The Government Has Focused a Considerable Amount of Energy To Prosecute Taxpayers Who Failed to File FBAR Reports and Accurately Account For Taxes. The Government has used the Required Records Doctrine to compel taxpayers to produce foreign bank account records.
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The Fifth Amendment protects individual taxpayers from being compelled to testify when such testimony is incriminating. This rule has been held to apply to the records in the custody and control of the taxpayer. However, when the taxpayer is required to maintain the records for non-law enforcement reasons that are public in nature, the Required Records Doctrine authorizes the government to subpoena such records. This is recognized as an exception to the Fifth Amendment.
Defendants in a FBAR penalty case argued that the Chief Counsel of the Internal Revenue Service has opined that the willfulness standard for purposes of 31 U.S.C. § 5321 is the same as the criminal standard. IRS CCA 200603026. However, the Court held that Chief Counsel Advice may not be used or cited as precedent. 26 U.S.C. § 6110(k)(3) Defendant also argued that the IRS manual stated that the definition of "willfully" was the same for criminal and civil cases. The Court held that the IRS was not bound by statements made in its manual. The Court held that the definition of "willfully" included reckless disregard for the tax laws.