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The IRS Can Force You to Produce Your Own Offshore Bank Account Information — Even if it’s Self-Incriminating

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    If you are living in fear because of your undisclosed foreign bank accounts, you can alleviate that fear by taking advantage of the IRS Offshore Voluntary Disclosure Initiative (OVDI). This program is the safest solution because the Internal Revenue Service has multiple ways of detecting your undisclosed accounts, and the stakes are only getting higher as time goes on.

    Many taxpayers are under the illusion that they will be protected by the Fifth Amendment, which says you cannot be forced to incriminate yourself. Therefore, you would think that the IRS cannot force you to produce your own offshore bank account records. However, there is an exception to the Fifth Amendment for “required records.” Under the Required Records Doctrine, your Fifth Amendment rights are not violated if:

    • The government’s inquiry is essentially regulatory;
    • The data is a preserved record of a kind customarily retained; and
    • The records have taken on public aspects making them comparable to a public document.

    This exception grants the IRS the authority to compel a taxpayer to produce “required records,” which the Courts have interpreted to include foreign bank records. Both the Ninth Circuit (in In re Grand Jury Investigation M.H.) and the Seventh Circuit (in In Re Special February 2011-1 Grand Jury Subpoena) have allowed prosecutors to force someone to produce offshore account records even if it was self-incriminating.

    Following these cases the courts have routinely allowed prosecutors to compel taxpayers to surrender offshore account information despite the information contained in these documents being self-incriminating, because of the Required Records Doctrine. Consequently, the Department of Justice and the IRS are currently feverishly investigating taxpayers that are suspected of using foreign bank accounts to elude paying U.S. income taxes. As a powerful tool in their investigatory efforts Federal Judges are routinely issuing subpoenas where requested by the IRS that demand taxpayers to produce records that they are expected to keep under the Bank Secrecy Act of 1970, which is the specific law that requires keep records of their Foreign Bank Accounts.

    It’s time to avoid a risky wait and see approach. For most taxpayers with yet to be disclosed foreign accounts, the IRS’s Offshore Voluntary Disclosure Program is usually the best way to ease your fears and avoid criminal prosecution for your past indiscretions.

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