The Payroll Manager Who Asked for a Lawyer
A special agent is investigating Ridgeline Construction for employment tax evasion. The company filed Forms 941 reporting $420,000 in federal income tax and FICA withholding for 2022 and 2023 but remitted only $90,000. Linda Park, the office manager, prepared the payroll records and signed many of the checks. She followed the owner's instructions to pay suppliers and lenders before paying the payroll taxes. The agent goes to the office to interview Park. She is not under arrest, the agent has not issued a summons, and no one has told her she cannot leave. When the agent identifies himself, Park says, "Do I need a lawyer? Will I be in trouble?" The agent has a draft affidavit in his case file and knows Park may be a subject of the investigation.
1. Should the agent give Park Miranda warnings before questioning her? How should he respond to her request for a lawyer, and what should he document?
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Miranda applies to custodial interrogation. IRS Criminal Investigation special agents are law enforcement officers, so the warning requirement can apply, but the key question is whether Park is in custody. A noncustodial office interview, where Park is told she is free to leave and is not physically restrained, generally does not require Miranda warnings. The agent should not create a custodial atmosphere by blocking the door, taking her keys, or telling her she must stay. When Park asks about a lawyer, the agent should not mislead her or tell her she is "not in trouble" if she may be a subject. He can explain that she is not under arrest, that she may consult a lawyer, and that the interview can be rescheduled. If she remains and agrees to talk, the agent should obtain a voluntary statement and document her exact words, the time, the setting, and who was present. If she says she wants a lawyer and the agent continues questioning in a way that makes a reasonable person feel unable to leave, custody may be found and statements may be suppressed.
2. Park prepared the payroll records and gave them to the agent voluntarily. Does an accountant-client privilege or tax practitioner privilege protect those records?
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There is no general accountant-client privilege under federal law. IRC 7525 creates a limited tax practitioner privilege for federally authorized tax practitioners, but it applies only in noncriminal tax matters before the IRS and in federal tax litigation, and it does not apply to criminal investigations. Park is an employee and office manager, not an attorney, and the payroll records were prepared in the ordinary course of business. Ordinary business records are not privileged merely because an accountant or bookkeeper prepared them. A limited work-product protection might apply to materials prepared at the direction of an attorney in anticipation of litigation, but the payroll records themselves would likely be discoverable. If the government later compels production of documents from Park, her Fifth Amendment act of production privilege may be analyzed separately, but that does not protect the contents of the records. The agent should not promise confidentiality and should document the voluntary nature of the production.
3. The owner tells the agent that Park was merely following orders and that he alone made the decision not to pay the taxes. How does that affect willfulness and Park's potential liability?
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Willfulness under IRC 7202 requires a voluntary, intentional violation of a known legal duty. Following an employer's orders does not automatically negate willfulness if Park knew the taxes were withheld and were not being paid over. Park prepared the payroll records, knew $420,000 had been withheld, signed checks, and helped choose which creditors to pay first. Those facts suggest knowledge and control. The owner's admission may support Park's defense that she lacked the final decision-making authority, but it does not erase her own conduct. The agent should determine who had the duty to collect and pay over the tax, who had check-signing authority, who decided which bills to pay, and whether Park ever objected or was threatened. The same facts may support a civil trust fund recovery penalty against both the owner and Park, while criminal liability under IRC 7202 is separate and requires proof beyond a reasonable doubt that Park acted willfully. The agent should not treat the owner's statement as exculpatory without testing it against Park's own statements and the payment records.