By Jason M. Silver, Tax Attorney, Silver Law PLC. Last reviewed September 2026.
If the IRS is auditing you, the person who knows your finances most closely may also be the easiest witness for the government to call: your CPA.
In most cases, your CPA records are not protected. Federal law doesn’t recognize a general accountant client privilege, so the IRS can summon the documents you gave your CPA, your CPA’s workpapers, and your CPA’s testimony. A narrower federal tax practitioner privilege under Section 7525 covers some tax advice, but only in civil matters, and it never covers return preparation.
That gap matters most when a civil exam turns into a criminal referral, because the limited protection you had with your CPA disappears.
No, not a general one. In Couch v. United States (1973), the Supreme Court said “no confidential accountant-client privilege exists under federal law, and no state-created privilege has been recognized in federal cases.”
Confidentiality is your CPA’s duty not to volunteer your information. Privilege is a legal right to refuse to hand information over, even when the government demands it. CPAs owe you the first. Federal tax law mostly doesn’t give you the second.
Not in a federal tax matter. Federal Rule of Evidence 501 says federal common law governs privilege in cases arising under federal law, so state rules don’t control an IRS summons. They can still matter in state tax disputes and state civil cases.
Arizona’s statute says CPAs “shall not be required to divulge, nor shall they voluntarily divulge” client information, but that duty gives way to an IRS summons, a court order, or a grand jury subpoena. The exceptions are tax advice covered by Section 7525 in a civil matter, and accounting work done for your attorney under a Kovel arrangement.
Nearly everything tied to preparing your return: the documents you handed over, your CPA’s workpapers, emails about your return, and often your CPA’s testimony. What stays protected is narrow.
| Record Or Communication | Usually Protected? | Why |
|---|---|---|
| Bank statements, receipts, and invoices you gave your CPA | No | Pre-existing records don’t become privileged by being handed over. |
| Your CPA’s return workpapers | No | Return preparation is accounting work, not legal advice. |
| Emails and texts with your CPA about your return | Usually no | In the Ninth Circuit, mixed messages are judged by their primary purpose. |
| Your CPA’s tax advice during a civil audit | Sometimes | Section 7525 can apply if the advice would be privileged coming from a lawyer. |
| That same advice once the case is criminal | No | Section 7525 applies only in noncriminal matters. |
| Work a Kovel accountant does for your attorney | Often yes | Attorney-client privilege can extend to an accountant helping the lawyer. |
Return preparation isn’t legal advice, even when a lawyer does it. The Ninth Circuit, which covers Arizona, California and Nevada, applies a “primary purpose” test to emails that mix return prep with legal questions: in In re Grand Jury (2022), messages whose main purpose was return preparation weren’t privileged. The Supreme Court took the case and dismissed it in January 2023 without deciding the question, so that rule still governs.
Not by the move itself. Documents you hand to a lawyer are protected only if they would have been privileged in your own hands. What your attorney can protect is new work: legal advice, and analysis an accountant prepares for the attorney under a Kovel arrangement. Handing over the file still helps, because your attorney needs to see exactly what the IRS can see.
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Usually by asking you first, then contacting your CPA with advance notice, and only then by summons. Section 7602 lets the IRS examine records and take testimony, and Section 7603(b) lists “any accountant” as a third-party recordkeeper.
The IRS requests records during an exam on Form 4564, an Information Document Request. Our guide on how to respond to an IRS Form 4564 request covers the request itself. This is the stage to decide what goes through your CPA and what goes through counsel.
Usually not. Section 7602(c) requires the IRS to give you notice, usually a Letter 3164, at least 45 days before it starts contacting third parties like your CPA, for a contact period of no more than one year. The exceptions are contacts you authorized, situations where the IRS believes notice would put collection at risk or invite reprisal, and pending criminal investigations. If you get a Letter 3164, assume your CPA will be contacted and bring in counsel first.
If the IRS summons your CPA, it must notify you within 3 days of service and at least 23 days before your CPA’s production date. You then have 20 days from when notice is given, not when you read it, to petition a federal district court to quash the summons (26 U.S.C 7609). The court usually only requires the IRS to show a legitimate purpose, possible relevance, that it doesn’t already have the records, and that it followed procedure. While your petition is pending, the IRS assessment clock is paused.
We rarely move to quash. Courts typically won’t quash an IRS summons, so the motion is usually a waste of time and money. Those 20 days are better spent reviewing what your CPA is about to hand over, deciding what is actually privileged, and getting your own copy of the file.
CPAs who practice before the IRS must turn over properly requested records as soon as possible. The exception happens only if they believe in good faith that the records are privileged, and preparer confidentiality rules allow disclosure in response to a summons.
Your CPA also faces their own risk: if a position on your return was unreasonable, Section 6694 penalizes the preparer the greater of $1,000 or 50% of the income they earned from the return, and the greater of $5,000 or 75% for willful or reckless conduct. Because a preparer can face separate exposure, counsel should look for a conflict before the preparer starts explaining your return to an examiner.
If you’re the CPA who was served, here’s the order we give: prepare the documents the IRS asked for, tell your client you received the summons, give the client a copy of those documents, and ask whether they object to production. Then find out whether the client has an attorney to coordinate with. We also handle representing CPAs before the Arizona Board of Accountancy.
Section 7525 gives tax advice from a CPA, enrolled agent, or other federally authorized tax practitioner the same protection it would have coming from a lawyer, but only in noncriminal tax matters before the IRS and noncriminal federal court tax cases. Congress added it in 1998.
It has four limits that catch taxpayers:
Once an examiner finds signs of fraud and the case moves toward IRS Criminal Investigation, communications with your CPA that may have been protected during the civil audit become available, and your CPA can be called as a witness.
What decides that turn is usually simpler than people expect.
“It comes down to what information was provided to the CPA, orally and in writing, including documents.”
Jason M. Silver. Tax Attorney, Silver Law PLC, and former IRS Chief Counsel trial attorney.
Under IRM 25.1.2, examiners document indicators of fraud, consult a Fraud Enforcement Advisor, and suspend the civil exam once they find affirmative acts of fraud. Once a Justice Department referral is in effect, Section 7602(d) bars administrative summonses, and grand jury subpoenas take over. Nobody can tell you in advance whether a particular exam will be referred or not.
The riskiest moment is the first week after the audit letter. In that week, before anyone calls a lawyer, taxpayers call the IRS and make admissions, or have their CPA prepare amended returns that increase income or reduce expenses, or simply panic. Each of those creates evidence and a witness at the same time. Read our guide on how to handle a criminal tax investigation and the difference between tax evasion and negligence before that call.
A Kovel agreement is an engagement in which a tax attorney hires an accountant to help the attorney give legal advice, which extends attorney-client privilege to the accountant’s confidential work. It comes from United States v. Kovel (1961), where the court compared the accountant to an interpreter. Because it rests on attorney-client privilege, it doesn’t end when a case turns criminal, which is why it carries so much weight in criminal tax defense.
A valid arrangement shows the accountant is working for the lawyer: a written engagement signed by the attorney before work begins, direction and reporting through the attorney, and a file kept separate from return preparation. Courts look past the paperwork. Where the accountant was already advising the client on their own, the privilege didn’t apply.
We put a Kovel engagement in place when the matter is criminal, or when we suspect it may become criminal. That usually means bringing in an accountant who hasn’t worked on the returns, because the CPA who prepared them already holds unprotected knowledge and can be questioned about that earlier work.
Privilege has to be claimed item by item; the IRS manual tells employees to ask for a privilege log. These moves can cost you protection you had:
Call a tax attorney before your CPA discusses anything beyond routine document requests. Then:
How far back the IRS can go is a separate question. Our guide on the statute of limitations in federal tax cases covers it. If you disagree with where an exam ends up, see what to do if you disagree with the outcome of an IRS audit.
A CPA documents the numbers. A tax attorney gives advice protected by attorney-client privilege, including in criminal matters, can bring an accountant under that privilege through a Kovel arrangement, and can represent you in the U.S. Tax Court. Serious audits often need both. When an exam involves possible fraud, foreign accounts, or large adjustments, start with one of our attorneys.
Most of what your CPA holds is reachable by the IRS, and the protections that exist depend on who you talk to, when, and whether the matter stays civil. Silver Law PLC represents taxpayers in IRS audits, appeals, and criminal tax matters from our Scottsdale office.
Call (480) 429-3360 or contact our office to talk with a tax audit attorney before your CPA answers the next IRS request.
Jason M. Silver is a tax attorney with Silver Law PLC in Scottsdale, Arizona. From 1995 to 1999 he served as a Trial Attorney and Criminal Tax Attorney with the IRS Office of Chief Counsel in Los Angeles. He is a Certified Tax Law Specialist through the Board of Legal Specialization of the State Bar of Arizona, a Fellow of the American College of Tax Counsel, and a former chair of the State Bar of Arizona Tax Section. See the firm’s audit and appeals experience.
This information is general and not legal advice. Every case is different. Talk to a licensed Arizona attorney about your situation.
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Your situation may differ. The general information here may not apply to your specific facts. Talk to an attorney about your circumstances.
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