Summons Enforcement and Kovel Agreements in IRS Criminal Investigations

The IRS summons is the administrative engine of every criminal tax investigation, so you need to understand how it works before you can understand what follows. Authorized under IRC 7602 and related provisions, the summons lets the government compel production of books, papers, records, and sworn testimony from any person, not only the taxpayer under investigation, and it does so before any criminal referral is made. The summons reaches taxpayers, third-party witnesses, and third-party recordkeepers alike, and the IRS does not need probable cause to get one enforced in court, because the summons exists to inquire, not to accuse. Internal Revenue Manual 25.5.6 builds in procedural rights when a summons goes to a third party: notice to the taxpayer, and a 23-day waiting period before summoned records may be examined, with examination barred until the 24th day after notice. That waiting period is the first real opening a practitioner gets to act. Criminal Investigation special agents use summonses throughout the administrative investigation phase, well before any grand jury is convened, so the summons stage typically comes first and supplies the raw material that a later grand jury or prosecution referral will build on. Because the summons can be served on banks, accountants, and exchanges just as easily as on the taxpayer, the question of who holds privileged information, and who does not, becomes urgent long before any indictment is drafted.

The four-part Powell test that governs whether a court will enforce a summons

Courts do not enforce IRS summonses automatically. United States v. Powell, 379 U.S. 48, 57-58 (1964), set the standard: the government must show that the summons serves a legitimate purpose, that the information sought is relevant to that purpose, that the information is not already in the IRS's possession, and that the administrative steps required to issue the summons have been followed. That four-part test sounds demanding, but the government's actual burden at the outset is light. A good-faith declaration from the issuing agent is usually enough to establish the prima facie case. The real fight then shifts quickly to the summoned party or the taxpayer, who must show abuse of process or a lack of good faith to defeat enforcement. Of the four prongs, the "already in possession" element gets litigated most often, because a summoned party who can show the IRS already has the records in hand has a direct path to narrowing or quashing the summons. The John Doe summons, used against Coinbase, Kraken, and SFOX in cryptocurrency investigations, raises the bar further: it requires advance approval from a federal district court and has to satisfy Powell independently before it ever issues. The Coinbase summons was narrowed by the IRS based on what it learned about user activity directly from Coinbase, not because of any constitutional challenge, and the First Circuit ultimately affirmed enforcement. A federal court in the Northern District of California authorized the Kraken summons in 2021, and it sought customer and transactional data the IRS did not already hold. The U.S. District Court for the Central District of California authorized the SFOX summons, and it covered U.S. taxpayers who conducted at least the equivalent of $20,000 in crypto transactions between 2016 and 2021. Each of these cases shows Powell operating as a real constraint, not a formality, even as it confirms how low the government's starting bar actually is.

What a summoned party's noncompliance costs

Ignoring an IRS summons does not make it go away, and it opens two enforcement tracks at once. The government can pursue civil enforcement under IRC 7604, asking a court to order compliance, and it can also prosecute criminally under IRC 7210 if the summons is not obeyed. IRM 25.5.10 provides that any summons issued as part of a criminal investigation that goes unanswered for six workdays past the compliance date, where enforcement action is warranted, must be referred to Criminal Tax Counsel to begin enforcement proceedings. There's no extension once that six-day period runs. Filing a petition to quash a third-party summons suspends the statute of limitations on both assessment and criminal prosecution for as long as the court proceedings and any appeals remain pending. That freezes the government's clock, but it also extends the taxpayer's own window of exposure for the same length of time, a tradeoff that cuts both ways. A separate risk runs through collection summonses specifically. IRM 25.5.6 requires that collection personnel have a legitimate collection purpose before issuing a summons, and using that collection authority as a pretext to gather evidence for a criminal case is prohibited subterfuge. The IRS will not flag this concern on its own. A practitioner who suspects a collection summons is being used to feed a criminal investigation has to raise the issue affirmatively and document it, because nothing in the process requires the government to disclose that it is happening.

The hard stop: how a DOJ criminal referral ends IRS summons authority

Everything about the summons power changes at one specific moment: the point at which the Department of Justice receives a criminal referral. Once that referral is made, the IRS, including Criminal Investigation, can no longer issue or enforce a summons against that taxpayer for the same tax and the same taxable period. Summons power over that person, for that period, simply stops. That referral is a documented, dated event, and in some cases a practitioner can identify or infer when it happened. A declination by the Tax Division does not end the story. If the Tax Division declines the referral, the IRS regains the ability to pursue civil administrative action, including further CI investigation using summonses, so the taxpayer's exposure can continue under a different track. The entire administrative phase before referral is the only window in which the government can summon records and testimony in a criminal matter. That makes the pre-referral period the most consequential stretch of the investigation for both sides: it's when the government does the bulk of its evidence-gathering, and it's the deadline by which any Kovel protection the defense intends to rely on has to already be in place. Waiting until after referral to build that architecture is too late, because by then the summons tool that would have reached the accountant's records has already done its work or lost its authority.

The accountant as the soft target the IRS routinely reaches for

Communications between a taxpayer and an accountant carry no privilege at common law, in any form, and that single fact shapes much of how the IRS builds a criminal tax case. The government is generally free to obtain those communications by summons, so if no properly structured Kovel agreement is already in effect, nothing the taxpayer told an accountant is protected in a criminal matter. That is precisely why the IRS reaches for tax return preparers and CPAs through third-party summonses so often: those professionals sit on detailed financial records and working papers the taxpayer might resist handing over directly, and the preparer has little legal basis to refuse. The accountant who prepared the taxpayer's prior-year returns is a particular point of exposure. That preparer holds documents and knows facts gathered entirely outside any attorney engagement, and Kovel protection cannot reach back to cover any of it. It only covers the engagement that begins once the attorney retains the accountant going forward. This is not a theoretical risk. In one documented criminal tax case, the government sought communications among a taxpayer, the taxpayer's attorneys, and accountants, all made before amended returns were filed, arguing both waiver and the crime-fraud exception. The court worked through what had been disclosed to the IRS on the filed returns themselves, and held that privilege still covered the advice and data that had never been disclosed. The result protected the taxpayer, but only because the line between what was filed and what was never filed had been carefully maintained. That outcome does not generalize into a safe assumption. It shows how much the protection depends on disciplined handling of disclosure, not on the existence of a Kovel agreement alone.

Kovel agreements and the doctrine behind them

The doctrine traces to United States v. Kovel, 296 F.2d 918 (2d Cir. 1961), where the Second Circuit vacated a contempt citation against an accountant who had refused to answer grand jury questions. The court reasoned that an accountant retained by a law firm to help translate complicated financial information for the attorney's legal advice functions much like a foreign-language interpreter working between attorney and client, and that communications passed through an interpreter remain within the attorney-client privilege. That analogy is the entire foundation of the doctrine. The privilege belongs to the attorney-client relationship itself, not to the accountant, and the accountant's communications and work product are covered only because the accountant is acting as an extension of the attorney's own legal work. No independent accountant-client privilege exists anywhere in this structure. A Kovel agreement puts that doctrine into practice through a specific written engagement: the attorney, not the taxpayer, formally retains the accountant; the accountant's work is directed by, and done in furtherance of, the attorney's legal advice; every communication happens in confidence and for the purpose of that legal advice; and the accountant bills the attorney directly, with all workpapers treated as the attorney's property.

The specific structural requirements that make or break Kovel protection

Kovel protection rises or falls entirely on how the engagement is built, and courts have repeatedly denied protection where the formal requirements were not satisfied. This is closer to a checklist than a judgment call, and treating it that way is the safer approach. The attorney has to be the accountant's actual client. If the engagement letter names the taxpayer as the client, or if the accountant sends invoices straight to the taxpayer, courts have found no Kovel protection, because the relationship has to run from accountant to attorney. The accountant's work has to stay tied to the attorney's legal advice, not drift into ordinary accounting services. If an accountant under a Kovel agreement also handles routine compliance work or bookkeeping for the same taxpayer, the commingling can unravel privilege across the whole engagement, not just the parts that strayed. The prior-return preparer rule deserves particular attention because it trips up practitioners more than any other requirement: whoever prepared the taxpayer's returns before the engagement began cannot serve as the Kovel accountant in a later criminal matter. That person already holds pre-engagement information and data gathered during return preparation, and the new agreement cannot protect any of it, no matter how the engagement letter is worded. Every communication also has to stay confidential. Disclosures made to outsiders, or anything placed on the tax returns themselves, can waive privilege over that specific piece of information, and the documented case referenced earlier shows courts willing to go line by line through what was and was not disclosed to figure out what survives.

Where Kovel agreements fail in practice

Many practitioners issue a Kovel letter and then treat it as a broad shield that covers nearly everything the accountant touches. The doctrine does not work that way. Kovel protects communications made in furtherance of legal advice, and nothing beyond that. An accountant who offers business, financial, or compliance recommendations that go past translating numbers for the attorney is giving accounting advice, and that advice is not privileged no matter what the engagement letter says. The crime-fraud exception sits underneath all of this as a separate limit. If the attorney-client relationship itself is used to further a crime or fraud, privilege disappears entirely, for the attorney's own communications and for the Kovel accountant's communications alike, and courts have ordered production of Kovel-covered material once the government made that showing. Waiver through the return-filing process causes recurring trouble. Filing a return does not automatically waive privilege over everything developed during the engagement, but courts look closely at what actually ended up on the return, and a practitioner who fails to track the line between what was developed in confidence and what was ultimately disclosed risks exposing the whole engagement to challenge. The scope of the doctrine also shifts depending on where the case is litigated. Kovel began in the Second Circuit, and while other circuits have adopted it, they differ on how strictly they enforce the structural requirements and how broadly they read "furtherance of legal advice."

How summons enforcement and Kovel protection interact

The government's summons power and the taxpayer's Kovel architecture are built to work against each other, and a criminal tax investigation plays out in the space between them. The IRS summons the accountant because the accountant is the weakest link in the defense team's privilege, holding financial detail with no inherent protection. A Kovel agreement is the only way to bring that accountant's records and testimony inside the privilege line before the summons arrives. Timing decides whether a Kovel agreement signed after the IRS has already summoned the accountant's records, or after the accountant has already turned documents over, can reach back and protect what has already left the accountant's hands, and it cannot. Once records are produced, the government has them, and no later engagement letter changes that. The entire structure described in the sections above, the attorney retaining the accountant directly, the confidentiality of every communication, the exclusion of the prior-return preparer, the discipline around what gets disclosed on a filed return, has to be in place before the administrative phase of the investigation closes, because once a DOJ referral ends the IRS's summons authority for that taxpayer, the record is largely fixed: whatever the accountant produced before that point is in the government's file, and whatever stayed protected under a properly built Kovel agreement stays protected because the structure was built correctly, not because the deadline happened to pass in the taxpayer's favor.