The penalty for fairly innocent goofs can run into the millions of dollars. Just ask 82-year-old Monica Toth, who the IRS sent a bill to for $2.2 million. Read more:
s there any limit to how unpleasant the IRS can be with people who pay all their taxes but don’t fill out the forms correctly?
Richard Collins, 85, is a Canadian-born engineer living in Pennsylvania. He spent much of his career abroad, and had accounts in France, Canada and Switzerland. In some cases these accounts were necessary in order to receive pay on government contracts. Collins was assessed a $308,000 FBAR penalty, plus a $98,000 penalty for not paying the penalty. The IRS beat him in lower courts. Collins is asking the Supreme Court to step in. If it declines the case, he will lose a large chunk of his retirement money.
Mess up, and you become a revenue raiser for the federal government. For the nine years through 2020, the IRS assessed $1.5 billion in FBAR penalties. Samuel Gedge, an Institute for Justice lawyer working on the Toth case, describes the government’s philosophy this way: “Take the most money from the most number of people with the least oversight.”
Part of the problem for the little guy is that, in most of these disputes, the taxpayer does not have the option to appeal to the Tax Court, a friendly venue that accommodates do-it-yourself litigants. Another IRS weapon is the ability to see multiple violations where ordinary folk would see only one. Alexandru Bittner is a Rumanian-U.S. businessman with complicated affairs and a lot of bank accounts. He paid taxes correctly. The IRS assessed him for five years of failing to report his foreign accounts. He should have sent in one FBAR, listing every account, annually.
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