Legal Duties, Privilege, and Civil Liability

This chapter focuses on the legal exposure that can arise from professional engagements apart from tax-specific penalties. The central question is how duties to clients and third parties are created, limited, breached, and enforced.

In This Chapter

• Common Law Duties Owed to Clients and Third Parties explains the main duty frameworks that govern professional services.
• Privilege, Confidentiality, and Taxpayer Information Protection distinguishes protected communications from broader confidentiality obligations.
• Malpractice Exposure and Engagement Contract Claims shows how civil claims arise from deficient performance or unmet promises.

How to Use This Chapter

• Read this chapter when legal-liability questions are being confused with ethics-only issues.
• Focus on who may sue, what duty exists, and what facts create or limit exposure.
• Return here whenever a REG fact pattern mixes confidentiality, negligence, and client harm in the same scenario.

In this section

• Common Law Duties Owed to Clients and Third Parties
  Negligence, privity, foreseeability, and third-party exposure in CPA work.
• Privilege, Confidentiality, and Taxpayer Information Protection
  Attorney-client privilege, IRC Section 7525, confidentiality duties, and privacy limits.
• Malpractice Exposure and Engagement Contract Claims
  How malpractice and breach-of-contract claims arise in tax engagements and how firms reduce exposure.