CPA Exam — REG (Regulation)Ethics, Professional Responsibilities, and Federal Tax ProceduresMedium
A tax practitioner is representing a client before the Internal Revenue Service (IRS) in an examination. During the examination, the IRS agent requests certain documents from the client that the practitioner believes are privileged under attorney-client privilege. What is the practitioner's appropriate course of action?
- AProvide the documents to the IRS agent but mark them as 'privileged' to indicate the practitioner's objection.
- BInform the IRS agent that the requested documents are privileged and refuse to produce them.
- CImmediately provide the documents to the IRS agent to avoid further issues and potential penalties.
- DSeek the client's explicit written consent to waive the privilege and provide the documents.
Show answer & explanationAnswer & explanation
Correct answer: B. Inform the IRS agent that the requested documents are privileged and refuse to produce them.
Under Circular 230, a practitioner has a responsibility to protect client information, including privileged communications. If the practitioner reasonably believes documents are privileged, they should assert that privilege and refuse to produce them, rather than unilaterally waiving it or producing them with a notation.
Why the other options are wrong
- A. Marking documents as 'privileged' while producing them effectively waives the privilege and is not appropriate.
- C. This would be a breach of the practitioner's duty to protect privileged information.
- D. While the client *can* waive privilege, the practitioner's initial duty is to assert it, not to seek waiver to comply with an IRS request.
Circular 230 Privilege Assertion
Under Circular 230, a tax practitioner must assert any recognized privilege, such as attorney-client privilege, on behalf of their client when faced with a demand for privileged information by the IRS.
- Practitioner's duty to protect client's privileged information.
- Applies to recognized privileges (e.g., attorney-client, tax practitioner-client).
- Assertion means refusing to produce documents/information based on privilege.
- Practitioner should not unilaterally waive privilege.
Memory trick: Privilege is sacred, assert it with might!