The 5^th Amendment of the United States Constitution holds that a person should not be compelled to be a witness against themselves.  Thus, it is possible to plead the 5^th Amendment in certain tax proceedings if answering a question would incriminate the summoned individual.  However, what a taxpayer should understand is that information, documents, and other related evidence that has been produced voluntarily by the taxpayer (or another witness) who has been summoned, can be used against the taxpayer even if the information would be incriminating.

Internal Revenue Code Section 7602 authorizes the IRS to summon taxpayers and other third parties to testify as well as provide records, documents, and information.  Although a summoned person can plead the 5^th amendment regarding an inquiry or question that may tend to incriminate them, as stated above, this does not apply to documents that may have already been voluntarily provided to the IRS.  This is so because the government did not compel the summoned person to produce the information when the information was voluntarily produced.  In certain circumstances, the actual act of producing and providing documents can incriminate an individual because the mere act of providing the documents is an admission that the documents and information actually exist.  Whether or not the actual act of production would incriminate an individual would be based upon the facts and circumstances of the actual case at hand, but, the person may have a valid argument using the 5^th Amendment privilege against producing existing documents that were voluntarily created.

What about third parties who may have received information or documents from the individual that is asserting their 5^th Amendment privilege?  If a taxpayer has transferred information and documents to a third party, the IRS can summon such individuals, and the taxpayer cannot argue the 5^th Amendment to prevent the summoned party from disclosing documents and information to the IRS.  This is because the 5^th Amendment is personal and therefore only the taxpayer can assert the privilege.  That being said, what about when the taxpayer provides information to their tax attorney?  If the taxpayer would have been able to avoid producing the records prior to transferring them to their tax attorney, the attorney-client privilege will prevent the IRS from summoning the attorney given the records were transferred to obtain legal advice.

The above article has been prepared by John McGuire from The McGuire Law Firm.  Mr. McGuire is a tax attorney whose practice focuses primarily on tax issues before the IRS, tax law & planning and business matters.