The Tax Times: An Expatriating Taxpayer, With FBAR Penalties, May Create New Precedent For Collection Outside the US?

Monday, January 9, 2023

An Expatriating Taxpayer, With FBAR Penalties, May Create New Precedent For Collection Outside the US? - Don't Think So!

According to Law360, as a result of a Floridian who moving his assets offshore in the wake of an $18 million penalty for failing to report foreign bank accounts, the U.S. should be allowed to seize the overseas funds, the U.S. told a Florida federal court on January 6, 2023 in U.S. v. Isac Schwarzbaum, case number 9:18-cv-81147, in the U.S. District Court for the Southern District of Florida.

Isac Schwarzbaum has not paid any amount he owes, forcing the U.S. to repatriate the funds he has deposited in several Swiss banks, the U.S. said in a motion to repatriate foreign assets.

"Schwarzbaum's blatant refusal to pay the judgment deprives the United States of funds to which it is legally entitled, and it also undermines the authority of the court," the U.S. said.

"Schwarzbaum's Actions May Encourage Others To Simply Refuse To Pay, Or Move Assets Offshore, Unless The United States Pursues Enforced Collection Efforts."

The Internal Revenue Service penalized Schwarzbaum in 2013 and 2014 for his willful failure to file Reports of Foreign Bank and Financial Accounts, or FBARs, for 2006 through 2009 on his Swiss accounts, according to court documents. The U.S. government sued in 2018 after he failed to pay the penalties, and a Florida federal district court found in March 2020 that he willfully failed to file.

However, the Eleventh Circuit found that the IRS erroneously used the highest balances of his foreign bank accounts to compute the penalties rather than their balances as of June 30, the deadline for filing FBARs, and made its own calculations of the penalty amount. The IRS should have redone the calculations, the Eleventh Circuit said in remanding the case. This remand did not vacate the entire judgment, the Florida court later ruled.

The IRS Recalculated Schwarzbaum's Penalties At
$17.9 Million As Of Sept. 12, 2022.

Schwarzbaum has no intention of paying the money he owes, the U.S. said in its motion. He sold his home in Florida and moved the proceeds overseas, it said. Schwarzbaum also has fled the country for Switzerland, the U.S. added, and has no intention of returning.

The Question Now Is How Does The IRS Levy On Assets
Outside The US or Against a Taxpayer
Who Is No Longer AUS Resident?