Victor Jaramillo Comments on FBAR Refund Claims in Bloomberg Tax

Foreign bank account holders may be forced to file lawsuits in order to recoup IRS penalties the U.S. Supreme Court ruled were excessive.

The high court said in its Feb. 28 decision in United States v. Bittner that the Internal Revenue Service was misreading the Bank Secrecy Act and over-penalizing foreign account holders who non-willfully failed to report their accounts. For some, the financial impact of the ruling could be enormous: Alexandru Bittner, for instance, now faces just $50,000 in penalties as a result of winning his case, not the $2.72 million the IRS assessed.

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Victor A. Jaramillo, a Member in Caplin & Drysdale’s Washington office who specializes in tax issues, questioned whether the IRS has legal authority to provide an administrative avenue for handling FBAR refund claims. He noted that the IRS can’t compromise on an FBAR penalty it has already assessed of more than $100,000 without approval from the Justice Department.

“If they do want to open up some sort of administrative avenue, they would need to find the legal grounds under which to do it, and I don’t know where you find that,” Jaramillo said.

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