Can a lawyer file an IRS Form 1099 reporting settlement money disbursed to a client without violating client confidentiality?

Plain-English summary

The inquiry concerned a lawyer's obligations in reporting the disbursement of a client's settlement proceeds to the IRS by filing a Form 1099. The committee stated that it does not give legal advice and did not comment on the accuracy of the lawyer's interpretation of the tax reporting requirements, assuming the lawyer had correctly analyzed the substantive law or would seek appropriate professional advice.

Subject to that caveat, the committee opined that RPC 1.6 does not prohibit the filing of a Form 1099 reflecting money disbursed to clients, unless the client requested that the lawyer keep the client's identity confidential or otherwise communicated that the identity or the settlement terms not be divulged, in which case RPC 1.6 prohibits the filing. The committee directed the lawyer's attention to WSBA Formal Opinion 194 for further guidance, and also to RPC 1.2(d), RPC 8.4(b) and (c), and RLD 1.1, reminding the lawyer that clients must be able to trust their lawyer to give legal advice that does not expose the client to additional liability.

Currency note

This opinion was issued in 2000, before the Washington State Bar Association's adoption of the 2006 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 Treat this page as historical context, not current guidance.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. The opinion also cites RLD 1.1 of the former Rules for Lawyer Discipline, a rule set later superseded by Washington's Rules for Enforcement of Lawyer Conduct (ELC); confirm the current authority before relying on it.

Common questions

Q: Does filing a Form 1099 that names a client violate the duty of confidentiality?

A: The committee concluded that RPC 1.6 does not prohibit filing a Form 1099 reflecting money disbursed to a client, with one exception.

Q: What is the exception?

A: If the client asked the lawyer to keep the client's identity confidential, or otherwise communicated that the identity or the terms of the settlement not be divulged, RPC 1.6 prohibits the filing.

Q: Did the committee decide whether the tax law required the filing?

A: No. The committee said it does not give legal advice and did not comment on the accuracy of the lawyer's interpretation of the tax reporting requirements; it assumed the lawyer had analyzed the substantive law correctly or would seek appropriate advice.

Background and rules framework

The opinion applied Washington RPC 1.6 (confidentiality of information, ABA Model Rule 1.6) to a tax-reporting disclosure, and pointed the lawyer to RPC 1.2(d) (limits on assisting client crime or fraud, ABA Model Rule 1.2(d)) and RPC 8.4(b) and (c) (criminal acts and conduct involving dishonesty, ABA Model Rule 8.4). It also cited WSBA Formal Opinion 194 and RLD 1.1 of the former Rules for Lawyer Discipline.

Citations and references

Rules of Professional Conduct:

• ABA Model Rule 1.6 (confidentiality of information); Washington RPC 1.6
• ABA Model Rule 1.2(d) (assisting client crime or fraud); Washington RPC 1.2(d)
• ABA Model Rule 8.4 (misconduct); Washington RPC 8.4(b), 8.4(c)

Other opinions cited:

• WSBA Formal Opinion 194: directed for further guidance.

See also

• WA Ethics Op. 1334: Client Identity on IRS Form 8300
• WA Ethics Op. 1256: Disclosure to Prevent a Crime
• WSBA Ethics Op. 1236: No Duty to Disclose Perjury

Source

• Landing page: https://ao.wsba.org/print.aspx?ID=1101

Original opinion text

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

Advisory Opinion: 1907
Year Issued: 2000
RPC(s): RPC 1.2(d); 1.6; 8.4(b); 8.4(c); RLD 1.1; Formal Opinion 194
Subject: Reporting disbursement to client of settlement proceeds to IRS on Form 1099

Your inquiry concerns the ethical obligations of a lawyer in reporting the disbursement of settlement proceeds of a client to the IRS by filing IRS Form 1099.

The committee stated that it does not give legal advice and therefore does not offer comment on the accuracy of the lawyer’s interpretation of any tax reporting requirements. It is assumed that the lawyer has either correctly analyzed his substantive legal opinions or will seek the appropriate professional advice regarding the same. Subject to that caveat, the committee opines that RPC 1.6 does not prohibit the filing of Form 1099 reflecting moneys disbursed to clients by the lawyers, unless the client has requested that the lawyer keep the client’s identity confidential or has otherwise communicated to the lawyer that his/her identity or the terms of the settlement not be divulged, in which case the lawyer is prohibited from doing so by RPC 1.6. The lawyer’s attention is directed to WSBA Formal Opinion 194 for further guidance.

The lawyer’s attention is further directed to RPC 1.2(d), 8.4(b) and (c) and RLD 1.1. The lawyer is reminded that clients must be able to trust their lawyer to give legal advice that does not expose the client to additional liability.