Paul L. Caron

Thursday, November 3, 2022

WSJ: The IRS And The 8th Amendment

UpdateThe FBAR’s Muddy Morass

Wall Street Journal, The IRS and the Eighth Amendment:

IRS Logo 2Navigating the labyrinth that is the U.S. tax code can already feel like punishment for ordinary taxpayers. But the real punishment comes when Americans face oppressive penalties from the Internal Revenue Service for innocent filing mistakes. That may be about to change. The Supreme Court hear[d] oral arguments Wednesday in Bittner v. U.S., a case that could ease excessive punitive measures from the IRS.

Alexandru Bittner, a Romanian-American dual citizen, nonwillfully failed to file five foreign bank account reports, or FBARs, with the IRS while living in Romania between 2007 and 2011. Taxpayers fill out annual FBAR forms if they have “foreign financial accounts exceeding $10,000.” When Mr. Bittner moved back to the U.S., he discovered this responsibility and had his certified public accountant file these forms to the IRS. The IRS responded by imposing a $2.72 million penalty even though there were no allegations of tax fraud or any additional taxes owed.

In Bittner, the court will have to determine how much in penalties Mr. Bittner must pay.

The tax code imposes a $10,000 penalty per nonwillful violation of this statute. Mr. Bittner argues he had five violations—one for each missed FBAR—bringing him to $50,000 in fines. The government wants more, arguing he had 272 violations, one for each unreported account during the five-year period.

Law360, How High Court Could Change FBAR Penalty Landscape

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