January 2022

So, you realize that you didn’t report all your income or foreign bank accounts to the IRS and decide that rather than paying a penalty, you sell all your US assets and move to another country far from the IRS. Or maybe you live already in another country and liquidate all your US assets and think that now there is nothing the IRS can get their hands on.

WRONG! Turns out the IRS can file for an Order To Repatriate Foreign Assets to satisfy a judgment.

That is what happened in United States v. Schwarzbaum. In this case, the U.S. District Court for the Southern District of Florida initially entered a judgment against Isac Schwarzbaum, a German native, of over $15.7 million in FBAR penalties, late-payment penalties, and interest in August 2020.

Schwarzbaum was given until September 11, 2020, to pay, but he didn’t respond to demand letters, and his debt together with surcharges for forcing the government to pursue collection efforts now reaches over $18 million.

Shortly after the court’s ruling in his case, Schwarzbaum sold his Palm Beach County residence and moved to Switzerland believing that the United States cannot compel the use of his Swiss holdings to satisfy the judgment against him.

The IRS didn’t give up and in June 2021 a magistrate judge agreed with the IRS’s request to issue a Report and Recommendation for a Repatriation Order to satisfy the FBAR penalties. The reason the IRS wanted an order of repatriation is that, according to the IRS, Schwarzbaum holds over $49 million in Swiss accounts that should be available to satisfy the FBAR judgment, as Schwarzbaum appears to have no longer any U.S. assets.

The District Court confirmed the magistrate judge’s Repatriation Order holding that the IRS was entitled to an order granting repatriation of funds in offshore accounts in support of collection of the judgment.  The Court supported the repatriation based upon the Federal Debt Collection Procedures Act of 1990 and the incorporation of the All Writs Act.

Schwarzbaum has appealed the Repatriation Order to the Eleventh Circuit.

In a different case, United States v. Monica Harrington, the IRS sought a preliminary injunction against Monica Harrington to require her to repatriate $2.2 million in an account at the Swiss bank Vontobel Holding AG.

The IRS sought the injunction to make sure that there will be enough money to pay any penalties, in the event the IRS will prevail in a still ongoing FBAR collection action against Monica Harrington’s husband, George.

George allegedly transferred in December 2012 ownership of his account of $2.7 million to Monica three months after he was first contacted by the IRS, in order to avoid the IRS from collecting any penalties.

The court did not compel Monica to repatriate the money but did order that she leaves at least $2.2 million available in the account.

We will keep you updated of course on the outcome of these cases, but if you find yourself in a similar situation, maybe it is time for you to not wait and run away from the IRS but to talk or meet with our attorneys and see how to come forward and minimize the penalties for you and/or your family.