IRS us using a new tactic ...
The end of Attorney-Client privelege may be at hand in financial matters. This could have far-reaching implications for dance clubs and dancers since, if this sticks, it would mean that the IRS could simply deem certain businesses as likely to be "abusive" of tax laws, and order their attorneys/CPA's to turn over business records. As the news blurb says, this would then allow the IRS to go after anybody else involved in transactions with that business without beginning individual investigations.
On June 19, 2003, a U.S. District Court judge in Chicago
ordered one of the largest U.S. law firms to disclose to
the Internal Revenue Service the names of about 700 clients who received tax shelter advice from attorneys at the firm.
The IRS has in recent years greatly increased its use of
such 'John Doe' summonses. Beginning in 2000, it employed them when seeking information on thousands of holders of offshore bank account credit cards from American Express, VISA and MasterCard. But the IRS has reportedly never used this highhanded tactic against a law firm.
If the IRS is successful in its demands against Jenkens &
Gilchrist, there will remain almost no confidentiality for
tax attorneys and their clients. A simple statement from
the IRS that it believes a certain tax shelter or other
plan to be 'abusive' will open the files of any client who
may have discussed the plan with a lawyer, let alone
adopted the plan as his own personal or business tax
strategy.
This radical new course of judicial activism is the easy
way out for the IRS. In the past, the agency had to proceed against each taxpayer individually, proving that his or her tax plan was somehow illegal or had been used in an abusive way. Now, if the IRS position is upheld, the agency can simply speculate that certain groups of people are engaging in alleged illegal tax avoidance schemes and grab their lawyers' files.
Re: IRS us using a new tactic ...
Luckily, my accountant is just as.. er.. creative as I am. :-)
Lena
Re: IRS us using a new tactic ...
Wow that's crappy, but I feel somewhat better seeing it was only a DISTRICT court, so that leaves room for appeals and overturn possibilities.
Re: IRS us using a new tactic ...
Quote:
The end of Attorney-Client privelege may be at hand in financial matters. [/i]
I wouldn't worry much about this one. Jenkens is one of those firms that issues so called letter advice that is really generic and not specific to the taxpayers set of facts. Because the IRRs do not require specificty in letter advice, firms like Jenkins can and do reuse the same letter hundreds of times, charging greatly every time they issue it. I'd say no reall privilege is created under these circumstances. The IRS would be better served by having the Treasury amend the IRRs but that takes time and the IRS is cautious about upsetting the tax professionals that practice before it. Also, because a regulatory change can only be prospective, the IRS has to take a different approach to existing problems anyway.
Z