FBAR: Costly Noncompliance and Heightened Scrutiny

The Department of Justice and Carl A. Zwerner (“Taxpayer”) have agreed to settle the case of United States v. Zwerner (S.D. Fla., No. 1:13-cv-22082). The settlement calls for the Taxpayer to pay penalties and interest totaling about $1.8M in connection with the Taxpayer’s failure to file the FBAR in multiple years.  Despite the jury finding the Taxpayer guilty of willful noncompliance of the FBAR filing requirements, the Government agreed to settle the matter for an amount that is significantly less than the total accrued FBAR failure to file penalties.  Though it’s anyone’s guess as to why, it is believed that the reason for settling was to avoid addressing the Taxpayer’s argument that the penalties are excessive and, therefore, violate the Eight Amendment of the U.S. Constitution. However, we urge you to think again if you think that the IRS is starting to go soft in this area.  In fact, according to a BNA Daily Tax Report article by Alison Bennett, IRS Commissioner Josh Koskinen said, while presenting the new Taxpayer Bill of Rights at a news conference, “[T]he Internal Revenue Service will continue a sharp focus on tracking down taxpayers hiding assets overseas under the Foreign Account Tax Compliance Act.”