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Punishing FBAR Penality, IRA Rollovers, Sick Leave Rules

Saul Brenner 06.18.2014 | eVisor


Penalty Exceeds Account Balance in FBAR Case

Can a penalty be more than the balance in your bank account? It may be so in the world of Foreign Bank and Financial Account Report (FBAR) penalties.  On May 28, 2014, in U.S. v. Carl Zwerner, 1 a jury found that the defendant willfully failed to file FBARs for Swiss bank accounts or the years 2004 through 2006. The maximum penalty is 50% of the highest balance in the unreported accounts for each year.  Under these strict rules, the FBAR penalties of $2,241,809 in this case substantially exceeded the balance of the accounts.

It was noted that the defendant kept the accounts under two different entity names and answered “no” on a tax return question that asked if he had any foreign accounts. Nevertheless, he did make a voluntary disclosure and paid taxes for 2007.  Further, in 2011, he attempted to participate in the IRS Offshore Voluntary Disclosure Initiative but was denied because he was already being audited. This decision could be revised under the Excessive Fines Clause of the Eighth Amendment.

In this contentious atmosphere, it is worth noting that the filing date for FBAR forms, which went all-electronic in 2013, is June 30.  You are required to file if you have a financial interest in or signature authority over at least one financial account located outside of the U.S. with an aggregate value of all foreign accounts exceeding $10,000 at any time during the calendar year.

Questions? Contact Saul Brenner at 212.331.7630 |

1 United State District Court for the Southern District of Florida Miami Division Case No. 13-22082-CIV-ALTONAGA/O’Sullivan United States of America v. Carl R. Zwerner



IRA Rollovers Limited 

The IRS has decided to follow a recent Tax Court decision 1 that settled the question of a limitation on rolling over IRAs. The bottom line for taxpayers is that you are limited to one rollover per year.2

The question was whether Sec. 408(d)(3)(B) applied to taxpayers on an aggregate basis or on an IRA-by-IRA basis.  By agreeing with the Tax Court’s decision applying the rule on an aggregate basis, the IRS went against its own proposed regulations 3 which it now intends to withdraw.

Sec. 408(d)(3)(A)(i) permits a tax-free rollover of funds in an IRA as long as the amount distributed to the taxpayer is paid into an IRA for the taxpayer’s benefit within 60 days, subject to the one-rollover-per-year limit of Sec. 408(d)(3)(B).  To give IRA trustees time to change their procedures for making IRA rollovers and disclosure documents, the new rules will not apply to rollovers made before 1.1.15.

1 Bobrow, T.C. Memo. 2014-21

2 Announcement 2014-15

3 Prop. Regs. Sec. 1.408-4(b)(4)(ii) and IRS Publication 590, Individual Retirement Arrangements (IRAs)

Questions? Contact Saul Brenner at 212.331.7630 |



NYC Sick Leave Rules Leave Hospitality Industry Uneasy

The New York State Restaurant Association is raising questions concerning NYC’s new paid sick leave rules which went into effect on 4.1.14.  Calling the rulemaking process rushed, the Association noted that the rules fail to address operational issues specific to the hospitality industry, including the four hour maximum shift rule.  It also noted that the law became effective before the rules were passed. 

The absence of sick leave rules had made it difficult for businesses to finalize their human resources policies.  Under the new rules, businesses with fewer than 20 employees have a six month grace period  protecting them from being fined for unintended violations of the law.   

For more information on the sick leave rules, go to:

Questions? Contact Jack Pulvirenti at 212.331.7514 |