Invoking the Fifth Amendment in Audits With Offshore Issues: Required Records Under the Bank Secrecy Act, Greenfield, and Continuation Penalties

The IRS continues to deliver on its promise to audit taxpayers who made quiet disclosures, who imprudently entered into the Streamlined Filing Compliance Procedures (” Streamlined Program”), or who never disclosed offshore accounts. These audits, which are typically based on third-party information received under the Foreign Account Tax Compliance Act (FATCA),’tax information exchange agreements or as a result of the Swiss Bank Program, require a special strategy because the third-party information that triggered the audit (whether right or wrong) usually supports the conclusion that the taxpayer violated US law. Practitioners handling audits with undisclosed offshore accounts must be especially proactive in asserting all applicable privileges, including the Fifth Amendment privilege against self-incrimination.