For neglecting to register $4.2 million in a Swiss bank account provided to her by her Jewish father who escaped Nazi persecution in the 1930s, a grandmother from Boston was penalized $2.1 million by the IRS.
Prior to his passing in 1999, Monica Toth’s wealthy businessman father created the account in case his daughter ever needed to leave the nation to avoid persecution as he did.
Her father moved to Argentina where his daughter was born, but Reason claims that he was scarred by his family’s experience fleeing Nazi Germany in the middle of the 1930s.
According to Institute for Justice, a nonprofit that is defending Toth, “he strongly believed that his daughter should have a reserve of money in case (as happened to him) she might one day have to flee government persecution.” Institute for Justice is one of many people who fled Germany or later survived the Holocaust.
At the age of 22, Toth, now 82, emigrated to the US while her parents remained in South America. She was naturalized as a citizen in 1980.
Toth now claims that the IRS and the US government are breaching her rights under the Eighth Amendment, which guards against the imposition of “excessive” fines or bails or harsh and unusual punishments on individuals.
A Overseas Bank and Financial Accounts (FBAR) form must be filed annually with the IRS by all US citizens to report any foreign accounts with a balance of more than $10,000 in accordance with the Bank Secrecy Act of 1970.
Monica Toth, 82, of Boston was ordered to pay $2.1million from the IRS after she failed to file a form identifying her Swiss bank account. She filed the Foreign Bank and Financial Accounts (FBAR) form in 2010 after learning she had to and was ordered to pay $40,000 before being slapped with the hefty fine in 2012
Toth’s father (pictured in the photograph) opened the account in 1999 in case his daughter ever needed to flee the country to escape persecution as he did. Her father, who is Jewish, escaped Nazi Germany in the mid-1930s and fled to Argentina, where his daughter was born
According to the Institute for Justice, Toth says she was not aware of the form and had retrospectively submitted five years’ worth of reports in 2010.
The Argentinian paid $40,000 in back taxes when the IRS audited her after the submission of the paperwork.
She also got a 2012 FBAR penalty of $2,173,703 in total. For a “maximum of either $100,000 or half the amount in their undeclared account, whichever number is larger,” the IRS may levy a penalty, which is distinct from a fine.
Toth’s refusal to submit the FBAR form was regarded by the government to be “reckless” and “willful,” which “triggered” the hefty penalties.
According to Institute for Justice, “The government then sued Monica in federal court to recover.”
It was “not a fine,” the First Circuit Court ruled in favor of the government.
Toth is now appealing the decision to the US Supreme Court on the grounds that she didn’t ‘willfully’ forget to submit the paperwork but rather that she was unaware. According to the Institute for Justice, the mother of four manually completed tax forms obtained from the local library.
She has also asked the court to declare that “civil penalties” are really fines.
Those who have overseas bank accounts but neglected to submit an FBAR have long been the target of the Institute for Justice.
The IRS can impose a penalty – which is different from a fine – for a ‘maximum of either $100,000 or half the balance in their unreported account, whichever sum is greater.’ The government deemed Toth’s failure to file the FBAR form as ‘reckless’ and ‘willful,’ which ‘triggered’ the massive fine. She is arguing that she didn’t know about the form, as she did her taxes by hand using forms at the local library
Her father (pictured) was traumatized after his family left Germany. He became a successful businessman in Argentina and stayed there. His daughter immigrated to the US when she was 22 and went on to have four children before becoming a citizen in 1980
She is challenging the government, claiming that the IRS’s penalty is really a fee and that it violates her rights under the Eighth Amendment.
According to the Institute for Justice, the IRS went after Holocaust survivor Walter Schik, who is approaching 100 years old, earlier this year and requested $8.8 million.
During the war, Schik and his family were transported from their residence in Austria to a concentration camp. In 1947, Schik will go to the US after being freed in Hungary.
Ten years after becoming a US citizen, he created a bank account in Switzerland to collect funds from relatives who perished in the concentration camps that were “recovered from the Holocaust” and had no link to the US.
Even though he had more than $16 million in the account, which was managed by his son, the program filled in automatically that he had no overseas accounts in 2007 while his lawyer was filing his taxes.
Later on, Schik would be fined $8,822,806 for filing a late FBAR form in 2007.
The IRS “insistence on severe fines against taxpayers having offshore accounts, irrespective of their benign intent,” the National Taxpayer Advocate warned in 2012.