Taxes: Don't Take the Fifth on the 15th


Discussing this topic in a one-page column means a brief treatment. But the subject is important, so I want to touch on it. Be warned, however: This is not legal advice. Proceed at your own risk…

The Fifth Amendment to the US Constitution covers a lot of territory, but the part that concerns us here is the privilege against self-incrimination: "No person…shall be compelled in any criminal case to be a witness against himself…" So that means: (a) we don't have to file income-tax returns; (b) the whole federal funny farm collapses; and (c) we live happily ever after—right? Wrong! Forget the folklore. Here's the real story.

In 1927, when the income tax was young, the US Supreme Court decided that the Fifth Amendment does not justify an outright refusal to file an income tax return (United States v. Sullivan). The case has stood for nearly 60 years; it's not going away.

Then, in 1976, the Supreme Court decided the case of Garner v. U.S. Roy Garner was a gambling man, and he came right out and said so on his income tax returns. Occupation: "professional gambler." Source of income: "wagering."

Armed with that and other evidence, the feds convicted him of a nontax offense (something about fixing horse races). Garner appealed, claiming he'd been "forced" to provide the evidence on his tax returns. The feds argued that he had submitted the evidence "voluntarily." Garner wasn't compelled to disclose his occupation or the source of his income, they said. He could have claimed the Fifth. Right on his returns!

Wait, argued Garner. The law regards a partial return as no return at all. If I refused to reveal my occupation, claiming the Fifth, I could be prosecuted under Internal Revenue Code section 7203 for failure to file. Sullivan says the Fifth is no excuse for not filing. I know a rigged game when I see one. I was "compelled" to reveal my occupation. Therefore you can't use it as evidence against me.

Not so, said the Supreme Court. If you really feared prosecution because of your occupation, you could have refused to disclose it. Any crime, even failure to file, requires proof of intent. You didn't intend not to file; you intended to protect yourself from gambling charges. So you could have taken the Fifth on your income tax return—legally. But you didn't, so your disclosure was "voluntary." Good evidence; good conviction. Good-bye, Roy Garner. Hello, blank tax returns? Not exactly.

This limited use of the Fifth should not be confused (said the Supreme Court) with saying nothing on a tax return. Sullivan still stands. Most people don't have criminal activity to disclose on their tax returns, so the Fifth doesn't apply to them. In those few cases where disclosure creates a criminal problem, folks can claim the Fifth—but only as to their occupations, or whatever else might somehow incriminate them.

The concept works something like this: "Name: Al Capone. Occupation: I respectfully refuse to answer. Income: $1 billion. Tax: $500. Check enclosed. Have a nice day." Everything clear? Well, not to some people.

Robert Neff, a San Jose police officer, wasn't a professional gambler—but he played for high stakes. He bet his liberty when he filed "classic" Fifth Amendment returns for 1974 and 1975, providing no information—except 100 pages of tax protestor literature. A jury convicted him of failure to file (not unusual in such cases). Neff appealed, arguing that what he did was sanctioned by the Supreme Court in Garner. Good defense, right?

Wrong. Unlike Roy Garner, Neff had no reason to claim the Fifth. His conviction was affirmed, based on Sullivan. Wham, bam; bye-bye Bobbie.

But sometimes people get lucky. Robert Ellis of Kismet, Kansas, beat the system. He filed a Fifth Amendment return for 1976, and the feds prosecuted him on one count for that one year. A fantastic break. It's much easier to prove intent with a few years of such tax returns to point to, but they went after Ellis anyway. The judge, moved by Ellis's poverty, ignorance, pregnant wife, and—get this—his blind reliance on some tax-protestor guru, found that his failure to file wasn't willful.

But don't get any crazy ideas.

The law is a tapestry of all relevant cases, not just the happy exceptions. Ellis was a prosecutor's mistake, decided solely upon the confused motivations of a woeful defendant, who messed up only once, and who might as easily have babbled about astrology instead of the Fifth Amendment.

Yet Ellis is the type of case that misleads the gullible. If some tax rebel is recruiting you, he'll show you decisions like Ellis. "See, boy? Nuthin' to it. Ellis did it. You can too." But he won't tell you that he's showing you one oddball case, and hundreds went the other way.

In my opinion, no one should rely upon the tax-protestor litany as authority for filing a "classic" Fifth Amendment tax return. Believing in such folklore is like believing in faith healing. Strange things do happen, but oddities prove nothing about the curative properties of mumbo-jumbo.

So forget the Fifth on April 15th. Unless you're a gambling man.

Warren Salomon is an attorney and tax specialist practicing in Miami.