The Fifth Amendment Rides

Again and Keeps on Riding

 

      In the case of United States v. Troecher, 99 F. 3d 933 (9th Cir. 1996), the Court held that "the Fifth Amendment may be validly invoked when the taxpayer fears prosecution for tax crimes."  Troecher was sent back to the District Court and he took the Fifth Amendment on specific questions.  The court allowed the use of the Fifth Amendment on many specific questions.  These are the same questions that an individual must answer when he fills out a tax return.  It is incredible that the government still prosecutes individuals for willful failure to file returns in light of the law in this case; but the continued double standard shows that the courts will do what they have to do to protect the income tax in spite of the continuing increase of case law in favor of the Fifth Amendment approach.

 

      The Fifth Amendment protects a person against being incriminated by his own compelled testimonial communications, Fisher v. United States, 425 US 391 (1976), a communication is testimonial if it would directly or indirectly reveal the defendant's knowledge of the facts relating him to the offense or require the defendant to share his thoughts and beliefs with the government, Doe v. United States, 487 U.S. 201 (1988).  In United States v. Doe, the court ruled that by producing documents, the defendant would in effect, be admitting that records exist, are in the defendant's possession and are authentic, Id. at 613.  (Isn't that exactly what people do who fill out tax returns?  They admit that records exist, are in their possession and are authentic when they sign the return under the penalty of perjury!)

 

      Ultimately the court must look at each individual question or document request posed by the IRS and determine whether the defendant is "faced with substantial hazards of self-incrimination that are real and appreciable and not merely imaginary and unsubstantial,"  Troescher, 99 F.3d at 935.  If a direct answer would support a conviction or provide a link in the chain of evidence leading to a conviction the defendant cannot be compelled to answer the question.  Troescher, 99 F.2d at 934-35 (citing Hoffman v United States, 341 U.S. 479 (1951).

 

      The court ruled that the defendant could assert his Fifth Amendment Rights to three categories of questions: personal questions, occupational questions and financial questions. Information may be either incriminating on its face, Hoffman, supra at 487 or the person asserting the privilege may demonstrate that otherwise innocent information has incriminating potential within the context of the particular questioning.  United States v Sharp, 920 F.2d 1167(4th Cir. 1990) citing United States v.  Rylander, 460 U.S. 752.  The court ruled that many of the questions posed at the IRS interview asked the defendant for personal information which would normally not be subject to Fifth Amendment protection, however because the defendant is alleged not to have filed tax returns for a number of years, the answers could lead investigators to find unreported income.  For example questions regarding the defendant's marital status and the names and social security numbers of his children---information which normally would not be incriminating---may be properly objected to in this context.

 

      The following are samples of the specific questions that the court allowed Troescher to answer with a Fifth Amendment objection:

 

Personal Questions:

 

      1.  Have you ever used a social security number?

      2.  What is your date and place of birth?

      3.  Have you used any other names?
      4.  How long have you lived at your address?

      5.  What are the names, dates of birth, and Social Security Numbers of your children?

 

Occupational Questions:

 

      1.  What is your occupation?

      2.  Did you file tax returns for the years 1986 to 1991?

      3.  Have you engaged in a business as a sole proprietor?

      4.  Have you ever owned any interest in any partnership, foreign or domestic as a general or limited partner?

 

Financial Questions:

 

      1.  What banks were business and personal accounts maintained by you and your related businesses for the years 1986 to 1991 tax periods?

      2.  What was the largest amount of case or currency, which you had at any time at your home, in a safe deposit or place other than on deposit in a bank?

      3.  Please disclose all sources of income during 1986 through 1991 tax periods that you received and/or earned, including income from taxable and non-taxable sources.

 

      The court allowed the Fifth Amendment to these and other questions but the above sample shows the types of questions that the defendant was allowed to answer with the Fifth Amendment.  The Fifth Amendment is very, very powerful tool and if enough of us start to use it correctly, we can force positive change in the Federal Tax System.

The Freedom of Information Act

 

      It is a good idea to order a copy of your tax transcripts under the Freedom of Information Act if you are considering a bankruptcy.  You will need to know the exact dates of filing of returns, the dates of assessment, the amounts of principal, interest and penalty, the tax return due dates and tolling problems. In your first request you should consider ordering the following documents: The IMFT-30 Transcript for personal 1040s, the collection file, the complete TDI File, all notes and histories on the case, all statutory notices of deficiency, all records of assessment provided for by the regulations e.g., Section 301.6203-1 Method of Assessment.  If the IRS does not give you the documents that you request, it is possible to file suit.  See the Anti-IRS Technical Manual by Bill Conklin for more information on this issue. 

 

      When you get your MFT-30, the IMF Specific, you need to analyze it to see the specific dates of the various events. Some of the things to look for are as follows:  The Code 150 is usually the date of assessment but sometimes it is not. The Code 610 shows a remittance with the return but the IRS may have filed the return.  The substitute for a return that is filed by the IRS does not qualify as a return for purposes of the 2-year rule.  Code "30" is an income tax claim and Code 460 is an extension of time for filing.  Code 480 means that an Offer in Compromise is pending and Code 481 means that an Offer in Compromise rejected.  Code 482 means that the offer was withdrawn and Code 582 shows that a tax lien was filed. 

     

      You can also get the MFTRA-X file, which is the "literal transcript."  It is much easier to read and understand. The literal transcript is not a detailed as the specific transcript and it will not show if the tax return that was filed was a substitute for a return or a regular tax return filed by the individual.  Also, the IRS' use of the Code 150 is not always exact.  The IRS may mean the date the return was received or the date the tax was assessed.  You must be careful about relying on the Code 150 in the transcript.  In the case of In re Gosciniak 1994 Bakr. LEXIS 833 (Bkrtcy. S.D.IND 1994, the court rejected the debtor's reliance on the Code "150" in the tax transcript. The MFT-30 or IMF Specific may be necessary to get the exact date of the filing of the return.