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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12683
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I need information on the ownership of client records and workpapers

Customer Question

I need information on the ownership of client records and workpapers from an enrolled agent. Do you know about that?
Submitted: 2 years ago.
Category: Tax
Expert:  Lane replied 2 years ago.
.There are no rules specific to Enrolled Agents, there are rules for FEDERAL practitioners, CPAs, EA's, Attys, Actuaries....Rules exist regarding accountants, generally and exist art both the Federal Level and the sate level. (As you might guess, states vary).First, in terms of case law regarding Priviledge (which DOES come into play as it relates to who owns the records), courts historically have not recognized a common-law accountant-client privilege. (See, for example,Couch v. United States, 409 U.S. 322, 335 (1973); United States v. Arthur Young & Co., 465 U.S. 805 (1984))..BUt with respect to Federally authorized tax practices, CPA, EA, actuaries, the same common law protections of confidentiality that applies to a communication between a taxpayer and their attorney also applies to a communication between a taxpayer and any federally authorized tax practitioner to the extent the communication would be considered a privileged communication if it were between a taxpayer and an attorney. (26 U.S.C. section 7525(a)(1)).By the way, the attorney-client privilege generally is waived if the communications are disclosed to third persons or to employees without the need to know that information. SO, the federal tax practitioner privilege will be waived if the tax advice is shared with third parties or employees without a need for that information..Now, NO state board of accountancy or federal statute deals with the way you've WORDED this (ownership)..Help me unerstand what you mean ... provide some context, if you would..Is a client asking for records?.Is a taxing authority asking for records?.I'll be here
Expert:  Lane replied 2 years ago.
OK, I still don't see you coming here so I'll try to provide some general info based on the common reasons records need to be turned over.
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Speaking of turnover..
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Client turnover is one of the main reasons a client will request the return of records from a CPA. Other possible reasons might include a pending lawsuit, the need to provide financial or tax records to a bank to obtain financing, or even a criminal action (request from legal authorities).
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There are several bodies of standards and law where a practitioner should be aware:
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AICPA Code of Professional Conduct (AICPA Code)
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The regs that govern Practice Before the Internal Revenue Service (31 C.F.R. Part 10).
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State boards, as mentioned above
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And of course, the place where use of the word "ownership" seems to be applied by the practitioner most; the practical consideration of whether a practitioner has to comply with a request BEFORE being PAID for services ALREADY PROVIDED to the client.
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Lets look at Section 10.28(a)
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It generally requires a practitioner to promptly return all "records of the client" necessary for the client to comply with his or her federal tax obligations. Records of the client include:
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All documents or materials, written or electronic, provided to the practitioner or obtained by the practitioner in the course of representing the client, which preexisted the client's retention of the practitioner;
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Materials prepared by the client or a third party (other than an employee or agent of the practitioner) at any time and provided to the practitioner; and
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Any return, claim for refund, schedule, affidavit, appraisal, or any other document prepared by the practitioner, including employees or agents, that was previously provided to the client if the document is necessary for the taxpayer to comply with his or her current federal tax obligations (Circular 230, §10.28(b)).
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Now, here's the part that MAY get to what you're asking...
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"Records of the client" do NOT include any return, claim for refund, schedule, affidavit, appraisal, or any other document prepared BY THE PRATITIONER or FIRM or the PENDNG the client's fulfillment of his or her contractual obligation to pay fees with respect to the document.
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Need to qualify that AGAIN, however, as it relates to a DISPUTE over fees ... state law typically controls:
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A dispute over fees does not generally relieve the practitioner of his or her responsibility to return client records.
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If your state's law law allows the practitioner to retain a client's records in the case of a fee dispute, the practitioner still has to return the records that must be ATTACHED to the taxpayer's return.
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And again, the practitioner must provide the client with access to review and copy additional records of the client that are necessary for the client to comply with his or her federal tax obligations.
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Finally, before releasing client records, the practitioner should consider and discuss with the client any concerns about the possible compromise of confidentiality under Sec. 7525, the Kovel doctrine (296 F.2d 918 (2d Cir. 1961)), or similar issues.
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In addition, if the records are being provided directly to a third party at the client's behest, the practitioner should be certain to comply with Sec. 7216.
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Hope this helps to provide a foundation.
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Again, if you give me more specifics, the context of this request, your state, I can provide a more specific answer.
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Lane
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If this HAS provided enough, I'd appreciate a positive rating, by clicking or touching, the smiles or stars on your screen ...   that's the ONLY WAY I'm credited for the work here.
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Expert:  Lane replied 2 years ago.
Hi,.Did my answer help?.Let me kknow.Lane.
Expert:  Lane replied 2 years ago.
Hi,.Did my answer help?.Let me kknow.Lane.