Niles Elber Weighs in on FBAR Enforcement in Law360

With a U.S. Supreme Court decision affirming a key 2017 tax provision on repatriation, millions of dollars in FBAR penalties upheld and a French ruling confirming the U.S. government's access to foreign bank accounts, the IRS stacked up important court victories on international enforcement in the first half of 2024.

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The Inflation Reduction Act's boost in funding for the IRS translates into more enforcement personnel and more overall investigations, Caplin & Drysdale Member Niles Elber told Law360. The agency is getting the opportunity to investigate, hire more agents and let them conduct more examinations, he said.

According to Elber, two cases decided in 2023 could be encouraging the IRS to assert willfulness, which carries greater penalties, in more cases. The Supreme Court's decision in Bittner v. Commissioner  limited nonwillful IRS penalties to $10,000 per year, not per account, and the justices' denial of certiorari in Bedrosian v. U.S.  upheld a trial court's finding of willfulness.

"When you look at these two cases together, why would the IRS try to bring a nonwillful case?" he asked. "You need to get as much bang for the buck."

The IRS also is focusing on FBAR enforcement because it involves higher-income taxpayers and thus higher-dollar disputes, Elber said.

"Poor people don't have any money, they don't have foreign accounts," he said. "The IRS made a big deal going after high-net-worth individuals. You get greater impetus in that area of compliance. As long as that continues — and I can't imagine that isn't going to continue — the IRS will go down this road for a while.

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