For taxpayers facing criminal tax charges, a Kovel Accountant can be an important part of their defense strategy. Unlike traditional communications between a taxpayer and their attorney, these communications are protected. In other words, the IRS cannot access them.

The Kovel Doctrine applies only in specific circumstances. The key is that the relationship must be between a taxpayer's attorney and the accountant, not between the taxpayer and the accountant.

What is a Kovel Agreement?

A Kovel agreement allows a law firm to hire a CPA or tax accountant to help provide legal advice to its clients on tax-related matters. The client's attorney-client protection is maintained as any communication between the Kovel accountant, law firm, and client remains privileged and confidential.

Attorney-client privilege is a cornerstone of the U.S. legal system. It establishes that whatever information a client shares with their attorney is protected.

This privilege allows clients to share all information, including less-than-flattering details, with their attorney. This, in turn, allows an attorney to prepare the strongest possible defense and avoid any surprises during the process.

Accountants, in comparison, don't have the same protections in place for conversations with clients. The exception is a Kovel Agreement, also referred to as the Kovel Privilege, which extends the attorney-client privilege to third-party professionals, such as accountants.

Attorneys may hire accountants to help provide legal advice to a client. When an attorney is seeking a professional's input in order to provide counsel to their client, the attorney-client privilege kicks in. This is because it's the attorney, not the client-taxpayer, who is seeking advice.

It's essentially a legal sleight of hand.

Accountant → Attorney → Taxpayer = Kovel Agreement likely applies

Accountant → Taxpayer = Kovel Agreement unlikely to apply

When Do Kovel Agreements Not Apply?

The key detail is that the relationship must be between the attorney and the accountant, not between the attorney and the client. This means that the attorney, not the client-taxpayer, hires the accountant. The attorney, in essence, is the accountant's client.

The following can potentially be used to show that the Kovel Agreement doesn't apply:

• A written document, such as an agreement for services, that lists the taxpayer as the accountant's client.
• The taxpayer is paying the accountant.
• Any agreement is between the taxpayer and the accountant, not between the attorney and accountant.

This doesn't mean that a taxpayer can't recommend their current accountant or another accountant with whom they've done business previously to their attorney. It simply means that there needs to be clear documentation establishing that, in this situation, the relevant relationship is between the attorney and the accountant, including that the attorney is paying for the accountant's services.

If you're facing criminal tax charges or want to know more about how a Kovel Accountant could benefit you, call Senior Partner, Tax Controversy Attorney, and former IRS attorney Brandon A. Keim at (602) 200-7399 or contact him online to discuss your options.