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Supreme Court Urged to Rein in IRS on Foreign Account Penalties

Aug. 19, 2022, 1:48 PM

A penalty for non-willfully failing to report foreign bank and financial accounts applies only once per year, not as many times as there are unreported accounts in a given year, said a dual Romanian-US citizen whose case will be argued before the Supreme Court this fall.

Alexandru Bittner is fighting a $2.72 million IRS bill for non-willfully failing to report foreign accounts over five years. Bittner said in his Thursday brief that he had been living abroad, didn’t know about the reporting requirement, and filed late corrected forms to report all the accounts, which were owned and run by Romanian companies.

“This is a classic situation for invoking” principles around lenience and for “refusing to presume Congress intended harsh punishments without saying so clearly in the enacted text,” Bittner told the high court.

The justices will hear arguments in the case on Nov. 2 over whether the $10,000 penalty for US residents and citizens who non-willfully fail to report foreign accounts on the annual forms known as FBARs applies each year for each unreported account, or simply once for the year. The Bank Secrecy Act reporting requirement applies to those who have more than $10,000 in foreign accounts.

The difference in the ensuing penalty bill would be staggering. If Bittner’s interpretation wins the day, he will owe just $50,000—less than one-fiftieth the IRS’s $2.72 million figure.

A trial court sided with Bittner in 2020, but was overturned by the US Court of Appeals for the Fifth Circuit the following year. The Fifth Circuit’s interpretation of the penalty created a split among circuit courts; the US Court of Appeals for the Ninth Circuit had previously ruled against the government’s stance.

On Thursday, Bittner insisted the reporting requirement asks only a binary question of whether a report was properly filed—meaning each mistake doesn’t trigger its own statutory violation.

Bittner also warned that the more expansive interpretation of the penalty would give the IRS too much discretion.

“The difference between those two metrics is not slight; just as it has in the past, this ‘discretion’ would permit the IRS to wield improper leverage and strongarm settlements by threatening parties with dozens of statutory violations for accidentally neglecting a single form,” Bittner said in his brief.

Clark Hill PLC and Haynes and Boone LLP are representing Bittner.

The case is Bittner v. United States, U.S., No. 21-1195, brief 8/18/22.

To contact the reporter on this story: Aysha Bagchi in Washington at

To contact the editors responsible for this story: Rachael Daigle at; David Jolly at