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Eighty-eight-year-old retiree Tuncay Saydam is at risk of losing his life’s savings. Not because of a bad investment or a fraudulent scheme. Rather, the federal government is trying to fine ...Tuncay over $437,000—because he unintentionally failed to file a one-page form.

https://ij.org/case/united-states-v-saydam/

Born and raised in Turkey, Tuncay (pronounced Toon-jai) became an early academic pioneer of computer science. He, his wife, and his two daughters immigrated to the United States in 1980, where he worked as a professor at the University of Delaware for 25 years. He became a U.S. citizen along the way, though he retains his Turkish citizenship too, and he and his wife make monthslong trips back to Turkey each summer. He’s not rich, but because of his expertise, he was able to build up savings to comfortably fund his retirement. In other words, Tuncay thought he was living the American Dream.

While working overseas during sabbaticals, Tuncay also consulted for several Swiss communications companies. Tuncay stored those earnings at a bank in Switzerland, eventually growing it to about $500,000. And when the Swiss bank stopped doing business with U.S. residents, he moved it to a Turkish bank, and then to a bank back in America. To Tuncay, it was a nest egg—his life savings.

But Tuncay did not know he was violating federal law. Not by having a foreign bank account—there’s nothing illegal about that. But federal law requires people who own foreign bank accounts totaling more than $10,000 to file a short, annual report with the IRS, called the “FBAR.” It’s separate and apart from your obligation to pay income tax; it applies whether or not the foreign account makes any taxable income at all. And the maximum penalties can be exorbitant: either $100,000 or half the balance in the unreported account for each unfiled year, whichever is greater.

Tuncay fell victim to them. Tuncay owed the government around $29,000 in back taxes. To that, the IRS tacked on an additional $12,000 in penalties. But for the FBARs, the agency hit Tuncay with a separate, staggering fine: $437,564.

When the government sued Tuncay to collect on the $437,564.00, the district court rejected Tuncay’s defense under the Eighth Amendment’s Excessive Fines Clause. But Tuncay’s not giving up. Now, he’s teamed up with the Institute for Justice to appeal his case. The Excessive Fines Clause embodies a simple principle—the fine must fit the crime. And with a win, Tuncay could not only rein in the IRS’s use of runaway penalties for minor offenses (Tuncay is far from the only one the agency has targeted with this trap for the unwary), but also reinvigorate a critical constitutional safeguard for countless ordinary Americans.Show More