Schwarzbaum Ruling and TIGTA Audit Show IRS Is Not Backing Off Expat FBAR Enforcement

A federal magistrate refused to vacate a $12.56 million willful FBAR penalty judgment against Isac Schwarzbaum in early 2026, and on April 29, 2026, the Treasury Inspector General for Tax Administration (TIGTA) issued Final Evaluation Report IE-25-026, finding that IRS Criminal Investigation cut more than 35 hours of financial investigative training and replaced it with 38 hours of general law enforcement instruction, all without senior-leadership approval. Read together, the two records say the same thing about expats with foreign accounts: post-Bittner, the IRS is not retreating from FBAR enforcement, and Criminal Investigation is leaning even more toward a law-enforcement-first stance. Your filing obligations have not changed, and the rules for catching up have not changed.

What Happened?

The Schwarzbaum Filing: Government Holds the Line on Old FBAR Judgments

Isac Schwarzbaum, a dual U.S.-German citizen, was assessed roughly $12.56 million in willful FBAR penalties for unreported Swiss accounts in 2007 through 2009. The Eleventh Circuit in 2025 ruled that willful FBAR penalties are “fines” under the Eighth Amendment, ordered about $300,000 trimmed as constitutionally excessive, and left the rest of the judgment intact. Schwarzbaum then moved to vacate the judgment as void on Seventh Amendment grounds, arguing the IRS assessment violated his right to a jury trial.

The government’s opposition brief drew a hard line: FBAR penalties are not a common-law remedy, the Seventh Amendment does not apply, and Bittner does not reopen a prior willful judgment. A magistrate agreed, concluding the judgment is not void and “the controlling law has not changed.” The signal is narrow but loud: the government will not let Bittner be used to unwind older willful FBAR judgments.

The TIGTA Audit: Criminal Investigation Training Shifts Toward Law Enforcement

On April 29, 2026, TIGTA published Final Evaluation Report IE-25-026, “IRS Needs to Improve Oversight of the Special Agent Criminal Investigative Techniques Training Program,” in response to a whistleblower allegation routed through the Office of Special Counsel. Auditors found that between September 2021 and August 2024, the Special Agent Investigative Techniques (SAIT) curriculum was changed in three material ways:

More than 35 hours of core financial investigative lessons were cut.
38 hours of general law enforcement instruction were added.
The overall curriculum was shortened from 66 days to 64 days.

TIGTA found that the Criminal Investigation Senior Executive Team did not review or approve the changes, and there were no supporting documents to justify them. Auditors also confirmed that leadership at the National Criminal Investigation Training Academy (NCITA) changed eight students’ failing test scores from 78% to a passing 80%, contrary to written policy.

These two records, on their own, do not change a single statute or penalty amount. They do tell expats with foreign accounts which agency is on the other side of any open FBAR or Form 8938 question right now.

Who This Affects

Anyone with unfiled or late FBARs from prior years who has been waiting for a friendlier enforcement environment before catching up.
Expats with active or potential FBAR disputes, including reasonable-cause arguments and willfulness contests in flight.
Late filers with quiet-disclosure questions or unreported FinCEN Form 114 obligations.
Foreign bank account holders with high-balance accounts, signature authority over employer accounts, or undisclosed foreign brokerage and pension balances.
U.S. taxpayers abroad with foreign business interests (controlled foreign corporations, foreign partnerships, or foreign trusts) who already file FBAR alongside Forms 5471, 8865, or 3520.
Accidental Americans and dual citizens who only recently learned about FBAR and Form 8938.
Anyone holding a Letter 3709, Letter 105-C, or other IRS notice referencing foreign account reporting.

What It Means for Expats

Bittner did not erase old judgments and never touched willful violations. Bittner v. United States (598 U.S. 85, 2023) capped non-willful FBAR penalties at one per form rather than one per account. Willful penalties were always a separate track, and Schwarzbaum confirms that a finalized willful judgment is not vulnerable to a late-stage Bittner attack. Greenback’s Bittner explainer covers what that ruling did and did not do.

The willful-violation bar is moving in the government’s favor. Earlier in 2026, the Second Circuit’s United States v. Reyes decision joined six other circuits holding that reckless disregard alone is enough to trigger the maximum willful penalty. Courts have read “reckless” to include willful blindness, ignoring questions on a Schedule B about foreign accounts, and a deliberate failure to ask a tax professional about an account you knew you held abroad. Greenback’s breakdown of Reyes and Sagoo explains why “I just didn’t know” is no longer a reliable defense.

Criminal Investigation is shifting toward a law-enforcement-first posture. TIGTA does not say CI is pursuing more expat cases. It says CI’s training mix is moving away from financial-forensic depth and toward general law enforcement techniques. Combined with the IRS’s AI-driven enforcement build-out and the FATCA enforcement gaps documented in TIGTA Report 2026-308-009, the enforcement function is changing shape, not standing down.

Voluntary catch-up paths still work. None of this changes the core compliance options. The IRS Streamlined Filing Procedures remain available for non-willful taxpayers, and the Delinquent FBAR Submission Procedures remain available where prior returns were filed, and only the FBAR is missing. Coming forward voluntarily, before the IRS contacts you, is still the most reliable way to limit penalty exposure.

What You Should Do Next

Three things matter most over the next few months.

Confirm your current FBAR and Form 8938 posture. Make sure this year’s filing uses the highest-balance figures, not year-end snapshots, and that any Form 8938 obligation is layered on top of your FBAR.
Pull a clean read on prior-year exposure. Where you have years with a missed FBAR, work out whether the omission was non-willful or whether the facts could be read as reckless. That answer drives which catch-up path is actually available to you.
Loop in a specialist before you put anything in writing to the IRS. This applies whether you are weighing a Streamlined or Delinquent FBAR submission, working on an active reasonable-cause argument, or already in contact with the IRS. Self-prepared filings and replies can become evidence in the willfulness analysis.

A specialist who works with U.S. expats every day can review your full account picture and decide which disclosure path is best before you commit.

The IRS Is Not Backing Off FBAR Enforcement. Your Best Move Is a Current File.

Greenback helps you get matched with a CPA or Enrolled Agent who evaluates FBAR exposure and disclosure paths every day.

Frequently Asked Questions

Does the Schwarzbaum ruling change FBAR rules for non-willful filers?

No. Schwarzbaum involved willful FBAR penalties and a finalized judgment from earlier in the case. The decision did not address non-willful penalties, which were separately addressed by the Supreme Court in Bittner v. United States (2023). Non-willful filers still face one penalty per FBAR form rather than one per account, and reasonable-cause defenses remain available.

Can a finalized willful FBAR judgment be reopened under Bittner?

Not based on what the magistrate concluded in Schwarzbaum. The court found Bittner did not change the controlling law for willful penalties and rejected the Seventh Amendment argument as both untimely and substantively wrong. The practical signal is that older willful FBAR judgments are not vulnerable to a late-stage Bittner attack.

Does the TIGTA Criminal Investigation training audit mean more expats will be prosecuted?

TIGTA Report IE-25-026 does not predict case volume. It found that IRS Criminal Investigation cut more than 35 hours of financial investigative training, added 38 hours of general law enforcement instruction, and shortened the curriculum from 66 days to 64 days, all without senior-leadership approval. The audit reads as a posture and oversight finding, not a forecast of prosecution numbers.

What counts as “reckless disregard” for FBAR purposes?

Federal courts have read reckless to include willful blindness, ignoring questions about foreign accounts on Schedule B of Form 1040, and a deliberate failure to ask a tax professional about an account you knew you held abroad. After Reyes, that level of conduct alone is enough to support the maximum willful penalty in seven federal circuits.

What should I do if my prior-year filings could be considered willful?

Do not start a Streamlined certification or a quiet disclosure on your own. Once willfulness exists in the facts, Streamlined is no longer the right path, and a self-prepared filing can become evidence against you. Have a qualified international tax professional review your account history, prior returns, and any open IRS correspondence before you commit to a disclosure path.

What should I do if the IRS has already contacted me about foreign accounts?

Pause before responding. Streamlined and the Delinquent FBAR Submission Procedures stop being options the moment an examination or notice is in motion, and your early responses shape the willfulness analysis. Get a specialist on the file before you reply to anything in writing.

The information in this article is for general informational purposes only and does not constitute tax, legal, or financial advice. Tax rules are complex and change frequently. Consult a qualified tax professional regarding your specific situation before taking any action.