Can a lawyer give the IRS a former client's closing documents and checks without the client's consent?

Plain-English summary

An attorney represented a client-buyer in an all-cash real estate closing with no mortgage lender; the buyer gave the attorney checks that the attorney deposited into the trust account. The IRS Criminal Investigations Division then asked the attorney for copies of the closing documents and the client's checks. People present at the closing had seen the closing statement, but only the attorney had seen the client's checks. The questions were whether releasing the documents to the IRS would breach confidentiality, and whether the duty extended to all closing documents or only those not seen by third parties.

The committee concluded the attorney may not disclose any documents to the IRS without the client's permission or a court order. Under Rule 1.6, a lawyer may not reveal information relating to the representation unless the client consents after consultation or the disclosure is impliedly authorized to carry out the representation, with narrow further exceptions for prospective criminal acts and the lawyer's own defense, and disclosures allowed or required by final court orders and Rules 2.2, 2.3, 3.3, and 4.1. The committee stressed that the implied-authorization exception is narrow, that confidences must be kept "inviolate," that the ethical duty is broader than the evidentiary privilege, and that it continues after the representation ends. It cited a line of prior opinions (89-03, 90-14, 93-04, 90-09, 94-30, 90-30, 94-11) holding that client information may not be released to auditors, opposing parties in discovery, credit bureaus, and others absent informed consent or a court order.

The committee set out the attorney's options: inform the client of the third-party inquiry and disclose only if the client consents after informed disclosure; if the client refuses, withhold the information and tell the IRS that the attorney in good faith ethically cannot comply without a court order; and if the IRS sues or serves a subpoena, inform the client of the court action and that the attorney may be obligated to reveal the information if required by court order.

Currency note

This opinion was issued in 1998, before the South Carolina Bar's adoption of the 2005 revisions to the Rules of Professional Conduct. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a lawyer give the IRS a client's closing documents on request?

A: The committee concluded no: the attorney may not disclose any documents to the IRS without the client's permission or a court order under Rule 1.6.

Q: Does it matter that some closing documents were seen by others at the closing?

A: The committee did not carve out an exception for documents others saw; it treated all information relating to the representation as confidential and declined to authorize disclosure of any of the documents absent consent or a court order.

Q: What should the lawyer do when a third party demands client documents?

A: The committee advised informing the client of the inquiry, disclosing only with the client's informed consent, otherwise declining and telling the requester a court order is needed, and notifying the client of any subpoena or suit.

Background and rules framework

The opinion interpreted South Carolina RPC 1.6 (confidentiality of information; the narrow implied-authorization and other exceptions, and disclosures required by court order), corresponding to Model Rule 1.6, drawing on a line of prior South Carolina advisory opinions on releasing client information.

Citations and references

Rules of Professional Conduct:

• South Carolina RPC 1.6 / Model Rule 1.6: confidentiality of information relating to the representation.

Other opinions cited:

• S.C. Bar Advisory Opinions 89-03, 90-14, 93-04, 90-09, 94-30, 90-30, 94-11: limits on releasing client information without consent or a court order.

See also

• SC Bar Ethics Op. 98-22: Switching Sides Against a Client
• SC Bar Ethics Op. 00-02: Six-Year Record Retention

Source

• Landing page: https://www.scbar.org/for-lawyers/quicklinks/legal-resources/ethics-advisory-opinions/ethics-advisory-opinion-98-23/

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER’S CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.

Ethics Advisory Opinion 98-23

Attorney represented client in a real estate closing. The client-buyer purchased the property as a cash transaction without a mortgage lender. Client-buyer gave attorney checks which attorney deposited into attorney's trust account.
Subsequently, the IRS Criminal Investigations Division requested attorney provide it with copies of the closing documents and the client's checks. People present at the closing have seen the closing statement, but only the attorney has seen the client's checks.

QUESTIONS:

1. Would releasing the documents to the IRS breach attorney's duty of confidentiality to client?
2. Does attorney's duty of confidentiality extend to all closing documents or only to those not seen by third parties at the closing?

SUMMARY:
Attorney may not disclose any documents to the IRS without client's permission or pursuant to a Court Order.

OPINION:
The confidentiality of attorney-client communications is governed by SCRPC 1.6. An attorney may not "...reveal information relating to representation of a client unless the client consents after consultation, except for disclosures that are impliedly authorized in order to carry out the representation...." Two other exceptions, one dealing with prospective criminal acts and one with defenses on the lawyer's behalf, are enumerated in the rule. The comments to the rule also acknowledge that final court orders and provisions in SCRPC 2.2, 2.3, 3.3, and 4.1 allow, or require, certain disclosures. The comment regarding "disclosures impliedly authorized" is narrowly written. Lawyers must keep "inviolate" client confidences; such is a fundamental part of the relationship. SCRPC 1.6, Comment. The ethical duty of confidentiality is broader than the evidentiary privilege, Robert M. Wilcox, South Carolina Legal Ethics, Section 6 (South Carolina Bar CLE Division 1996), and continues after the representation has concluded. Rule 1.6, comment.

The attorney-client relationship is based upon the fundamental principle that all information communicated in confidence by the client or relating to the representation of a client is confidential. According to this principle, Rule 1.6 (a) provides that a lawyer shall not reveal information of client representation unless: 1) the client consents after onsultation or 2) the client impliedly authorized disclosure so the representation may be carried out. Rule 1.6 (b)(1) and Rule 1.6(b)(2) create exceptions to the general rule by identifying two circumstances which a lawyer may reveal information about his client.

Some of our prior opinions concerning the release of client information may be helpful. In Adv. Op 89-03, the Committee opined that a real estate lawyer who is also an agent for a title insurance company, may not, pursuant to the company's audit, disclose information from its real estate files without the express, informed consent of the client (unless the information was already released to the insurer to obtain the insurance). Other opinions include: a lawyer who is a party to a lawsuit may not, in response to discovery requests, identify former clients or the work done for them, without the informed consent of each client (unless under court order) (Adv. Op. 90-14); a lawyer cannot reveal client confidences to a person holding the client's power of attorney, unless the client is incompetent or consents (Adv. Op. 93-04); preparing legal memoranda for insurance company's agents requires informed consent (Adv. Op. 90-09); a lawyer may not reveal a client's address, if the address was communicated in confidence, absent a court ruling (Adv. Op. 94-30); a lawyer, who discovers that the former client committed a crime during representation, may not disclose that fact without informed consent (Adv. Op. 90-30); a lawyer may not perform a credit check on a client if doing so reveals the person's status as a client; similarly, a lawyer may not report a nonpaying client to a credit bureau and may tell a collection agency only information necessary to the collection of the legal fee (Adv. Op. 94-11).

The attorney has several options in this situation.

1. Attorney should inform the client of the third party inquiry. Attorney may reveal the information if Client gives permission after informed disclosure.

2. If client refuses to grant his consent to disclose the requested information, the attorney must not reveal the information. The attorney may inform IRS that, in good faith, he ethically can not comply with its request without a court order.

3. Should the IRS bring an action against attorney or serve attorney with a subpoena, the attorney should inform client of the Court action and may inform the client that the attorney may be obligated to reveal the information if required by court order.