Victor Jaramillo Comments on IRS Penalty Cap with Law360

A Colorado federal judge became the latest to say an old penalty cap for undisclosed offshore accounts was still applicable, citing a Texas federal court’s recent conclusion that the U.S. Congress’ 2004 decision to raise the amount did not cancel out the earlier regulatory limit.

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Victor Jaramillo, who is of counsel at Caplin & Drysdale Chtd. and is not representing any of the parties in the two cases, told Law360 on Thursday if the IRS did appeal the Texas case, it would also have to challenge the Colorado one in the Tenth Circuit.

“It’s still possible that both circuits say both of these courts are crazy, but now you have two courts saying this is valid and [Treasury] has handcuffed themselves,” he said. “It gets harder to just brush this aside.”

He added that if the $100,000 cap for willful violations was upheld on appeal, taxpayers might start challenging whether FBAR penalties are applied per account or per violation.

“If you left off 10 accounts that were million-dollar accounts and you’re at the 50 percent [cap], it doesn’t matter how you slice up the math,” he said. “It’s 50 percent.”

However, Jaramillo added that if the limit is at $100,000, the question would be if that penalty is applied per each account that the individual has failed to report.

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Excerpt taken from the article “Colorado Judge Rules That IRS Penalty Cap Is Still Intact” by Natalie Olivo for Law360.