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I'm writing a work of fiction that involves some criminal activity, and I'm having a hard time understanding how that would affect the accountant in this situation. The work is set in the US, in the 1980s.

Bob and some friends decide to go "off the grid" for an extended time (ie several decades). These people intend to form their own private community and withdraw themselves from modern society. There are definitely laws that this would break (see my older question here), from taxes to hunting and fishing to child education and so on. None of these are violent crimes and they aren't trying to hurt anyone, but this is definitely not legal.

To try to prevent their discovery, Bob plans ahead and secures the help of an accountant, Alice. He has a large endowment, and from it Alice draws a stipend and pays Bob's taxes for him. Bob figures if he pays his taxes, no one will ever come looking and see what they're up to. The endowment is sufficient to pay Bob's taxes and Alice's salary indefinitely.

Here's the question. Alice knows that Bob is probably breaking the law even if she's no legal expert. And she's willingly helping him. But her accounting work is all legal. She pays the taxes due in Bob's name legally and faithfully. And she isn't technically helping him hide or break those other laws just by serving as an accountant. Is Alice criminally liable? If so, is her liability any more severe because she is an accountant? Or is her liability no different than an average person who knows what Bob is up to and helps him here and there?

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  • Are Alice and Bob in communication (even sporadically) while he's "off the grid"? Or did he just leave a bunch of money in a bank account and tell her to guesstimate his taxes for the duration? There's no way that Alice would be able to accurately do Bob's taxes without up-to-date information about his life, so I suspect she would have a professional duty to dig a little more.
    – Cadence
    Commented Nov 15 at 5:28
  • @Cadence The instruction could be as thorough as "pay taxes for a person owning X acres in the mountains and having 0 income, renew my hunting and fishing permit each year and put it in the box at this location on the first of the month."
    – Trish
    Commented Nov 15 at 9:35
  • @Trish But as discussed in the linked question, that's not accurate for his taxes - he has to estimate his income based on what he's selling (or trading) to others in his community.
    – Cadence
    Commented Nov 15 at 9:45
  • @Cadence yes they meet once a year or so
    – nuggethead
    Commented Nov 15 at 10:49
  • Also I don't plan to go into specific detail about HOW the taxes are paid
    – nuggethead
    Commented Nov 15 at 10:50

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There are many different taxes involved. An accountant can pay some with no additional input, but not others.

For example, property taxes are based on the property and not the owner and conceivably one may pay them without ever being in contact with the owner.

However income taxes are based on income, and without knowing the income it is going to be impossible to file adequate tax returns and pay the correct amounts. Given your Bob has significant assets in the endowment it is very likely that they generate some income (interest, dividends, rents, royalties). If they set up an entity - they'd be getting some distributions from that entity. The Internal Revenue Code, and the Treasury Circular 230 (31 CFR 10), impose penalties for an accountant and taxpayer filing fraudulent returns.

Note that income can be in terms of barter as well. If Bob hunted a deer but wants milk - Bob gives deer meat to Candice and Candice in return gives Bob a bucket of milk. Bob just sold an asset, gaining the value of the milk minus the expenses of acquiring the deer meat prorated to the portion sold (part of the depreciation of the rifle, ammo). The fact that they live in a community is irrelevant (Bob and Candice being married is relevant though, if they are).

Even Alice's stipend may be an income to Bob. Alice's compensation may or may not be deductible (currently is not, but in 1980's may have been), but that would be under certain conditions as an itemized deduction.

If the question is whether the Bob kills the deer illegally and then appropriately reports the income would create liability for Alice - then it depends on the circumstances. There's no "accountant-client" privilege, but there's also no general requirement to report past crimes. Being the filer and Bob's representative Alice may end up being asked and if asked - will have to provide the information because... no privilege. Unless Alice is an attorney, of course.

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    True, the point is that it is income
    – littleadv
    Commented Nov 15 at 18:04
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    Anyway, I think the premise is that there's nothing false on the tax return. So as long as she reports the income and expense, which cancel each other out, there's no tax problem.
    – Barmar
    Commented Nov 15 at 18:13
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    Some jurisdiction do have an accountant-client privilege (and a related duty of confidentiality), although it is much more limited and has more exceptions than some of the other privileges. An accountant isn't at liberty to blab about your finances to anyone without repercussions. You also imply, but don't spell out, that an accountant will generally have no special duty to disclose non-tax/non-financial crimes (e.g. truancy). Accountants often have a legal duty to disclose money laundering, however, either under money laundering laws or professional ethics rules.
    – ohwilleke
    Commented Nov 15 at 22:09
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    @littleadv Usually privileges and confidentiality duties come in pair, and usually the confidentiality duty is a matter of professional ethics. Lots of jurisdictions do have a narrow accountant-client privilege. See, e.g., Colo. Rev. Statutes § 13-90-107(f). codes.findlaw.com/co/title-13-courts-and-court-procedure/… and en.wikipedia.org/wiki/Accountant%E2%80%93client_privilege
    – ohwilleke
    Commented Nov 15 at 22:50
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    @littleadv In most cases involving money laundering by a client, the accountant is involved as if the accountant prepare tax returns or financial statements without disclosing it. Some jurisdictions (e.g. Spain) specifically require accountants to affirmatively disclose money laundering and financial crimes that the learn of.
    – ohwilleke
    Commented Nov 15 at 22:51

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