory law.
It does not cover tax return preparation.
It is limited in scope and can be rejected by the Courts.
The Attorney is not a Board-Certified Tax Specialist with Advanced Tax Credentials
Being Board-Certified is the highest designation a tax lawyer can receive.
Just claiming to be a tax specialist or an attorney “specializes” means nothing.
In fact, even the IRS uses the term “Tax Law Specialist” to designate entry-level, non-substantive tax positions at the Internal Revenue Service.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically Streamlined Filing Compliance.
Contact our firm today for assistance with getting compliant.