Settlement Agreement Means FBAR Penalties & 8th Amendment Questions Linger – Los Angeles Income Tax Planning & Income Tax Litigation Attorney Bruce Givner

by Bruce Givner on June 25, 2014

A few weeks ago we blogged about a case in which Carl A. Zwerner was set to face over $2 million dollars in penalties for failing to submit a Report of Foreign Bank and Financial Accounts (FBAR) for an account he held in a Swiss bank three out of four years. Now it appears that a settlement has been reached, leaving practitioners and taxpayers alike to wonder about the question of whether or not those penalties violated the Eighth Amendment.

On June 6, Zwerner’s attorney, Martin Press, stated that his client and the Department of Justice (DOJ) had reached a settlement, the terms of which have yet to be disclosed. Press added “Mr. Zwerner believed that a settlement at this time was in his best interests. The Eighth Amendment issue will have to be litigated at some future date by others.”

At issue was the size of the penalties. Specifically, Zwerner faced a penalty of 50% of the account for each year in which it went unreported. Totaling $2.2 million, the penalty would have exceeded the amount in the account in any of those three years. Given the unprecedented size of the penalty, practitioners questioned the penalty’s legality under the Eighth Amendment, which prohibits cruel and unusual punishment.

The settlement agreement has led some to believe that the government was unprepared to make their case on the issue. Josh O. Ungerman of the Dallas firm Meadows, Collier, Reed, Cousins, Crouch & Ungerman LLP, argued that the settlement shows the government’s reluctance for the case to go to an appeals court. Ungerman added that he found it especially troubling that Zwerner was still hit with willful FBAR penalties after trying to go into the IRS’s Offshore Voluntary Disclosure program (OVDI).

Givner & Kaye focuses on sophisticated income tax planning and compliance, tax litigation and procedure, estate planning, and asset protection plans for individuals and businesses in Beverly Hills, Calabasas, West Los Angeles, Hollywood, and other areas of Los Angeles, Orange, Ventura, San Bernardino, Riverside and Santa Barbara Counties. Call Los Angeles Estate Planning and Asset Protection Plan Attorneys Givner & Kaye at (310) 207-8008 today.

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