IRS Criminal Investigation’s Top Ten Cases of 2021

Many (if not most) people and organizations approach a new year by setting new goals or implementing changes. This exercise, however, requires a reflection on the previous year’s events, successes, and failures. And government agencies are not exempt from taking time to reflect on the prior year’s accomplishments. IRS Criminal Investigation (CI) recently selected its “Top Ten Cases of 2021,” and the list involves quite a range of prominent investigations during the past tax year.

IRS CI, Generally

According to its mission statement, Criminal Investigation “serves the American public by investigating potential criminal violations of the Internal Revenue Code (IRC) and related financial crimes in a manner that fosters confidence in the tax system and compliance with the law.”[1] IRS CI’s four main strategies are compliance, money laundering, international, and terrorism.[2] Additionally, CI pursues investigations that align with its mission, considering factors, such as: whether the investigation is high profile, whether the investigation involves egregious allegations, the deterrent of the investigation, and conformity with the CI’s Annual Business Plan (ABP).[3]

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A Current “Playoff Picture” Of Non-Willful FBAR Violation

It’s that time of year again. Various football teams scramble at the end of the regular season for a chance at the playoffs. And with each game’s conclusion spectators get an updated “playoff picture” with respect to where each team stands. In that same spirit, as we begin 2022, it is helpful to see a “playoff picture” of the current legal landscape for FBAR violations, specifically non-willful violations. Certainly, football playoff games are more eventful than federal court decisions; however, such court decisions are no less impactful, particularly for those taxpayers with unreported foreign accounts.

FBARs, Generally

The Bank Secrecy Act, passed by Congress in 1970, authorized the Department of Treasury to collect certain information from U.S. persons who have financial interests in or signature authority over financial accounts maintained with financial institutions outside the United States. Further, in April 2003, the Financial Crimes and Enforcement Network (“FinCEN”) delegated its enforcement authority with respect to FBARs to the Internal Revenue Service.[1]

U.S. persons must file a FinCEN Form 114, Report of Foreign Bank and Financial Accounts (“FBAR”), if the aggregate maximum values of the foreign financial accounts exceed $10,000 at any time during the calendar year. For purposes of FBAR reporting, a “U.S. person” includes a citizen or resident of the United States, an entity created or organized in the United States or under the laws of the United States (including corporations, partnerships, and limited liability companies), a trust formed under the laws of the United States, or an estate formed under the laws of the United States.[2]

31 U.S.C. § 5321

A U.S. person may be subject to certain civil and/or criminal penalties for FBAR reporting violations. 31 U.S.C. § 5321(a)(5) states, in part, as follows:

(5) Foreign financial agency transaction violation.—

(A) Penalty authorized.—

The Secretary of the Treasury may impose a civil money penalty on any person who violates, or causes any violation of, any provision of section 5314.

(B) Amount of penalty.—

Except as provided in subparagraph (C), the amount of any civil penalty imposed under subparagraph (A) shall not exceed $10,000.[3]

Section 5321 also addresses penalties for willful violations, see 31 U.S.C. § 5321(a)(5)(C); however, this article is focused on the current landscape for non-willful violations and, specifically, what constitutes a violation.

Current FBAR Violations Map

FBAR Penalties



Breakdown of Major Court Decisions

The following federal cases addressed the issue (either directly or in dictum) of whether non-willful FBAR violations apply per FBAR filing or per foreign account. Each decision was issued in 2021 (save one), and the majority decisions occurred during the fourth quarter.

  • United States v. Boyd, 991 F.3d 1077 (9th Cir. Mar. 24, 2021)—Largely setting the 2021 landscape for FBAR violations, Boyd squarely addressed the meaning of “violation” and held it applied per FBAR filing. Accordingly, this decision is reflected in solid red in each state that comprises the Ninth Circuit Court of Appeals. For more information and discussion on this decision, see our previous Insight Blogs: Good News for the Taxpayer with Foreign Accounts—United States v. Boyd and Recent FBAR Case Allows Multiple Penalties for Single Failure to File FBAR.
  • United States v. Bittner, 19 F.4th 734 (5th Cir. Nov. 30, 2021)Bittner also directly addressed the meaning of “violation” and decided a non-willful violation applied per account, putting the Fifth Circuit directly at odds with the Ninth Circuit. This decision is reflected in solid blue in each state that comprises the Fifth Circuit Court of Appeals. For more information and discussion on this decision, see our previous Insight Blogs: The Largest Non-Willful FBAR Penalty Case Ever?Court Strikes Down Largest Non-Willful FBAR Penalty Ever, and Why Taxpayers in Louisiana, Texas, and Mississippi Should Consider the IRS’s Streamlined Compliance Procedure Program Now.
  • United States v. Horowitz, 978 F.3d 80 (4th Cir. Oct. 20, 2020)—As noted by the Fifth Circuit in Bittner, the Fourth Circuit has suggested that it would take a per-FBAR-filing view, rather than a per-foreign-account view. See Horowitz, 978 F.3d at 81 (“[a]ny person who fails to file an FBAR is subject to a maximum civil penalty of not more than $10,000[.]”). Accordingly, this dictum is reflected in a checkered, red pattern in each state that comprises the Fourth Circuit Court of Appeals.
  • United States v. Solomon, No. 20-82236-CIV, 2021 WL 5001911, at *1 (S.D. Fla. Oct. 27, 2021)—Like Bittner(albeit a month prior), the U.S. District Court for the Southern District of Florida determined that non-willful FBAR penalties should be applied per foreign account. The Solomon decision has been appealed, so it remains to be seen how the Eleventh Circuit will rule (given the history of Boyd and Bittner). Thus, the map currently reflects a striped, blue pattern in the state of Florida—although any decision by the Eleventh Circuit on this issue will also affect Alabama and Georgia. For more information and discussion on this decision, see our previous Insight Blog: Beware of Your FBAR Obligations—U.S. v. Solomon.
  • United States v. Giraldi, No. 20-2830 (SDW) (LDW), 2021 WL 1016215, at *1 (D.N.J. Mar. 16, 2021)—Over a week before the Ninth Circuit’s decision in Boyd, the District Court for the District of New Jersey also held that non-willful FBAR penalties should apply per FBAR filing. Accordingly, this decision is reflected in solid red in the state of New Jersey.
  • United States v. Kaufman, No. 3:18-CV-00787 (KAD), 2021 WL 83478, at *1 (D. Conn. Jan. 11, 2021)—Like Boyd and Giraldi, the District Court for the District of Connecticut decided that non-willful violations should apply per FBAR filing, not per foreign account. Accordingly, this decision is reflected in solid red in the state of Connecticut. For more information and discussion on this decision (as well as others), see our previous Insight Blog: Do FBAR Penalties Survive Death? A Texas Court Says “Yes”.


It is apparent that various federal courts have taken divergent views on the term “violation” with respect to Section 5321—whether it should apply only to each taxpayer’s FBAR filing or whether it should apply to any foreign account held by a taxpayer. The Boyd and Bittner decisions create a direct federal appellate split on the issue. Additionally, the Solomon case will provide the Eleventh Circuit the opportunity to provide input on this issue. Regardless, the legal landscape for FBARs (and non-willful violations) is still in flux and the subject of much discussion. Whether this issue is ultimately addressed by the U.S. Supreme Court or by a change in the laws by Congress remains to be seen. However, one thing is certain: taxpayers should be mindful of their FBAR obligations in this current environment.

Have a question? Contact Zachary Montgomery, JD, CPA Freeman Law, Texas.

Beware Of Your FBAR Obligations - United States v. Solomon

Free Attendee Ticket – Freeman Law International Tax Symposium

FBARs are no laughing matter. In recent years, the Internal Revenue Service, as well as other tax agencies around the world, have stepped up their efforts with respect to international civil tax enforcement. In particular, the Internal Revenue Service oversees investigations concerning FBAR compliance and assesses and collects civil penalties for those U.S. persons who fail to report foreign accounts. The penalties are steep—now a $12,921 maximum annual penalty. However, one relevant question is whether those penalties apply per FBAR filing or per account. In a recent decision by the Southern District of Florida, the Court determined that such FBAR penalties should be applied per account.

FBARs, Generally

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Section 6700 Penalties – False Or Fraudulent Statements

Promoting abusive tax shelters. Taxpayers and tax return preparers should be aware of the various penalties that exist and can be assessed for certain actions (or nonactions). One such action includes promoting an abusive tax shelter. In a previous blog, Freeman Law provided an expansive overview of tax shelter penalties: Tax Shelter Penalties: Listed Transactions and Reportable Transactions. However, in a recent memorandum, the Office of Chief Counsel of the Internal Revenue Service commented on what constitutes a “false or fraudulent” statement under Section 6700.

Section 6700, Generally

Under Subchapters A and B of 26 U.S. Code Chapter 68, taxpayers may be subject to certain additions to tax and assessable penalties. Taxpayers who promote abusive tax shelters can be subject to Section 6700 of the Internal Revenue Code. Section 6700 generally provides as follows:

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Cryptocurrency, Third-Party Subpoenas, And Personal Jurisdiction Collide - Strobel v. Lesnick

Coinbase, Mt. Gox, and Gemini are well-known virtual currency exchanges. It is through these exchanges that cryptocurrency users may execute transactions (e.g., a Bitcoin transfer—whereby a transaction announcement occurs on the blockchain). As noted in a previous blog post, cryptocurrency transactions are pseudonymous, not anonymous. Further, cryptocurrency users do not have Fourth Amendment privacy interests in their virtual currency transaction records. See Bare Bitcoins – No Fourth Amendment Privacy in Virtual Currency Records. However, in the civil context, are litigants privy to blockchain information to identify users? Last Friday, a federal district court dealt with whether a civil litigant could apply for leave to serve a third-party subpoena on certain cryptocurrency exchange platforms.

Strobel v. Lesnick, et al.

A. Background

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Missed Window - Taxpayer Loses Chance To Sue IRS On Claim For Refund

In The Merry Wives of Windsor, William Shakespeare penned the famous line: “Better three hours too soon than a minute too late.” And such sentiments of time are certainly true in the tax world. One minute late may have certain consequences—particularly when there are so many deadlines for tax filings, payments, even claims for refund. In a recent decision by the Eighth Circuit Court of Appeals, the Court affirmed the lower court’s determination to dismiss the taxpayer’s lawsuit against the IRS. The taxpayer, the Court held, missed the period of limitation on filing a claim for refund, and, therefore, the Court did not have subject-matter jurisdiction.

28 U.S.C. § 1346

Generally, federal district courts have original jurisdiction with respect to civil lawsuits brought against the United States for the recovery of taxes. Specifically, Section 1346(a)(1) provides as follows:

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Back Off, IRS! - Accounts Holding Advance Child Tax Credit Payments Immune From Levy?

By now, many eligible taxpayers may have found a deposit appear in their bank account during July. This was likely in addition to one or more correspondence letters from the Internal Revenue Service and/or the White House (which may or may not have given some taxpayers a heart attack, thinking the IRS letter was a potential income tax audit). That initial deposit and related communications were the beginning of advance Child Tax Credit payments. Eligible taxpayers will receive periodic payments between July and December 2021 in advance of the 2021 Child Tax Credit claimed on their 2021 personal income tax returns. Some taxpayers are not thrilled about the advance deposits (to the extent they have received them); however, according to a recent memorandum issued by the Internal Revenue Service, such funds may be subject to levy protection.

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Zachary Montgomery - Tough Luck, Taxpayer!—IRS Continues to Levy on Social Security Benefits

Many taxpayers (if not all) would agree with the sentiment expressed on a wall plaque that recently caught my eye: “Dear IRS: I would like to cancel my subscription. Please remove my name from your mailing list.” That feeling is intensified for those taxpayers who owe the Internal Revenue Service money for back taxes. The IRS has various tools at its disposal to collect outstanding tax liabilities: notices, liens, personal visits, etc. However, levies are perhaps one of the most powerful tools (weapons?) the IRS wields against taxpayers. In a recent decision by the Eleventh Circuit Court of Appeals, the Court affirmed the lower court’s determination to dismiss the taxpayer’s lawsuit against the IRS. The IRS, the Court held, acted lawfully when it continued to collect the taxpayer’s Social Security benefits from a levy it issued prior to the ten-year collection statute expiration date.

Section 6331

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"Extreme Personal Hardship” Doesn’t Excuse Trust Fund Recovery Penalties

Trust Fund Recovery Penalties (or TFRPs) refer to the tax penalties assessed against the responsible person(s) of a business (e.g., directors, officers, etc.) that failed to collect, account for, or pay over taxes on behalf of its employees. As a result, the failure of a business to pay over employment taxes does not necessarily stop with the business. Directors and officers may be personally liable for their actions (or inactions) with respect to the business’ employment taxes. In a recent decision by the Fifth Circuit Court of Appeals, the Court affirmed the lower court’s determination that the president and owner of certain businesses was personally responsible for trust fund recovery penalties. Further, while the taxpayer experienced “extreme personal hardship,” as well as business difficulties, those circumstances did not excuse his underlying tax responsibilities.

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Ill and Illiterate - Torres v. Commissioner

Distinguished physicist, Albert Einstein, once said, “The hardest thing in the world to understand is the income tax.” Likewise, the constantly growing Internal Revenue Code is difficult to understand. But perhaps it is even more difficult to understand when one cannot read, or one is suffering from a debilitating illness. In a recent memorandum opinion, the Tax Court dealt with a taxpayer who (1) argued that a deduction qualified under either Section 162 or 165, and (2) argued that he should not be subject to the addition to tax under Section 6651(a)(1). While the taxpayer’s inability to read and illness excused the assessment under Section 6651(a)(1), the taxpayer’s arguments to claim a tax deduction ultimately failed.

Sections 162 and 165

As a general rule, a trade or business shall be allowed a deduction for all of the ordinary and necessary expenses paid or incurred during the taxable year.[1] Expenses are “ordinary” if they are ordinary, usual, or customary or is related to a transaction of common or frequent occurrence for a given type of business.[2] Additionally, expenses are “necessary” if they are helpful and appropriate to the taxpayer’s business, though the expenses need not be essential.[3]

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Passport Revocation Challenges—Shitrit v. Commissioner

Section 7345. Perhaps it’s the challenge it poses to U.S. taxpayers and their rights and freedoms (i.e., international travel). Perhaps it’s the type of method employed by the U.S. government to promote federal tax compliance. Or perhaps U.S. taxpayers don’t want to think about passport issues after being stuck inside for over a year. Regardless of the reasons, U.S. taxpayers continue to pose challenges to Section 7345 of the Internal Revenue Code. I covered one such challenge in a previous blog regarding the constitutionality of Section 7345: Is Section 7345 Constitutional? – Jones v. Mnuchin. However, in a recent memorandum opinion, the Tax Court dispensed with a taxpayer’s contest of certain tax issues related to Section 7345 based on mootness and jurisdictional grounds.

Section 7345, Generally

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Release The Kraken?—In Re Tax Liability Of John Does

No, I’m not referring to Laurence Olivier’s (or Liam Neeson’s) quote as Zeus in Clash of the Titans. The “Kraken” is actually a reference to Payward, Inc. dba Kraken—a digital currency exchange and trading platform. In one of its more recent investigations in the digital currency realm, the Internal Revenue Service is seeking information on cryptocurrency transactions (and the associated taxpayers) related to Kraken. Currently, the United States is seeking to serve John Doe summonses on Kraken to uncover helpful information as a part of its ongoing cryptocurrency investigation. However, such summonses are not without limit, as a federal court in California is currently evaluating whether the summons at issue conforms with the requirements of Section 7609(f).

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