The Internal Revenue Service (IRS) has broad statutory authority to investigate and audit taxpayers.[i] In many cases, the IRS attempts to fulfill this statutory authority through seeking communications made between taxpayers and third parties, such as tax return preparers and CPAs. Oftentimes, the IRS is authorized to obtain these communications.
However, there are methods to protect communications made between taxpayers and accountants. One such method is referred to as a Kovel agreement. Under that agreement, the taxpayer engages a tax attorney who, in turn, engages the services of a tax accountant. When done properly, federal courts have recognized that communications amongst these parties are not subject to disclosure under the theory that such communications are protected by the attorney-client privilege.