You can’t necessarily plead the Fifth this time
As should be clear to anyone reading our blog —- if you are not up to date with your US tax filings THE IRS IS COMING TO GET YOU!
More and more non-US advisors, banks, and trust companies, for example, are requiring their US clients to be complaint with their US tax obligations; some are even requiring proof of such compliance.
FATCA, the US legislation requiring non-US financial institutions to report their US clients to the US is coming into force soon. Even foreign governments are agreeing to help in this endeavor.
One of the many data sources the government seeks to obtain from taxpayers is their foreign financial account records. Taxpayers have tried to challenge such searches by arguing that forcing them to divulge such records violates their right not to incriminate themselves as guaranteed by the Fifth Amendment not to incriminate yourself.
But the rights granted by the Bill of Rights are not absolute; including the right granted by the Fifth Amendment.
For example, various federal banking laws require individuals to keep records of their foreign bank accounts – the now, hopefully familiar, Foreign Bank Account Report or “FBAR” being just one.
In this context, three Federal Circuit Courts have now held that an individual can be compelled to discourse his or her records pertaining to their foreign bank accounts without violating the Fifth Amendment right against self-incrimination.
The Courts are supporting the efforts of the IRS. For all of us who have paid our taxes it’s good to know that those who have not complied are now being brought into the fold.
For those who have not been compliant, now is the time to consider getting up-to-date.