{"id":338,"date":"2025-05-28T12:11:41","date_gmt":"2025-05-28T12:11:41","guid":{"rendered":"https:\/\/concepcionlaw.iscopedata.com\/?p=338"},"modified":"2026-05-20T08:37:50","modified_gmt":"2026-05-20T08:37:50","slug":"protecting-attorney-client-privilege-in-irs-streamlined-filing-compliance-submissions-the-role-of-kovel-agreements","status":"publish","type":"post","link":"https:\/\/concepcionlaw.iscopedata.com\/es\/protecting-attorney-client-privilege-in-irs-streamlined-filing-compliance-submissions-the-role-of-kovel-agreements\/","title":{"rendered":"Protecting Attorney-Client Privilege in IRS Streamlined Filing Compliance Submissions: The Role of Kovel Agreements"},"content":{"rendered":"

The IRS Streamlined Filing Compliance Procedures (which includes the Streamlined Domestic<\/em> Offshore Procedures and the Streamlined Foreign<\/em> Offshore Procedures) offer a critical path to compliance for taxpayers who failed to report foreign financial assets but whose conduct was non-willful. While these procedures provide relief from certain penalties, the decision to come forward is often accompanied by sensitive discussions about intent, omissions, and timing\u2014issues that could be pivotal if the IRS challenges the non-willfulness assertion. This raises an essential question:\u00a0how do we protect those communications during the disclosure process?<\/p>\n

I.\u00a0Privilege Concerns in Tax Compliance<\/strong><\/h4>\n

Attorney-client privilege exists to protect confidential communications between a client and their attorney when made for the purpose of obtaining legal advice. However, this privilege does\u00a0not extend to accountants\u2014even when they are providing advice on complex tax matters\u2014unless specific structures are put in place.<\/p>\n

This distinction was made clear in\u00a0United States v. Arthur Young & Co.<\/em>, 465 U.S. 805 (1984), where the Supreme Court held that there is no accountant-client privilege under federal law in criminal or civil tax proceedings. The Court emphasized that the public has a right to \u201cevery man\u2019s evidence,\u201d and that accountants serve as \u201cpublic watchdogs,\u201d not confidential advisors.<\/p>\n

In Florida, attorney-client privilege is codified in\u00a0\u00a7 90.502, Florida Statutes, which protects communications made for the purpose of securing legal services. Importantly, this privilege may extend to third parties\u2014such as accountants\u2014when their involvement is necessary to facilitate legal advice. This is where the doctrine established in\u00a0United States v. Kovel<\/em>, 296 F.2d 918 (2d Cir. 1961), becomes crucial.<\/p>\n

II.\u00a0The Kovel Agreement: Bridging Legal and Accounting Expertise<\/strong><\/h4>\n

The\u00a0Kovel<\/em>\u00a0doctrine allows attorneys to extend privilege to non-lawyers, such as accountants, if the non-lawyer is acting as a \u201ctranslator\u201d or facilitator of legal advice. In\u00a0Kovel<\/em>, the Second Circuit held that communications with an accountant working under the direction of an attorney could be protected as part of the attorney-client relationship.<\/p>\n

For this protection to apply:<\/p>\n

    \n
  1. \n

    The accountant must be\u00a0engaged by the attorney, not the client directly.<\/p>\n<\/li>\n

  2. \n

    The accountant\u2019s role must be to\u00a0assist the attorney\u00a0in providing legal advice, not to provide standalone accounting services.<\/p>\n<\/li>\n

  3. \n

    A formal agreement should be in place\u2014often called a\u00a0Kovel letter\u2014outlining the scope of engagement.<\/p>\n<\/li>\n<\/ol>\n

    IRS Chief Counsel has acknowledged the application of privilege in these settings in internal memoranda, but also cautions that the privilege is\u00a0narrowly construed\u00a0and\u00a0does not apply to the preparation of tax returns\u00a0or communications intended for eventual disclosure.<\/p>\n

    III.\u00a0Streamlined Procedures and the Risk of Disclosure<\/strong><\/h4>\n

    The Streamlined Filing Compliance Procedures require the taxpayer to submit amended or delinquent tax returns, FBARs, and a signed\u00a0Certification of Non-Willfulness\u2014a narrative explanation of their conduct. This certification becomes a key document if the IRS later audits the submission or disputes the taxpayer\u2019s good-faith intent.<\/p>\n

    Discussions surrounding how to frame the facts, what to include or omit, and whether the taxpayer qualifies for the streamlined program are all potentially sensitive. If these discussions occur\u00a0outside of the protection of attorney-client privilege\u2014such as directly with an accountant\u2014they may be discoverable.<\/p>\n

    In contrast, if a taxpayer first retains an attorney, and the attorney then brings in an accountant via a\u00a0Kovel agreement, these same communications may be shielded. The attorney oversees the legal analysis, and the accountant supports the legal work with technical calculations, data reconstruction, or return preparation.<\/p>\n

    IV.\u00a0Best Practices for Maintaining Privilege<\/strong><\/h4>\n

    To ensure the protection of privilege in Streamlined or other voluntary disclosures:<\/h4>\n