- 1 Fifth Amendment Claim Rejected for IRS Summonses Involving Foreign Account Information
- 2 US v Fridman Case No. 18-3530 (2d Cir. 2020) Background
- 3 Prior FBAR History
- 4 Fifth Amendment Assertion for IRS Summonses
- 5 US Court of Appeals Rejects Fifth Amendment Assertion for IRS Summonses
- 6 Be Careful of Asserting Fifth Amendment Blanket Protection in Foreign Account
- 7 Golding & Golding: About Our International Tax Law Firm
Fifth Amendment Claim Rejected for IRS Summonses Involving Foreign Account Information
Supreme CT Rejects fifth Amendment in IRS Foreign Account Summons: Recently, in 2021 the Supreme Court denied certiorari on a matter involving a US Person’s claim that the fifth amendment protects his right against self-incrimination regarding two summonses he received from the IRS that request for the production of documents involving foreign accounts. Before seeking Cert at the Supreme Court, the matter originated in the Second Circuit, in which the appellate court affirmed the lower court’s ruling that the fifth amendment would not protect against self-incrimination for an IRS summons in this case. Let’s take a brief look at the U.S. court of appeals for the Second Circuit’s opinion in US v Fridman.
US v Fridman Case No. 18-3530 (2d Cir. 2020) Background
Unfortunately for Mr. Fridman, his case escalated from bad-to-worse — and then much worse. It began after his personal representative disclosed the existence of a few personal bank accounts overseas. This led to the IRS uncovering several more foreign bank accounts (Switzerland) along with many foreign companies — none of which had apparently been properly reported to the IRS in accordance with international information reporting requirements such as FBAR, Form 5471, Form 8938, etc. The US Government later learned that the foreign companies themselves has ownership/control over 17 different foreign accounts.
This led to the IRS issuing two summonses in order to discover more information about Defendant’s accounts and businesses abroad. Petitioner then sought to assert the fifth amendment to prevent having to produce documents in response to the IRS Summonses.
Prior FBAR History
From the court’s ruling, it appears Defendant did file some FBARs in prior years to report some, but not all of his foreign accounts — and from the court ruling it also appears the FBAR was not consistently filed each year.
Fifth Amendment Assertion for IRS Summonses
In response to the IRS summonses, Taxpayer claimed his Fifth Amendment right and refused to produce any of the documentation requested by the US government. This led to the US Government filing a petition to enforce the summons, which was granted by the District Court of New York. The case was brought up on appeal, where it was next remanded back to the District Court fo certain issues involving the foregone conclusion doctrine and other related issues. the District Court again granted the petition and now the case went back up on Appeals —
US Court of Appeals Rejects Fifth Amendment Assertion for IRS Summonses
The court ruled in favor of US government, with a detailed summary as to why the Foregone Conclusion Doctrine applies as to the fifth amendment protection in the current case.. As a result, Petitioner is required to respond to the IRS summonses or face potential criminal fines and penalties
Be Careful of Asserting Fifth Amendment Blanket Protection in Foreign Account
While many times a Taxpayer’s knee jerk reaction is to simply claim the fifth amendment (especially if they are in an Eggshell Audit) it is important to note that the fifth amendment does not always apply — especially in civil tax matters. Taxpayers should be aware of what their rights so that they can work with counsel to affectively preserve and protect their rights — especially in cases involving the fifth amendment.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure.
Contact our firm today for assistance with getting compliant.