Skip to Main Content

Tax Notes Quotes Zhanna Ziering: Stakes Rising in Litigation of Non-Willful FBAR Violations

August 1, 2019, Tax Notes

Whether the IRS can impose maximum penalties for non-willful violations of foreign bank account reporting by year or by account is again the subject of litigation, and this case involves a much higher potential penalty.

. . .

The crux of the litigation turns on how to count violations. The government is seeking nearly $3 million in penalties and accruals for the FBAR violations, assessing $10,000 per account per violation under 31 U.S.C. 5321(a)(5).

. . .

But Bittner argues that the “astronomical penalties of nearly $3 million . . . is far in excess of any appropriate punishment.” Bittner owed only $625 in tax for the years at issue, the answer asserts. He also argues that the amount rises to the level of a criminal sanction and constitutes an unconscionable punishment.

“The sheer comparison of the penalties . . . to the income that had to be picked up, it’s absurd,” said Zhanna Ziering of Caplin & Drysdale.

“There is no mechanism built into either the statute or the [Internal Revenue Manual] which would settle up the duplication of accounts. . . . When you’re dealing with a non-willful penalty, you might be penalizing the failure to report the same exact money as it travels from account to account,” Ziering said, adding that this goes beyond the intent of the statute.

. . .

Under IRM, in most cases examiners will recommend one penalty per year for non-willful violations, though facts and circumstances may dictate otherwise. It also states that in no case will non-willful penalties exceed 50 percent of the highest aggregate balance of all unreported accounts. This penalty cap, first instituted in a May 2015 memo, has largely been viewed as the IRS’s attempt to address concerns that FBAR penalties might otherwise run afoul of the Eighth Amendment.

“The IRM guidance suggests one penalty per FBAR, and only in special circumstances [assert otherwise]. And in a case where somebody only has [$625 in taxes] and seems to have a plausible explanation, it is not clear on the face of the complaint what were the special circumstances,” Ziering said.

For the full article, please visit Tax Notes’ website (subscription required).


About Caplin & Drysdale
Celebrating our 55th Anniversary in 2019, Caplin & Drysdale continues to be a leading provider of legal services to corporations, individuals, and nonprofits throughout the United States and around the world. We are also privileged to serve as legal advisors to accounting firms, financial institutions, law firms, and other professional services organizations.

The firm's reputation over the years has earned us the trust and respect of clients, industry peers, and government agencies. Moreover, clients rely on our broad knowledge of the law and our keen insights into their business concerns and personal interests. Our lawyers' strong tactical and problem-solving skills -- combined with substantial experience handling a variety of complex, high stakes, matters in a boutique environment -- make us one the nation's most distinctive law firms.

With offices in New York City and Washington, D.C., Caplin & Drysdale's core practice areas include:
For more information, please visit us at
Washington, DC Office:
One Thomas Circle NW
Suite 1100
Washington, DC 20005
New York, NY Office:
600 Lexington Avenue
21st Floor
New York, NY 10022


This communication does not provide legal advice, nor does it create an attorney-client relationship with you or any other reader. If you require legal guidance in any specific situation, you should engage a qualified lawyer for that purpose. Prior results do not guarantee a similar outcome.

Attorney Advertising
It is possible that under the laws, rules, or regulations of certain jurisdictions, this may be construed as an advertisement or solicitation.
©2021 Caplin & Drysdale, Chartered
All Rights Reserved.

Related Professionals

Related Practice Area(s)