The Supreme Court of the United States denied cert (i.e., review) of a Ninth Circuit Court of Appeals’ decision affirming a federal court’s decision in favor of the IRS, which assessed a staggering $1.2 million penalty against the taxpayer for failing to disclose a foreign bank account.

The sweeping decision was announced on April 30, 2018 and is significant for two reasons. First, it demonstrates that when it comes to civil penalties, how vast the FBAR penalty can be even for a taxpayer with a single unreported foreign account in a single tax year (i.e., tax year 2006). Indeed, many tax practitioner consider the FBAR penalty to be second in size to only the civil fraud penalty. Second, it shows the type of taxpayer arguments that courts will not hesitate to throw away with the bathwater when it comes to determining whether the IRS abused its discretion in calculating the penalty amount.

While the Bussell Appeals Court decision does not address how the IRS calculated its $1.2 million penalty, it nonetheless gave the penalty its stamp of approval. One can speculate that this had a little something to do with the court’s holding that Ms. Bussell willfully failed to disclose her foreign account. Compounding matters was Ms. Bussell’s prior arrest dating back to 2002 for concealing financial assets that must not have sat well with the judges. Indeed, she arrived in court tainted by a prior brush with the criminal justice system which destroyed her reputation for being an honest and trustworthy person. Thus, Ms. Bussell’s past cannot be overlooked as having at least some bearing on the IRS’s assessment and on the Court’s decision.

The arguments advanced by Ms. Bussell but rejected by the Appeals Court include the following:

• the penalty violated the Eighth Amendment Excessive Fines Clause;
• the government violated the statute of limitations by failing to bring its claim earlier (however, the record showed otherwise … the government filed suit within the 6-year statute of limitations period)
• the assessment violated Ms. Bussell’s due process rights because the government could have brought the claim against her earlier;
• Ms. Bussell was punished more than once for the same offense;
• the IRS abused its discretion in calculating the penalty amount;
• by allowing banking evidence to be introduced during the case, the district court violated an international treaty between the United States and Switzerland.

Bussell petitioned the Supreme Court of the United State to review the Court of Appeals’ decision, but the Court refused to hear the case, thus ending this sordid affair once and for all and eliminating any possibility of Ms. Bussell snatching victory from the jaws of defeat.

As the Bussell decision demonstrates, failing to file an FBAR is no laughing matter. For FBAR delinquent taxpayers, programs are provided by the IRS to prevent catastrophic outcomes that could deprive you of something far greater than your money – your liberty. If you have unreported foreign bank accounts, the time is now to speak to a tax attorney.