The Tax Times

Tuesday, December 9, 2025

No CDP Lifeline for FBAR Penalties: Eleventh Circuit Clarifies Tax Court Limits

The Eleventh Circuit has delivered an important reminder to taxpayers with foreign account reporting problems: you cannot use the U.S. Tax Court’s Collection Due Process procedures to fight FBAR penalties or Social Security offsets collecting those penalties. In Stephen Jenner et al. v. Commissioner of Internal Revenue, No. 25-10014 (11th Cir.), the court affirmed the Tax Court’s dismissal of a CDP petition brought by a Florida couple who tried to challenge the collection of their willful FBAR penalties through Treasury’s offset of their Social Security benefits.

Stephen and Judy Jenner had previously been hit with significant willful FBAR penalties under Title 31 for failing to report foreign accounts. Those penalties were then collected through the Treasury Offset Program, which diverted a portion of their monthly Social Security benefits. Treating this like any other IRS collection action, the Jenners submitted paperwork seeking a Collection Due Process (CDP) hearing and then petitioned the Tax Court when they did not receive the relief they wanted. Their theory was straightforward: if the government is taking their benefits to collect a federal liability, they should get the same CDP protections available for federal tax debts.

Both the Tax Court and the Eleventh Circuit rejected that position. The key distinction is that FBAR penalties are imposed under Title 31 of the U.S. Code, not the Internal Revenue Code. CDP jurisdiction under sections 6320 and 6330 applies only to “unpaid tax” and related additions and assessable penalties under Title 26. In other words, the CDP regime is a tax mechanism, not a universal shield against every kind of federal debt collection. Because the Jenners’ liability was a Title 31 FBAR penalty, there was no qualifying CDP “determination” and the Tax Court had no jurisdiction to review their case.

For taxpayers and practitioners, the message is clear:

Tax Court Is Not A Viable Forum To Litigate FBAR Penalty Collections, Even When The Government Uses Familiar Tools Like Offsets Against Social Security Benefits.

Challenges to FBAR assessments and collection must instead proceed through other avenues, such as refund litigation in federal district court or the Court of Federal Claims, or by defending against government-initiated suits to reduce penalties to judgment. Advisors representing clients with FBAR exposure should plan strategy with this jurisdictional line firmly in mind and avoid giving clients false comfort that a CDP petition will stop or undo FBAR-driven offsets.

This decision also underscores the growing structural divide between traditional tax controversies and the parallel world of Bank Secrecy Act enforcement. While IRS employees play a central role in FBAR examinations and assessments, the remedies, procedures, and forums are not interchangeable with those that apply to income tax, employment tax, or other Title 26 liabilities.

For high-net-worth individuals and cross‑border clients, that means any FBAR problem needs litigation and settlement strategy from day one and one that accounts for the limited role of the Tax Court and the real risk that collection can proceed through administrative offsets with fewer procedural guardrails than many taxpayers expect.

Do You Have Undeclared Offshore Income?

Want to Know if the OVDP Program is Right for You?

Contact the Tax Lawyers at

Marini & Associates, P.A.

for a FREE Tax Consultation contact us at:

www.TaxAid.com or www.OVDPLaw.com

or Toll Free at 888-8TaxAid (888) 882-9243

Sources

1. https://law.justia.com/cases/federal/appellate-courts/ca11/25-10014/25-10014-2025-12-08.html

2. https://www.law360.com/articles/2419350/11th-circ-affirms-tax-court-wrong-venue-for-fbar-challenge

3. https://my.kiplinger.com/members/links/ktl/241107/Jenner_v_Commissioner.pdf

4. https://ustaxcourt.gov/files/documents/163_TC_141-150.pdf

5. https://law.justia.com/cases/federal/appellate-courts/ca11/2025/

6. https://www.journalofaccountancy.com/issues/2020/jul/tax-court-denial-travel-deductions/

7. https://editions.journalofaccountancy.com/article/Tax+Matters/4925877/839905/article.html

8. https://us11thcircuitcourtofappealsopinions.justia.com/category/tax-law/

9. https://www.facebook.com/groups/573295111141320/posts/1373278684476288/

10. https://law.justia.com/cases/federal/appellate-courts/ca11/

11. https://www.daslifesciences.com/_files/ugd/24a291_c5870b46509a45f08a999afe29189b2d.pdf?index=true

12. https://unicourt.com/courts/federal/us-courts-of-appeals-3?upid=2519735296&init_S=csup_next

13. https://www.academia.edu/144098373/BORDER_MARKETPLACES_AS_INFRASTRUCTURES_OF_MOBILITY_VISA_REGIMES_AND_EVERYDAY_TRANS_LOCALITY_IN_TEXAS

14. https://casetext.com/case/jenner-v-commr-of-internal-revenue-6

15. https://ru.scribd.com/document/791913136/VisionIAS-Research-and-Analysis-December-2024-Science-and-Technology-10-Years-UPSC-PYQ-Trend-Analysis

16. https://www.law360.com/tax-authority/cases/677c57f583edd5a35154727e

17. https://www.ca11.uscourts.gov/sites/default/files/oral_arguments/cal6(Rev.1)_0.pdf

18. https://www.ca11.uscourts.gov/unpublished-opinions-log

19. https://www.gtlaw.com/-/media/files/insights/alerts/alerts-prior-to-march-27-2017/024906gt-alertsupreme-court-allows-taxpayers-to-question-irs-agents-regardi.pdf

20. https://ustaxcourt.gov/files/documents/appellate_report_january_2025.pdf

Friday, November 21, 2025

Issues Concerning Filing a Form 706NA?

We previously posted "Some Nonresidents with U.S. Assets Must File Estate Tax Returns" where we discussed that deceased nonresidents who were not American citizens are subject to U.S. estate taxation with respect to their U.S.-situated assets.

Many foreigners owning property or assets in the United States are in violation of 706-NA filing requirements because of a number of misunderstandings. The basic rule is pretty clear-if a foreign decedent has assets in the United States with a gross value in excess of $60,000, the estate is supposed to file a tax return with the Internal Revenue Service.

Many people think of numerous reasons not to file. The main one relates to mortgages or liens against the US property. Assume that a property in Florida is worth $150,000 and there is a $100,000 mortgage held by Bank of X. The owner of the property dies. Is a 706-NA required? Yes-you are not permitted to net the mortgage against the fair market value of the property. The only way you can do this is if the person who owns the property is a German domiciliary in which case the value can be netted on the tax return. This is a peculiarity of the German- United States estate tax convention. Cyst The deceased German domiciliary must still file the tax return because the gross value of the property, the criteria for filing a tax return, is still met.

Other people look to tax treaties to avoid filing the tax returns even when the assets exceed $60,000. What most people do not realize is that in order to take advantage of a tax treaty, one needs to file a federal estate tax return and include a form 8833 with the return explaining the application of the treaty to this particular estate. If you fail to file the 706-NA, you would still technically owe tax on any US situs asset with a gross value in excess of $60,000.

Let's make it very simple for everyone- if you represent a foreign client with assets in the United States with a gross value exceeding $60,000, you are required to file a federal estate tax.

Without the filing of the tax return, you are unable to take advantage of deductions, credits, and treaties benefits which might aid you in reducing the gross federal tax to a point of zero. Additionally, I might add, your client's estate is not in compliance with federal estate tax laws if no 706-NA is filed

Have a US Estate Tax Problem?

Estate Tax Problems Require

an Experienced Estate Tax Attorney

Contact the Tax Lawyers at

Marini & Associates, P.A.

for a FREE Tax Consultation Contact US at

www.TaxAid.com or www.OVDPLaw.com

or Toll Free

at 888-8TaxAid (888 882-9243).

Robert S. Blumenfeld -

Estate Tax Counsel

Mr. Blumenfeld concentrates his practice in the areas of International Tax and Estate Planning, Probate Law, and Representation of Resident and Non-Resident Aliens before the IRS.

Prior to joining Marini & Associates, P.A., he spent 32 years as the Senior Attorney with the Internal Revenue Service (IRS), Office of Deputy Commissioner, International.

While with the IRS, he examined approximately 2,000 Estate Tax Returns and litigated various international and tax issues associated with these returns.As a result of his experience, he has extensive knowledge of the issues associated with and the preparation of U.S. Estate Tax Returns for Resident and Non-Resident Aliens, Gift Tax Returns, Form 706QDT and Qualified Domestic Trusts.

No More Calls or Forms: First-Time Abatement Now Automatic

Beginning with 2025 tax returns filed during the upcoming season, the IRS will automatically grant first-time penalty abatement (FTA) relief to taxpayers who meet existing eligibility requirements—meaning taxpayers no longer have to submit a formal request or call to ask for relief if they qualify.

What Automatic FTA Means

· Qualified taxpayers (those who haven’t had similar penalties in the last three years and are otherwise tax-compliant) will have failure-to-file, failure-to-pay, and failure-to-deposit penalties automatically removed if they’re assessed on tax year 2025 or later returns.

· Previously, practitioners or taxpayers needed to actively request this relief by contacting the IRS or filing Form 843, which will now be unnecessary for eligible cases.

Eligibility Highlights

· Taxpayer must have filed required returns and paid or arranged to pay taxes for the year in question.

· No similar penalties must have been assessed during the prior three years (except those abated for non-FTA reasons).

· Applies only for certain penalty types: failure-to-file, failure-to-pay, and failure-to-deposit—not for accuracy-related or fraud penalties.

Practitioner and Compliance Impact

· The new system will reduce administrative workload for tax professionals and speed up relief for affected taxpayers.

· However, practitioners must ensure clients do not have prior ineligible penalties, since the IRS will use an automated evaluation—any prior penalty for the same tax type may automatically disqualify the taxpayer from abatement for the new year.

Have an IRS Tax Problem?