IRS Settlement Didn't Bind the Government, Eleventh Circuit Rules in FBAR Case

Sometimes, a taxpayer can do everything a settlement with the IRS is supposed to guarantee, sign their agreement, pay the amount owed, and still end up owing more than five times as much. This is what happened in United States v. Niksich, a matter decided on June 4, 2026, by the Eleventh Circuit. In this case, the court considered three primary questions: 1) whether the taxpayer’s conduct was willful, 2) whether the settlement was enforceable, and 3) whether the penalty itself could be challenged as excessive.

CEO Hides Millions in Swiss and Panamanian Accounts, One in His Dog's Name

Eugene Niksich, founder and CEO of Unique Sporting Products, Inc., moved assets offshore in the 1990s on the advice of his accountant to shield them from a potential judgment creditor. He opened a Swiss account using the alias “Misty” (his dog’s name), paid a fee to have the bank hold his mail, and intentionally kept the account concealed from his wife at the time. He did not timely file FBARs for the account.

Niksich later moved funds to DZ bank, and then opened a Panamanian account in preparation to become a permanent resident. The balances on the account ran roughly from $2.3 million to $4.6 million across the period of time at issue.

On his 2006 tax return, Niksich answered “no” to the foreign account question. He left the question blank in each subsequent year from 2007 to 2012, despite having discussed the Foreign Account Tax Compliance Act with others, including family members, bank representatives, and a business associate.

IRS Agrees to Settle for $419,000, Then Reneges After Niksich Pays

Niksich claimed he first became aware of the FBAR requirement in 2013 or 2014. He entered the IRS Offshore Voluntary Disclosure Program in 2014, which offers taxpayers with undisclosed income from foreign assets an avenue to correct their tax filings and resolve any liabilities. Niksich filed corrected FBARs and then opted out of the program in 2017, which the IRS committee approved.

In May 2018, Niksich’s file was assigned to IRS agent Daniel Ford, who calculated a $419,123 penalty to resolve the FBAR issues. Niksich signed Form 906 and was told to provide payment. Ford received a check for $331,375.85 and testified that Niksich fulfilled the requirements for the settlement and the check was processed. Ford also completed Form 8278, stating the penalty was $419,124, which was approved by Michael Counts, his supervisor.

In mid-2020, the IRS reneged from the settlement. Niksich was told the IRS would not honor the settlement agreement because he had been removed from the disclosure program rather than opting out voluntarily. The IRS assessed a $2,286,954 willfulness penalty instead, alleging willful failure to file complete and accurate FBARs for 2006-2012 under 31 U.S.C. § 5321(a)(5). Only the original payment was credited against Niksich’s account. In July 2020, Niksich disputed the willfulness penalty and requested a refund of his settlement payment.

Eleventh Circuit: Niksich's FBAR Failures Were Reckless

For FBAR purposes, willfulness is judged objectively. This means it does not matter what the taxpayer actually believed. Rather, establishing willfulness requires a showing of recklessness. Courts typically apply a three-part test (from United States v. Rum) to determine whether a taxpayer was reckless in cases involving FBAR failures:

1) the taxpayer clearly should have known

2) there was a grave risk that an accurate FBAR wasn't filed,

3) and was in a position to discover this information easily.

In Niksich, the court found that Niksich's argument that he simply misunderstood the FBAR requirement doesn't matter under an objective standard. Good-faith confusion isn't a defense once the facts of the case demonstrate recklessness.

In determining whether the reckless standard was met, the court considered the facts that Niksich opened the account with the purpose of shielding assets from a creditor, using his dog's name as an alias. He paid a fee to have mail held by the bank, hid the account from his then wife, and discussed FATCA with multiple people. Further, he answered “no” to the question about foreign accounts in his IRS tax filings and subsequently left the question blank for five years, while holding a master's degree in business administration.

Settlement Agreement Wasn't Binding Because the IRS Agent Lacked Authority

Niksich argued that he and the IRS entered into a binding settlement agreement. Niksich asserted all of the elements of accord and satisfaction were met: there was a specified settlement amount, mutual agreement between the parties, and payment was made. However, the agreement ultimately was not enforceable because the person who signed for the government did not have the actual authority to enter into a binding agreement.

In this case, the signature line for the Commissioner of Internal Revenue was left blank, and the IRS agent’s own role was labeled “Receiving Officer.” This meant Ford could only recommend the settlement rather than approve it.

Although Niksich also argued the defense of equitable estoppel, the court found that the IRS keeping Niksich's penalty payment without a formal refund claim doesn't rise to the level of affirmative misconduct, which is required to estop the government.

Eleventh Circuit Extends Schwarzbaum: FBAR Penalties Are Subject to the Excessive Fines Clause

The Eleventh Circuit opined that the district court correctly ruled that Niksich’s failure to properly report was willful and no affirmative defenses applied. But relying on the 2025 holding in United States v. Schwarzbaum, the circuit court found that the district court erred in its holding that FBAR penalties are not subject to the Excessive Fines Clause of the Eighth Amendment. While the court’s opinion in Schwarzbaum was only rendered after the district court decided the instant matter, United States v. Niksich was remanded to the district court to “develop an appropriate factual record to determine if the fines were excessive.”

As it stands, Niksich’s $2.28 million IRS penalty has not been reduced, but in accordance with the Eleventh Circuit’s decision, he now has the opportunity to argue to the lower court that it should be. While FBAR enforcement continues to tighten around what qualifies as “reckless,” the Excessive Fines Clause is becoming a real (albeit developing) basis for challenging penalties that taxpayers can pursue.

Attorney Joseph R. Viola is a tax attorney in Philadelphia, Pennsylvania with over 30 years of experience. If you're facing a willful FBAR penalty, or you believe the penalty is excessive compared with your accounts, contact Joe Viola to schedule a free consultation.