Regarding Steve's comment earlier about the likelihood of being investigated if you claim the Fifth Amendment on your tax return: Based on my experience, that is
extremely unlikely. I have never actually had to do that for a client. However, I can tell you that I prepare hundreds of returns every year that include Form 8275 -- which is
supposed to be a huge red flag for the Internal Revenue Service. In over 15 years of doing this, I have yet to see the IRS examine a return based on this red flag.
Merely writing "fifth amendment" to describe an item of income on a federal income tax return is probably much less of a red flag that including a Form 8275.
IRS personnel who post here can provide a more authoritative explanation than I can, Steve, but you have to understand that each IRS Service Center processes MILLIONS AND MILLIONS of tax returns each year. A line on a Form 1040 with the words "fifth amendment" on it is a needle in a haystack.
And what would the IRS do if an IRS employee saw that entry on your tax return? What is the IRS supposed to do? What could they do? Exactly what are they going to investigate? You've reported the income, you've (hopefully) computed the tax properly, you've (hopefully) paid the tax -- so, what crime is the IRS going to investigate? Is the IRS going to initiate a criminal investigation of you to find some crime that does not even involve tax evasion, etc., based on your assertion of the privilege on a tax return? An investigation of what? Let's get real, Steve.
I think layman (and laywomen??) have a warped view about what asserting the privilege really means, and how the assertion of the privilege affects the person asserting that privilege.
I myself would certainly assert the Fifth Amendment privilege for myself on a tax return (or anywhere else) -- even if I have committed no crime -- if I ever thought I should do so.
Check this out (Professor James Duane, Regent University Law School):
http://www.youtube.com/watch?v=i8z7NC5sgik
You think that the Fifth Amendment's purpose was to prevent things like the requirement that we file a Form 1040? Is that what you're saying, Steve? Are you serious?
EDIT: Steve, the purpose of the Fifth Amendment's privilege against being compelled to be a witness against yourself is, in part, to protect you in cases where the law REQUIRES YOUR TESTIMONY. The purpose of the Amendment is
not to prevent Congress from enacting laws that require your testimony. The whole idea is that you
assert the privilege.
As a general rule, in cases where you're not
required by law to testify, there is no "need" to even have a Fifth Amendment provision regarding this privilege. If you're not legally required to testify, then why would you even need to claim the privilege? You would just say, "Sorry, bubba, I'm not answering that question."
Steve and others who have tried to argue that the Founding Fathers intended that the privilege was intended to prevent Congress from enacting laws requiring testimony, etc., etc., are wrong. They don't understand the purpose of the Amendment, and they don't understand how the privilege was intended to work.
"My greatest fear is that the audience will beat me to the punch line." -- David Mamet