Tax Whistleblower Blog

Attorney-Client Priviledge Becomes Topic of Discussion by Whistleblower Office

Stephen Whitlock, director of the Office of the Tax Whistleblower Reward Program, discussed the recently enhanced federal tax whistleblower statute at the Taxpayers Against Fraud annual conference in Washington, D.C., on September 10, 2008.  Whitlock examined issues of confidentiality and attorney-client privilege facing attorneys, accountants, and employee insiders who want to blow the whistle on clients and employers engaged in abusive and fraudulent tax shelter activity.  Whitlock spoke along side Judge Peter Panuthos of the U.S. Tax Court. 

Attorney-Client priviledge has been an area of concern for the IRS and practicioners since IRC section 7623 was enacted as law in December 2006.  The issue took center stage after the IRS released Notice 2008-11, wherein the IRS clarified that it will not accept information from an informant who represents the taxpayer in an administrative or litigation matter against the IRS.  Although, the IRS clarified that it will not accept such information, it left open the possibility of accepting information from the taxpayer’s lawyer or accountant who does not represent the taxpayer in an administrative or litigation matter against the IRS.  “The ‘jist’ of IRS Notice 2008-11 is that the IRS will let the courts decide what information should be outside of their grasp, and the IRS will vigorously pursue the matter in court to define their boundaries,” says Tom Pliske, former IRS attorney and principal of www.RewardTax.com.