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ACCOUNTANT-CLIENT CONVERSATIONS. Be careful of what you say to your accountant ... if you have something to hide. Suppose that for years you consistently neglected to tell your accountant about a certain source of income. If you now tell the accountant about it, he can be called on by the government to testify against you in court, since accountant - client communications aren't privileged. An attorney can't be compelled to testify against a client who has admitted that he committed a crime. Best advice for someone in this position: Hire an attorney, who can then hire the accountant and include him under his umbrella of privilege.

Note: IRS reform bill would create a legal privilege between accountants and clients.

Source. Ms X, a former IRS agent, who is still well -connected.


DOES YOUR ACCOUNTANT HAVE RIGHT STUFF? Far too many accountants are intimidated by aggressive revenue agents. Some let themselves be pressured into giving damaging information about their clients. Any number of practitioners who hold themselves out as capable of representing clients before the IRS are more nervous about a confrontation than their clients are. Best question to ask you accountant before an audit:

"If I told you that I didn't report all my income, how would you respond to the agent when he/she asks?" The kind of answer you would want your accountant to give is a noncommittal one, such as "Why do you think my client hasn't reported all his or her income?" or "I'll get back to you later with an answer to that question." You don't want an accountant who lies, nor do you want one who would incriminate you by telling the truth.

Source. Ms X, a former IRS agent, who is still well -connected.


TAPE-RECORDED PHONE CALLS. The use of eavesdropping devices, such as tape-recording telephone calls, is quite legal if the IRS is participating in the conversation. The only requirement to legally record a conversation is the consent of one of the parties to the conversation, it's usually the IRS that does the consenting and the approval of IRS higher-ups. A court order is only required in cases where none of the parties to the conversation consent to the eavesdropping.

What this means to you: Listening in to conversations is not uncommon in criminal investigations. If you're a target, assume your telephone calls with the IRS are being recorded by the IRS.

Source. George S. Alberts, former director of the Albany and Brooklyn IRS districts.


BETTER THAN CERTIFIED MAIL. Sending a letter via certified mail, return-receipt requested, provides proof that the letter was received ... but does not verify the envelope's contents. Trap: The recipient can deny having received the information you claim to have sent. Example: The IRS can claim that it never received necessary tax information from you, and charge heavy penalties as a result.

Better than certified mail: Notarized mail. This is how it works. You bring the document you want to send to a notary public. He/she photocopies it, notarizes both the photocopy and the original document and then attaches an affidavit to the copy attesting that it is a true and legal copy of the document mailed. The notary then institutes a jurat's, which the originator signs. The notary public keeps a copy of the document, the jurated copy, and sends the original document certified, return-receipt requested. Notary fees vary by state.

Source. Irene Kelly, notary public and owner, The Branch Office, 3111 S. Valley View Blvd. B106, Las Vegas 89102.


NOT-SO-PRIVATE RETURNS. New rules enable the IRS to hire outside contractors to process tax-return information for it. The new rule states that providing tax return information to the outside companies will not violate taxpayer confidentiality.

Source: Regulation 301.6103(n)-], amended.


IMPACT OF BANKRUPTCY ON DEBTS TO M. Property attached by the IRS, but not yet sold at tax sale, is still legally the taxpayer's property. If he goes bankrupt, it can be taken by the trustee, under the turnover rules of the Bankruptcy Law.

Source. US v. Whiting Pools, S.Ct. No. 82-215.