Expat Ordered Arrested for Skipping $20M FBAR Enforcement Hearing

A recent order out of the Southern District of Florida underscores just how aggressively the government is willing to pursue FBAR enforcement—even when the taxpayer is abroad and already facing a massive civil judgment.

In United States v. Schwarzbaum, a federal judge has now taken the unusual step of ordering the arrest of a U.S.-German expatriate who failed to appear at a court-ordered hearing tied to a nearly $20 million FBAR judgment.

Background: From FBAR Penalties to Contempt

The case has been closely watched for years. The government originally assessed substantial FBAR penalties against Isac Schwarzbaum for willfully failing to report foreign accounts in Switzerland and Costa Rica for tax years 2007 through 2009.

Key developments include:

·         A 2020 finding of willful FBAR violations

·         A 2022 judgment of approximately $12.5 million

·         An Eleventh Circuit adjustment in 2024

·         A revised 2025 judgment totaling approximately $19.6 million with interest and penalties

Despite the judgment, the government has alleged that Schwarzbaum moved assets abroad—reportedly maintaining tens of millions of dollars in Swiss accounts—while refusing to satisfy the liability.

The Court’s Escalation: Civil Contempt and Arrest

The latest development stems from Schwarzbaum’s failure to appear at an August hearing addressing the government’s motion for civil sanctions, including an order to repatriate foreign assets.

Judge Beth Bloom rejected several defenses for nonappearance, including:

·         Lack of proper notice

·         Health-related travel limitations

·         Residence abroad

The court emphasized that Schwarzbaum made no effort to request a continuance or appear remotely.

As a result, the court:

·         Found him in ongoing civil contempt

·         Ordered his arrest

·         Authorized incarceration until he complies (i.e., repatriates assets to satisfy the judgment)

·         Referred the matter to the U.S. Attorney’s Office for potential criminal prosecution

This is a notable escalation—transforming what began as a civil FBAR enforcement action into something approaching quasi-criminal enforcement pressure.

Extradition Realities

One complicating factor is that Schwarzbaum resides in Switzerland.

Civil contempt alone is generally not extraditable under the U.S.–Switzerland treaty. However, the court’s referral for potential criminal prosecution introduces a new variable. If criminal contempt or related charges are pursued, Swiss authorities would evaluate extradition under the treaty’s dual-criminality standard.

In practice, that creates uncertainty:

·         Civil remedies may have limited cross-border enforceability

·         Criminal escalation may be necessary to compel compliance

·         Even then, extradition is far from guaranteed

Constitutional Undercurrents

Schwarzbaum has also challenged the underlying FBAR penalty on constitutional grounds, arguing a violation of his Seventh Amendment right to a jury trial.

This argument has gained some traction in other jurisdictions, particularly following a 2024 Texas federal court decision questioning the IRS’s ability to assess FBAR penalties without a jury proceeding.

While that issue remains unresolved at a broader level, it did not persuade the court here to delay or avoid enforcement.

Practical Takeaways

For practitioners advising clients with offshore exposure, this case highlights several important points:

·         FBAR enforcement is not slowing down; the government continues to pursue high-dollar cases aggressively.

·         Moving assets offshore does not eliminate enforcement risk; it often escalates it.

·         Courts are increasingly willing to use civil contempt—and even incarceration—to compel compliance.

·         Failure to engage with the court process (even from abroad) can significantly worsen outcomes.

·         Constitutional challenges to FBAR penalties remain unsettled but are not currently a reliable defense strategy.

Perhaps most importantly, this case illustrates that FBAR enforcement is no longer confined to financial penalties—it can evolve into personal liberty risk when taxpayers refuse to comply with court orders.

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Robocall Fundraiser’s Estate On The Hook For $4.3M In Payroll Taxes

On May 15, 2026, the U.S. District Court for the Eastern District of Michigan entered judgment in United States v. Estate of Richard T. Cole Jr., Deceased, et al., Case No. 2:22‑cv‑12916, holding the estate of a telemarketing entrepreneur liable for more than $4.3 million in unpaid payroll taxes tied to his robocall fundraising business. The ruling underscores how aggressively the government will pursue responsible persons—even after death—when withheld employment taxes are not paid over to the IRS.

Background: A Telemarketing Fundraiser That Didn’t Pay Payroll Tax

The defendant in the case was the estate of Richard T. Cole Jr., identified in court and media filings as a co‑founder of a defunct telemarketing fundraising company that operated large‑scale robocall campaigns. According to the government’s complaint, the company withheld federal income tax and FICA from its employees’ wages but failed to remit those “trust fund” amounts to the IRS over multiple quarters, generating millions of dollars in unpaid tax, penalties, and interest.

The United States filed suit in December 2022 in the Eastern District of Michigan, Detroit Division, to reduce to judgment the trust fund recovery penalty and related assessments that had been made against Cole during his lifetime. After Cole’s death, the case proceeded against his estate and associated defendants, with the government seeking to collect from probate assets based on his role in the company and its payroll tax compliance.

The Court’s Ruling: Personal Liability Survives Death

In its May 2026 decision, the court granted the government’s motion to hold Cole’s estate liable for more than $4.3 million in unpaid payroll taxes. While the written opinion is technical, several themes stand out for tax practitioners and business owners:

·         The court accepted the government’s position that Cole was a “responsible person” who willfully failed to collect, account for, and pay over trust fund taxes for the company.

·         The government’s assessments and supporting account transcripts were sufficient to establish the amount of liability, shifting the burden to the estate to rebut those figures, which it apparently could not do.

·         The court allowed the United States to enforce those assessments against the decedent’s estate, confirming that trust fund and related payroll tax liabilities remain collectible from estate assets even after the responsible person’s death.

The net result was a judgment of more than $4.3 million in favor of the United States, to be satisfied from the assets of Cole’s estate and any other property reachable under federal collection law.

Why Payroll Taxes Are So Dangerous

The case is a vivid illustration of why employment tax noncompliance is often described as “the nuclear issue” in federal tax enforcement. When an employer withholds federal income tax and the employee’s share of FICA from wages, those amounts are held in trust for the United States, and using them as working capital is treated as a serious breach of duty.

Key risk points highlighted by the case include:

·         Trust fund recovery exposure: Individuals who have authority over payroll, bank accounts, or bill‑paying decisions can be tagged as “responsible persons” and assessed personally under the trust fund recovery provisions if they willfully allow withheld taxes to go unpaid.

·         No corporate veil: The government is not limited to the employer entity; it can and will pursue officers, owners, and other responsible persons individually.

·         Liability outlives the taxpayer: As Cole’s estate learned, trust fund liabilities do not evaporate upon death; they become claims against the estate, competing with other creditors and heirs for limited assets.

For closely held businesses with cash‑flow issues, there is often intense pressure to use withheld taxes to cover payroll, vendors, or lenders, but this case reinforces that doing so simply converts a business cash‑flow problem into a long‑term personal collection problem.

Practical Takeaways For Business Owners And Fiduciaries

For business owners, officers, and professional fiduciaries, United States v. Estate of Cole offers several practical lessons.

·         Always prioritize payroll deposits. Federal employment tax deposits should be treated as a non‑negotiable expense; if the business cannot make its payroll tax deposits in full, that is a red flag that the underlying business model may be unsustainable.

·         Document who is responsible. Boards and owners should be deliberate about who has signatory authority, who approves disbursements, and who oversees payroll tax filings; those roles are precisely what the government looks at in assessing trust fund liability.

·         Address problems early. If a pattern of missed deposits emerges, prompt engagement with a tax professional and, where appropriate, the IRS Collection function can prevent a manageable shortfall from snowballing into multi‑million‑dollar personal liability.

·         Estate and probate implications. Personal representatives should expect that significant unpaid payroll tax liability will surface as a federal claim against the estate, and they should factor that into decisions about distributions, creditor negotiations, and litigation strategy.

If your business has ever delayed payroll tax deposits to cover other expenses, now is the time to evaluate your risk and discuss options, not after the IRS has filed suit.

 Have Payroll Tax Problems?

 

 Contact the Tax Lawyers at
Marini & Associates, P.A. 

for a FREE Tax HELP Contact Us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888-8TaxAid (888-882-9243) 

Sources:

1.       https://law.justia.com/cases/federal/district-courts/michigan/miedce/2:2022cv12916/366243/67/              

2.      https://www.law360.com/employment-authority/other/articles/2478384/co-founder-of-robocall-company-liable-for-4-3m-tax-debt                     

3.      https://www.law360.com/tax-authority/federal/articles/2478384/co-founder-of-robocall-company-liable-for-4-3m-tax-debt                    

4.      https://dockets.justia.com/docket/michigan/miedce/2:2022cv12916/366243   

5.       https://www.law360.com/cases/63891cb6df8164027bcba22c 

6.      https://appliedantitrust.com/06_conspiracy/b_twombly/allegations_sufficient/packaged_ice/packaged_ice_edmich_docket_sheet.pdf

7.       https://case-law.vlex.com/vid/u-s-v-cole-888382328

8.      https://www.ca10.uscourts.gov/sites/ca10/files/opinions/01019203633.pdf

9.      https://www.govinfo.gov/content/pkg/USCOURTS-mied-5_24-cv-10560/pdf/USCOURTS-mied-5_24-cv-10560-2.pdf

10.   https://www.govinfo.gov/app/details/USCOURTS-ca6-08-05752

11.    https://litigationtracker.law.georgetown.edu/wp-content/uploads/2023/01/Long-Island-Anesthesiologists_2024.10.14_REPLY-IN-SUPPORT-OF-MOTION-TO-DISMISS-PLAINTIFF-AMENDED-COMPLAINT.pdf

12.   https://48hourprobate.com/guides-media/2020/04/In-re-Estate-of-Cole.pdf

13.   https://case-law.vlex.com/vid/in-re-in-the-888083798

14.   https://www.law360.com/cases/686533726e2dfd36435e400e

15.    https://law.justia.com/cases/texas/second-court-of-appeals/2022/02-21-00410-cv.html

16.   https://law.justia.com/cases/federal/district-courts/michigan/miedce/2:2022cv12916/366243/67/   

17.    https://www.law360.com/employment-authority/other/articles/2478384/co-founder-of-robocall-company-liable-for-4-3m-tax-debt   

18.   https://www.law360.com/tax-authority/federal/articles/2478384/co-founder-of-robocall-company-liable-for-4-3m-tax-debt   

19.   https://dockets.justia.com/docket/michigan/miedce/2:2022cv12916/366243

IRS Offers Reduced Penalties in New Conservation Easement Settlement Program

In  IR-2026-65 the IRS has released a new, time-limited settlement initiative for taxpayers involved in conservation easement and historic preservation easement disputes, signaling both continued enforcement pressure and a renewed effort to resolve a large inventory of pending cases.

A Shift in Settlement Strategy

Since 2020, the IRS has offered settlement programs in syndicated conservation easement cases, generally requiring taxpayers to concede the charitable deduction entirely, accept penalties, and retain only a limited deduction for out-of-pocket costs. While those initiatives resolved over 400 cases, acceptance rates remained relatively modest.

This new initiative attempts to remove key barriers to participation—most notably by eliminating the requirement for an upfront payment in many cases and reopening settlement opportunities for taxpayers who previously declined or were ineligible.

Key Terms of the New Initiative

Eligible partnerships will receive individualized settlement offers, with a structured timeline and tiered penalty framework:

·         No charitable contribution deduction will be allowed.

·         Taxpayers may claim an “other deduction,” typically equal to estimated out-of-pocket costs.

·         A reduced gross valuation misstatement penalty applies:

o    10% if accepted within the initial 90-day window

o    20% if accepted within the following 45 days

·         Interest will continue to accrue under normal rules.

·         No upfront payment is required at the time of election (a notable departure from prior initiatives).

·         Cases will be resolved through stipulated decisions (for docketed cases) or closing agreements (for non-docketed cases).

After 135 days, the IRS will only consider settlements based on hazards of litigation—typically reflecting just 5% to 7% of the claimed deduction and a 40% penalty.

Scope and Eligibility

The initiative potentially affects a significant portion of the IRS’s current inventory:

·         Approximately 1,100 total cases remain pending.

·         Nearly 450 cases will benefit from deferred payment terms.

·         Around 500 previously rejected or expired offers may be revived.

·         Up to 175 new cases may now be eligible.

However, several categories are excluded, including cases on appeal, cases already tried, and certain imminent or designated test cases.

Litigation Reality Continues to Favor the Government

The IRS emphasized that recent court outcomes have overwhelmingly favored the government. On average, the Tax Court has allowed only about 6% of claimed deductions in these cases, typically coupled with a 40% gross valuation misstatement penalty and interest.

This context is central to evaluating the new offer: even with the disallowance of the deduction, the reduced penalty structure and deferred payment terms may produce a materially better economic outcome than continued litigation.

TEFRA vs. BBA Considerations

The mechanics of liability will differ depending on the applicable partnership regime:

·         TEFRA cases (generally pre-2018): Investors will receive computational adjustments after settlement.

·         BBA cases (2018 and later): Liability generally remains at the partnership level unless a push-out election applies, in which case partners will bear the adjustments individually.

Practical Takeaways

This initiative reinforces the IRS’s dual-track approach: aggressive litigation paired with structured settlement opportunities. For taxpayers and advisors, the decision is less about whether to concede and more about when—and on what terms.

The reduced penalty tiers, elimination of upfront payment in many cases, and the IRS’s strong litigation record all point to a narrow window for achieving a more favorable resolution.

Taxpayers with pending cases should expect individualized correspondence and should be prepared to act quickly, as no extensions will be granted.

How Our Firm Can Help

Once the IRS releases the detailed terms of the new settlement initiative, affected taxpayers will need to make fast, high‑stakes decisions. We expect the program to involve trade‑offs between certainty, cost, and the likelihood of success in continued litigation.

Our firm can assist by:

·         Reviewing your existing conservation easement transactions and identifying which are likely to be targeted.

·         Evaluating the strengths and weaknesses of your position in light of recent court decisions and IRS guidance.

·         Modeling the financial impact of potential settlement versus continued dispute.

·         Guiding you through the procedural steps of responding to settlement offers, negotiating where appropriate, and coordinating with other partners and advisers.

If you are involved in a conservation easement transaction or have received IRS correspondence regarding such an investment, now is the time to get ahead of the forthcoming settlement opportunity—not after the clock starts running.

Have A Conservation Easement Problem?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)