This is a thought experiment regarding the Miranda Rights and how they might properly apply to OVDI and FBAR. If a big boy says to a little boy at school, “Give me your lunch money or I will clobber you on your way home today.” The teacher sees the little boy hand the money over to the big boy. The big boy says to the teacher: “He gave it to me voluntarily.”
UPDATE: Steven J. Mopsick, 30 year IRS Veteran has responded.
In 1963 Ernesto Miranda confessed to theft, kidnapping and rape and was convicted. But the Supreme Court ruled that law enforcement failed to inform him of his Fifth Amendment right not to incriminate himself; and the Court therefore ordered a new trial, not permitting the evidence of his confession. As a result of this, law enforcement routinely informs arrested criminal suspects of their Miranda Rights, so that the evidence that the suspect provides may be admissible in court.
The analogy to FBAR and to Offshore Voluntary Disclosure Initiatives (OVDI) is perhaps not obvious. In the OVDI, the IRS agrees not to bring criminal charges provided that the suspect co-operates with the proceedings. So this remains at the level of civil law. But I nevertheless suspect that the IRS has largely set aside the constitutional guarantees to due process (see Fifth Amendment), both substantive and procedural due process. As I have argued, the OVDI is a make believe world in which a person has no rights, and in that world, the IRS makes up the rules as they go along.
These are dangerous waters that the IRS is navigating in light of Miranda. In the Miranda decision, the Supreme Court made it essentially illegal to convict a person based on information provided by the suspect who has not been informed of his rights. It would seem to me that the intent of Miranda is to guarantee that law enforcement conducts its business in a manner that respects constitutional rights.
The IRS, with the authorization of Congress, has acted in a manner which seems callous and oblivious to constitutional rights. First, the requirement to file FBARs is tantamount to a general warrant, in violation of the Fourth Amendment. Second, it is oblivious to the Fifth Amendment rights–forcing citizens to hand over information that is potentially incriminating. Third, it threatens with fines that are way out of proportion to the damage done to government, in violation of the Eighth Amendment: e.g., a $10,000 account earns in a year interest of $100, for which $25 tax is owed–damage to the government, $25; potential non-wilful fine, $10,000; potential willful fine, up to $100,000 or 50% of the contents of the account per annum.
I wonder how much time the IRS spends informing OVDI suspects of their rights under the Constitution. E.g., do they mention that if the fine is over $20, that the person has a right to a trial by jury? Do they remind suspects of their right to a jury of their peers in the district in which the crime occurred? Do they inform them going into the program, that they must waive their Fourth and Fifth amendment rights? What the suspect perhaps doesn’t know is that after handing over the required account information, it will be nigh on impossible to defend oneself against charges; but furthermore, the IRS would have a hard time even getting an indictment without the information provided by the suspect himself, FATCA notwithstanding. Take me for example. I have said that I won’t do an FBAR. What are they going to use to indict me? My RRSP that I disclosed in my tax returns? Give me a break. I could go to jail and pay hefty fines because I didn’t file an FBAR on an RRSP that the US already knows about?
Essentially, with OVDI the IRS seems to have created a make-believe world in which all Constitutional rights don’t exist in order to extort money from suspects. Miranda, in essence, is supposed to remind law enforcement not to abuse constitutional rights by requiring it to inform suspects systematically of their rights.
I wonder if the OVDI is actually ripe for a serious court challenge–and that the billions that the IRS has collected could be in serious jeopardy. But I suppose that the IRS has also said that it will charged with criminal penalties anyone who decides to appeal their fines under OVDI.
But furthermore, I think that the whole program has been completely discredited, not least of all by the criticisms of the Tax Advocate Service, but also by the testimony of minnows who have been in the program. Certainly no Canadian resident should ever enter the program. Quiet disclosure or go-forward compliance is a much better option than the OVDI. But I honestly think that Canadian residents would do very well to ignore completely the FBAR filing requirements–but I’m sure that a real professional will come along and say that people need to be extremely cautious before taking such a suggestion, and further, that I am painting myself as a tax protester. Yet I can’t help but think that our own Finance Minister would encourage me in this.
But my reasoning is thus: If (1) the IRS needs the information to charge you with a crime or to assess a criminal penalty and (2) your assets are in Canada and the Canadian government will laugh at the United States attempts to collect your FBAR fines here in Canada, then the risk goes up exponentially with any and all attempts of compliance with FBAR. Miranda Rights say, “You have the right to remain silent; anything you say will be used against you in a court of law.” Thus, I remind readers that OVDI, quiet disclosures and go-forward FBARs, are a tacit waiver of the very constitutional rights that could protect us. I understand if some need access to the United States and want to remain in compliance with FBAR, and that they want to keep their US passport. But Schubert’s suggestion is excellent:
I appreciate that some people feel they have to be able to cross the US border, either for family or business reasons. However, I strongly suggest anyone who is concerned about the costs, both financial and moral, of complying with IRS extortion, seriously consider the option of refusing to comply with IRS demands and not crossing the border again. Yes this may have a down-side for you, but what is the trade-off in terms of costs to you, your family, and your retirement if you comply with the IRS?
originally published: FEBRUARY 14, 2012
Thought you might be interested in this Case just filed with the Supreme Court on January 9th
PETITION FOR WRIT OF CERTIORARI
Note:(Certiorari (/ˌsɜrʃⁱəˈrɛəraɪ/, /–ˈrɛəri/, or /–ˈrɑri/) is a type of writ seeking judicial review, recognized in U.S., Roman, English, Philippine,and other law, meaning an order by a higher court directing a lower court, tribunal, or public authority to send the record in a given case for review.)
Note this name which should be familiar
MARK E. MATTHEWS
CAPLIN & DRYSDALE CHTD.
This case involves the relationship between two aspects of this Court’s Fifth Amendment self-incrimination jurisprudence: the “act-of-production privilege” and the “required records doctrine.” Petitioner has been commanded by subpoena to produce records of any foreign banking interests he may have held during a specified period. The Bank Secrecy Act (“BSA”) imposes a requirement on all taxpayers to keep records of such interests. Because Petitioner has not previously disclosed any such interests, the government concedes that the compelled act of producing such records would be testimonial and incriminatory and thus gives rise to an act-of-production privilege under the Fifth
Amendment. Nonetheless, the government contends, and the Seventh Circuit agreed, that the required records doctrine “overrides” or “supersedes” Petitioner’s constitutional privilege because the records are required by the BSA. The court based that conclusion on this Court’s decision in Shapiro v. United States, 335 U.S. 1 (1948), a case addressing whether the contents of records were “public” or “private” back when the Court considered the contents of private, but not public, papers protected by the Fifth Amendment. The Court has long since abandoned the understanding that the contents ofany records—private or public—are protected, and instead emphasized that the relevant question is whether the act of producing records is testimonial and incriminatory, and thus protected by the Fifth
Amendment. The question presented is:
Can the required records doctrine be invoked to “override” or “supersede” the Fifth Amendment act-of- production privilege that concededly arises when, as here, the record-keeping requirement presumptively applies to all taxpayers and the compelled production of records would be testimonial and incriminatory?
Here is Jack Townsend’s take on it…
Petition for Cert filed in FBAR Required Records Case (1/18/13)
Robert Woods has this recent article…
Why Every American Should Worry About Bank Record Subpoenas
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Fascinating. And intuitively obvious, which is why so many law-abiding people are under the radar.
Hence the malevolent genius of FATCA.
FATCA effectively forces you to comply, at least if your bank notices you. Because you have to show that you have either renounced or complied in order to continue banking.
And at that point, the bank will forward your information to the local government according to the local IGA, and the IRS will get your info. At which point the IRS will ask why you havent filed FBARs.
Of course you could tell your bank that you are compliant, and therefore keep your account. And then just ignore anything that comes from the IRS.
Overall, a US birthplace condemns you to at least consider full compliance. Whereas a non-US birthplace lets you remain under the radar.
Yet another federal court falls in line and says: your decision to exercise your human right to leave any country and to take your personal property with you means you are deemed to be “voluntar[ily] participat[ing] in certain regulated activities” and can thus be deprived of other human rights.