Richard Collins v. United States

This case involves the Bank Secrecy Act’s foreign bank account reporting (“FBAR”) penalty, which is assessed against individuals who “willfully” fail to report to the Treasury Department the existence of their foreign bank accounts with a value of over $10,000. The Treasury Department delegated assessment authority to the Internal Revenue Service. Under the statute, the Treasury Department has two years to reduce the penalty assessment to a judgment in a de novo proceeding filed in federal district court. Collins contends that this Court should review the penalty imposed in this action. The FBAR penalty imposes draconian financial punishments on “willful” failures to report foreign bank accounts. However, the term “willful” really means “reckless” in this context and the penalty is up to fifty percent of the value of the account. Such a penalty can be exceedingly harsh, as was the case here where the IRS imposed a penalty of nearly 35% of the balance of Collins’s foreign accounts, which represented a substantial portion of his retirement funds. This case is an ideal vehicle to analyze the grossly disproportionate penalty along with the complete lack of substantive proof of willfulness. The underlying penalty assessed by the Government was an overreach and certainly not warranted on these facts. The questions presented to this Court are as follows: Whether the Government overreached by imposing any penalty on a taxpayer who owed no additional