Magazine article The CPA Journal

Avoiding Unintentional Incrimination

Magazine article The CPA Journal

Avoiding Unintentional Incrimination

Article excerpt

In order for an accountant or attorney (or certain other authorized persons) to represent a taxpayer before the IRS and/or perform certain acts on behalf of the taxpayer, the taxpayer must execute a power of attorney specifically authorizing the representation. Reg. Sec. 601.503 sets forth the information that must be contained in the power of attorney. The IRS has issued Form 2848, which contains all the requisite information. Although the IRS will accept a properly completed power of attorney other than on Form 2848, this form is the power of attorney most often used by tax practitioners. Form 2848 contains pre-printed language pursuant to which the principal (the taxpayer) authorizes the attorney-in-fact (the attorney or accountant) to perform any and all acts that the principal could perform, unless the principal lists on the form the powers to be excluded.

THE PROBLEM: U.S. V. PAPPAS

A Federal district court recently held that incriminating statements made by a taxpayer's attorney and accountant while representing the taxpayer in a civil tax audit pursuant to a power of attorney granted to the attorney and accountant on a Form 2848 were admissible against the taxpayer in a subsequent criminal tax proceeding against the taxpayer [United States v. Pappas, No. 92-24-01 (D.C.N.H. 10/23/92)].

Pappas involved a civil tax audit in connection with which the taxpayers, a husband and wife, signed Form 2848 authorizing their attorney and accountant "to perform any and all acts that the principals can perform" with respect to the tax matter in question. During the audit the attorney and accountant allegedly made inculpatory statements concerning the taxpayers. The IRS attempted to use the statements against the taxpayers in a subsequent criminal prosecution, and the court held that the statements were admissible on the ground that they were made by the attorney and accountant within the scope of their authority. The court also held that the statements were not privileged, because the privilege was deemed waived, and that there was no requirement that Miranda warnings be given.

The court analyzed the case by first noting that statements made by representatives acting pursuant to a power of attorney may be admitted against a criminal defendant, if they are made within the scope of the power [United States v. O'Connor, 433 F.2d 752, 755-56 (1st Cir. 1970), cert. denied, 401 U.S. 911 (1971); United States v. …

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