The IRS is demanding much of an 88-year-old retiree's savings;
@IJ is fighting the excessive fine.
Tuncay Saydam (pronounced Toon-jai) dutifully paid his taxes every year, using one of the big filing services millions of Americans work with. He didn’t know that he needed to fill out a one-page form to tell the government about a foreign bank account he was keeping as his nest egg—money he’d earned decades earlier from teaching and consulting in Europe.
When the IRS audited him, they said he owed $29,000 in back taxes and $12,000 in late penalties. But because of the missing forms alone, the IRS is demanding another $437,000. That would gut Tuncay’s life savings.
Tuncay earned the money in his account by being a pioneering computer science professor respected worldwide. Tuncay was born in poverty in Turkey but excelled in mathematics from a young age. He first came to the United States as a Fulbright Scholar in the early 60s and worked on early computers at the University of Texas.
He helped found the first computer science program in Turkey and gained an international reputation for his work. In 1979, he was invited by the University of Delaware to teach, and a decade later he and his wife became American citizens. Today, his children and grandchildren are successful and he is retired and living near family in San Francisco.
During several sabbaticals in the 80s and 90s, he taught in Switzerland and also did consulting work for Swiss telecommunications firms. He left his earnings in a bank account overseas that he intended to keep for retirement. For years, he didn’t do much with it, only moving it to Turkey after his Swiss bank decided to close all American accounts.
Under the 1970 Bank Secrecy Act, Americans with foreign bank accounts containing over $10,000 must file annually a one-page “FBAR” form with the government. If someone fails to file the form, the penalty can be either $100,000 per report or half of whatever the unreported bank account contained for each unreported year.
The law was passed in the intention of uncovering transnational crime, but it has become a trap for unwary retirees. A few years ago, for example, IJ appealed a similar case on behalf of a woman who had a foreign bank account that her father had passed down to her. The father had escaped Germany during the rise of Naziism and told her the money should be used in case the family ever needed to flee because of persecution. And her and Tuncay’s experiences are hardly unique. As one advocacy organization explained in Tuncay’s case, “the FBAR has ensnared everyone from Holocaust survivors and their families for maintaining ‘escape funds’ to guard against another genocide to American citizens who live overseas and simply deposit their overseas earnings into overseas accounts.”
The Eighth Amendment is short and simple: “Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.” But when a fine becomes excessive isn’t a simple matter for courts right now.
In Tuncay’s case, the district court said that the IRS was best positioned to determine for itself when a fine becomes excessive. But the fine Tuncay is facing is fifteen times more than his back taxes. And for its part, the IRS stridently maintains that the Excessive Fines Clause doesn’t constrain its FBAR penalties at all. They’re “penalties,” you see, not “fines.” And if that strikes you as a distinction with a difference, you’re not alone.
IJ litigated the last major excessive fines case to be considered by the Supreme Court. That 2019 decision said that the Eighth Amendment applies not just to the feds, but to state and local governments as well. There, Indiana was trying to punish a man with the forfeiture of his car for a low-level drug offense. Ultimately, the Indiana state courts agreed with IJ that forfeiting the car was “grossly disproportionate” to the serious of the crime.
If the federal court were to follow the same standards IJ successfully argued for in Indiana, Tuncay would certainly owe a much more reasonable amount. Fines cannot be grossly disproportional to the offense, and Tuncay’s offense was failing to file a handful of forms, not doing anything illegal or illicit with his money.
Tuncay is facing a devastating blow to his finances, but he remains optimistic and hopes that his case could make the promise of the Eighth Amendment real for more Americans. His case will be heard at the federal appeals court later this year. Stay tuned.