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Articles · FBAR · Seventh Amendment

The Seventh Amendment and FBAR penalties: a jury before the penalty?

The IRS decides willfulness and assesses the FBAR penalty itself, then sues to collect. Whether that process honors the right to a jury is one of the newest open questions in FBAR law.

By Tongzhou Li, Attorney & CPA, former IRS Appeals Officer · Current as of November 7, 2026

What the Seventh Amendment says

The Seventh Amendment to the U.S. Constitution provides: “In suits at common law, where the value in Controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law.” In short, it guarantees a jury in federal civil cases of the kind historically tried in courts of law — which, the Supreme Court held in 2024, can include a government suit for civil penalties meant to punish.

An evolving area of law. The Supreme Court’s decisions in SEC v. Jarkesy (2024) and FCC v. AT&T (2026) have opened a new question for FBAR penalties, and the courts are only beginning to answer it. New decisions arrive often; this article is current as of November 7, 2026.

Where things stand

June 2024
SEC v. Jarkesy, 603 U.S. 109 (2024): when an agency seeks civil penalties that punish, the Seventh Amendment can require a jury.
September 2025
United States v. Sagoo (N.D. Tex.): a federal court dismisses an FBAR collection suit because the penalty was assessed without a jury.
June 2026
FCC v. AT&T, 608 U.S. 531 (2026): no violation where an agency’s penalty order does not itself require payment and a jury decides the facts anew before collection.
October 2026
On the government’s motion, the Fifth Circuit vacated the Sagoo dismissal and sent the case back.
Today
No court of appeals has decided whether assessing a willful FBAR penalty without a jury violates the Seventh Amendment.

How an FBAR penalty is imposed

  • The IRS audits, decides whether the violation was willful, and assesses the penalty — up to the greater of $100,000 (adjusted for inflation) or 50% of each unreported account’s balance. No judge or jury is involved.
  • Once assessed, the penalty is a debt owed to the United States. Interest and a late-payment penalty accrue (31 U.S.C. § 3717); the Second Circuit upheld the 6% late-payment charge in United States v. Reyes (2026).
  • To get a court judgment, the government must sue within two years of assessment (31 U.S.C. § 5321(b)(2)).

Jarkesy: the starting point

  • Holding. When the SEC seeks civil penalties for securities fraud, the defendant is entitled to a jury. The vote was 6–3; Chief Justice Roberts wrote for the Court.
  • Step one: is the claim “legal”? The remedy is “all but dispositive.” Penalties tied to culpability and deterrence, which the government keeps rather than returns to victims, are designed to punish — a remedy traditionally decided by juries.
  • Step two: the “public rights” exception. It did not apply; a claim resembling a common-law action belongs in court before a jury.
  • Why it reaches FBARs. The willful FBAR penalty is also tiered by culpability — nothing if reasonable cause applies, up to $10,000 if non-willful, far more if willful — and is paid to the Treasury, not to any victim.

Sagoo: the government’s concession

  • The IRS assessed $1,020,922.50 against Ms. Sagoo for willful failures to report in 2011 through 2013, then sued to collect.
  • After Jarkesy, the government conceded that the Seventh Amendment applies to FBAR penalty cases and did not argue the public-rights exception. Its position was that the later collection suit — where she could have a jury decide her liability anew — was enough.
  • The district court disagreed: the IRS had already adjudicated liability and imposed a penalty with real-world consequences, and a trial brought afterward by the government was her only chance at a jury. It dismissed the case with prejudice.
  • The Fifth Circuit paused the appeal for the Supreme Court’s AT&T case, then, on October 21, 2026, granted the government’s motion to vacate and remand. The docket entry does not state the reasons.

FCC v. AT&T: when a later jury is enough

  • Holding (8–1). The FCC may issue forfeiture orders without a jury because the orders do not settle legal obligations and the agency’s findings are not conclusive. The Seventh Amendment requires only that, before legal rights are conclusively determined, a party can insist that a jury make the “ultimate determination of issues of fact.”
  • What made the FCC scheme work. The agency cannot execute on its order; there is no interest or penalty for nonpayment; the order cannot be held against the party; and the only way to collect is a suit tried “de novo,” where the jury gets the last word.
  • How Jarkesy was different. The SEC’s penalties were immediately enforceable — the agency could garnish wages or take money from a tax refund — and no jury was available on the underlying violation.

Where FBAR penalties fit — the open question

  • Features that look like Jarkesy. An assessed FBAR penalty accrues interest and a late-payment penalty, and as a debt owed to the United States it can be pursued through the federal debt-collection laws, such as offset of federal payments (31 U.S.C. § 3716) — the kinds of features the Court said made the SEC scheme different.
  • Features that look like AT&T. To obtain a judgment, the government must sue in federal court, and courts commonly decide willfulness anew in that suit, where a jury can be demanded.
  • A wrinkle. In United States v. Rum (11th Cir. 2021), the court assumed that willfulness is reviewed de novo but reviewed the IRS’s choice of penalty amount only for whether it was arbitrary or capricious. If the amount is not decided anew, that may matter under AT&T’s test.

Practical point: raise it early

  • In United States v. Schwarzbaum (S.D. Fla. Aug. 14, 2026), the court assumed a jury right might exist but held it was waived: the taxpayer first raised it more than seven years after answering the complaint, after final judgment.
  • In United States v. Leeds (D. Idaho Feb. 13, 2026), the court would not let the defendant take a Seventh Amendment position contrary to her earlier briefing.
  • A taxpayer sued to collect an FBAR penalty should consider demanding a jury and preserving any constitutional challenge at the outset of the case.

More surveys

Please see more surveys of how the federal courts of appeals have answered these questions:

  • FBAR penalty cases — the leading FBAR case in each circuit, and how the courts have decided willfulness and the size of the penalty.
  • The TFRP, circuit by circuit — how each circuit applies the Trust Fund Recovery Penalty’s two elements, responsible person and willfulness, and where the circuits disagree on defenses.
  • All surveys

Sources

  • SEC v. Jarkesy, 603 U.S. 109 (2024)
  • FCC v. AT&T, Inc., 608 U.S. 531 (2026)
  • United States v. Sagoo, No. 4:24-cv-01159 (N.D. Tex. Sept. 19, 2025), vacated and remanded, No. 25-11271 (5th Cir. Oct. 21, 2026)
  • United States v. Schwarzbaum, No. 9:18-cv-81147 (S.D. Fla. Aug. 14, 2026)
  • United States v. Leeds, No. 1:22-cv-00379 (D. Idaho Feb. 13, 2026)
  • United States v. Rum, 995 F.3d 882 (11th Cir. 2021); United States v. Reyes, 164 F.4th 78 (2d Cir. 2026)
  • 31 U.S.C. §§ 3716, 3717, 5321(a)(5), 5321(b)

General information only. This article is not legal or tax advice and does not create an attorney-client relationship. This is an actively developing area of law; check for later decisions before relying on it. Facing an FBAR penalty collection suit? See how I help or request a consultation.