A couple’s inability to convince a federal appeals court they were entitled to a hearing over IRS penalties for alleged failure to report their foreign financial holdings still leaves taxpayers with other avenues to raise similar arguments.
The US Court of Appeals for the Eleventh Circuit held that foreign bank account reporting penalties aren’t taxes, so Stephen and Judy Jenner couldn’t petition the US Tax Court to challenge the IRS’s refusal to provide a collection due process hearing before withholding their Social Security benefits.
But the appeals court was clear that decision doesn’t close the door on the Jenners’ ability to fight the penalties.
“The IRS can offset money owed by the federal government to the person who owes FBAR penalties to the government,” said Brian Camp, a tax professor at Texas Tech University School of Law. “A person who believes the IRS has wrongfully offset money can sue for the return of that money in federal court.”
A win by the Jenners wouldn’t necessarily have affected their ability to overturn the underlying penalties.
But a finding that a CDP hearing is warranted before penalties were collected could have at least slowed the process, said Scott Frewing, a tax litigator and partner at Baker McKenzie.
Offset or Levy?
Practitioners saw the Eleventh Circuit as potentially amenable to the Jenners’ argument, based on previous cases in which the court expressed sympathy for people who failed to file FBARs.
In January, for example, the court held that FBAR penalties are subject to Eighth Amendment scrutiny as a potentially excessive fine, creating a split with the First Circuit—previously the only other circuit to rule on the issue.
Frewing pointed to the Jenners’ argument that the notice-and-hearing requirements for a levy under IRC Section6330 aren’t limited to taxes, and therefore FBAR penalties should be entitled to the same process.
The government, however, said the two enforcement actions are completely different.
A levy is the seizure of a taxpayer’s property—like money in a bank account—to satisfy a tax liability, while an administrative offset under 31 U.S.C. § 3716 preserves money already in the government’s possession in order to satisfy a non-tax debt, it argued.
Merits Undetermined
Megan Brackney, a tax controversy attorney and partner at Kostelanetz LLP, said there’s potential legal ground to treat the process for collecting FBAR penalties the same as tax levies.
Those penalties aren’t explicitly laid out in the Internal Revenue Code, but rather described in the Bank Secrecy Act. The Treasury Department delegated its statutory FBAR authority to the IRS.
The IRS’s participation poses the question of why the Jenners couldn’t use statutory tools intended to protect taxpayers’ rights where the IRS is the agency responsible for collecting penalties, Brackney said.
“The problem they’re identifying—being able to get relief from a Social Security offset—is a serious and real problem,” she said.
Still, Brackney was unsure why the Jenners didn’t file their case in the US Court of Federal Claims, the usual venue for monetary claims against the federal government.
It remains to be seen whether the Jenners can now win relief in the Court of Federal Claims. The couple has yet to make any merits-based arguments as to whether the FBAR assessment was the proper amount or for the proper reason, Camp said.
The couple’s “argument was all about procedure, not merits,” Camp said. If they want to make a merits argument about the FBAR assessment, they can do that in federal court, as the appeals court pointed out, he said.
Mather Anderson represents the Jenners.
The case is Jenner v. Commissioner, 11th Cir., No. 25-10014, unpublished 12/8/25.
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