A district court in Texas has dismissed a lawsuit filed by the Justice Department to collect an FBAR penalty, concluding for the first time that the Internal Revenue Service’s administrative assessment of an FBAR penalty violates the right to a jury trial guaranteed by the Seventh Amendment. See United States v. Sagoo, 2025 WL 2689912 (N.D. Tex. Sept. 19, 2025). This decision, which is sure to send shock waves through the halls of the IRS and Justice Department and will undoubtedly be appealed, equips FBAR litigants with a powerful new defense to fight lawsuits seeking to collect FBAR penalties.
United States v. Sagoo
The defendant in the case, Sharnjeet K. Sagoo, had several bank accounts in Kenya, India, and England, but failed to annually disclose those accounts as required by law to the Internal Revenue Service on the Report of Foreign Bank and Financial Accounts reporting form (commonly referred to as the FBAR). The IRS therefore assessed a $1 million penalty against Ms. Sagoo for willfully failing to file FBARs in 2011, 2012, and 2013. After Ms. Sagoo failed to pay the penalty, the Justice Department filed a lawsuit seeking to reduce the assessed penalty to judgment.
Ms. Sagoo filed a motion to dismiss the lawsuit on several grounds, including on the ground that the government violated her Seventh Amendment right to a jury trial by assessing the willful FBAR penalty. In response, the government acknowledged that Ms. Sagoo was entitled to a civil jury trial (based upon the Supreme Court’s recent decision in SEC v. Jarkesy, 603 U.S. 109 (2024)), but denied that any Seventh Amendment violation had occurred yet, because Ms. Sagoo was entitled to a post-assessment de novo jury determination of her liability for any willful FBAR penalty. Ms. Sagoo countered that the Seventh Amendment violation occurred when the IRS assessed the willful FBAR penalty against her, and that she was entitled to a jury trial before any such assessment could be made. The district court agreed with Ms. Sagoo, following the Fifth Circuit’s recent decision in AT&T, Inc. v. FTC, 135 F.4th 230 (5th Cir. 2025), holding that a jury trial following an agency’s assessment of civil penalties violates the Seventh Amendment.
First, the district court concluded that a jury trial occurring after the IRS has assessed the FBAR penalty – what it called an “after-the-fact jury trial” – does not protect the taxpayer’s constitutional right to a jury trial. The district court found that the Secretary of the Treasury and the IRS improperly “acted as prosecutor, jury, and judge” in investigating the taxpayer, determining that she was liable, and assessing a FBAR penalty.
Second, the district court found that an “after-the-fact jury trial” does not protect an individual’s Seventh Amendment rights because the underlying penalty assessment has “real world impacts,” including “the threat to either pay or get sued, reputational harm, and administrative offsets.” Indeed, the district court noted that the IRS could attempt to collect Ms. Sagoo’s FBAR penalty through administrative offsets before a jury ever determined whether she was in fact liable for the penalty.
Third, the district court noted that Ms. Sagoo only has access to an Article III court with a jury after the penalty has been assessed. And she only has the right to a jury if she refuses to pay the penalty and the Justice Department chooses to file a lawsuit to reduce the assessment to judgment. If the government elects not to file suit, a taxpayer like Ms. Sagoo would have no opportunity for a jury determination of her liability, yet she would remain liable for the underlying assessment.
Implications for FBAR Litigants
Since the IRS started enforcing the FBAR filing obligation in earnest about 15 years ago, the Justice Department has filed hundreds of federal court lawsuits nationwide seeking to reduce FBAR assessments to judgment. Until Sagoo, no court had held that the Seventh Amendment was implicated by the IRS’s administrative assessment of FBAR penalties. While the decision is Sagoo is only a district court decision, and is sure to be appealed by the government, its holding provides an additional defense to FBAR penalties that can — and should — be asserted in all pending FBAR cases, whether they are still before the IRS or being litigated in federal court. Individuals facing FBAR penalties should immediately take advantage of this favorable decision and assert their rights to a jury trial under the Seventh Amendment.