Two cases when considered together raise the prospect that communications in writing and notes and recollections of conversations between taxpayers and return preparers may have serious consequences for members of the immigrant community (those taxpayers who are on VISA or Green Card status). The cases are Edwards v. U.S. on appeal from the Ninth Circuit to the U.S. Supreme Court and Kawashima v. Holder, decided by the U.S. Supreme Court on February 21, 2012.
Edwards holds that the there is no taxpayer-return preparer privilege in criminal proceedings. Meaning that the return preparer can be called before a Grand Jury on in court, to testify about communications with the taxpayer. Kawashima holds that a conviction for tax evasion involving $10,000 or more constitutes an “aggravated felony” for purposes of the deportation statutes. The result of integrating the holdings is illustrated as follows:
An immigrant taxpayer confides to a return preparer about unreported income, such as an unreported offshore financial account which should have been disclosed in the prior years on a Report of Foreign Bank Account (FBAR). The taxpayer previously signed income tax returns that deny having such accounts, a false statement crime which is an act of tax evasion.
An immigrant taxpayer who has foreign assets which must be disclosed with the taxpayer’s Form 1040 for 2011 and either refuses to make the disclosure of makes a false or incomplete disclosure. Signing a return under these circumstances could be viewed as a false statement crime constituting an act of tax evasion.
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