Is the Tax Adviser Privilege a Trap for the Unwary?


As we approach April 15th many taxpayers will meet with professional tax advisers and some may be under the impression that communications between a taxpayer and a tax adviser are privileged. This assumption is wrong as demonstrated by a case now on appeal from the Ninth Circuit to the U.S. Supreme Court (Edwards v. The United States of America).

In Edwards a taxpayer believed that his communications with his non-attorney tax adviser was a protected communication and that his tax adviser could not be compelled to testify against him. The trial court and the Ninth Circuit Court of Appeals found that the privilege protecting communications was subject to two important limitations which limit the privilege to NON-CRIMINAL matters or proceedings. Is spite of Edward’s objection the trial court and appellate court found that the privilege did not apply and Edward’s tax adviser was called before the grand jury and gave testimony against him based upon communications that Edwards made or provided to the tax adviser. Partly as a result of the tax adviser’s testimony, Edwards was charged criminally as a result of an indictment issued by a federal grand jury. Edwards pled guilty to a single count of a five count indictment and was sentenced to twenty-one months, which was stayed pending his appeal to the United States Supreme Court. In his petition to the Supreme Court Edwards asserts that the government has created a “trap for the unwary” by limiting the non-attorney tax adviser communication privilege to what amount to only non-criminal matters. The odds of the Supreme Court granting a hearing on the case are very slim, so it certainly worth considering the lesson from Edwards.

Please see full article below for more information.

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