Most people hear "willful" and think "on purpose." In the civil FBAR world, that is not the test. Norman v. United States is one of the early appellate decisions holding that you can be hit with the willful penalty, the big one, without proof that you knew about the FBAR requirement at all. Recklessness is enough.
The Facts
Mindy Norman, a school teacher, opened an account with the Swiss bank UBS in 1999. It was a "numbered account," meaning statements listed only the account number, not her name or address. From 2001 to 2008, the balance ranged between about $1.5 million and $2.5 million.
She was not a passive owner. She spoke frequently with her UBS representative, in person and by phone. She gave investment instructions. She signed a document preventing UBS from investing in U.S. securities on her behalf, which the court said helped prevent disclosure of the account to the IRS. She withdrew money in 2002 and received it in cash from her banker. In 2008, UBS records showed her surprise and displeasure at the bank's "new business model," which the trial court found referred to UBS working with the U.S. government to identify American clients. Just before UBS publicly announced that change, she closed the account and moved the funds to another foreign bank.
She never filed a timely FBAR. For 2007, the year at issue, she signed her tax return under penalty of perjury, and the return falsely said she had no interest in a foreign account. She signed it after her accountant sent her a questionnaire specifically asking whether she had a foreign bank account.
During the later IRS audit, she told the IRS, in an interview and in a letter, that she first learned of the account in 2009 and "was shocked to first hear about the existence of foreign accounts" in her name. After hiring counsel, she wrote again "to correct several misstatements," admitting she had known of her interest for more than a decade.
The IRS assessed a willful FBAR penalty of $803,530. She paid it in full and sued for a refund in the Court of Federal Claims. After a trial, that court upheld the penalty.
The Issues
Ms. Norman raised three. Does "willful" in § 5321(a)(5)(C) require actual knowledge of the FBAR requirement? Was the finding of willfulness wrong on these facts? And does a 1987 Treasury regulation cap the willful penalty at $100,000? She also raised an Eighth Amendment excessive fines argument.
The Holding
Chief Judge Prost wrote for the panel. On the standard: "we hold, as did the Court of Federal Claims, that willfulness in the context of § 5321(a)(5)(C) includes recklessness." On the facts, the trial court did not clearly err. On the regulation, "the 2004 amendment to 31 U.S.C. § 5321 rendered void the 1987 regulation capping penalties for willful violations of § 5314 at $100,000." The Eighth Amendment argument was not properly preserved, so the court declined to reach it. The judgment was affirmed.
The Reasoning
Civil willfulness includes recklessness
The court relied on the Supreme Court's statement in Safeco Insurance Co. of America v. Burr that "where willfulness is a statutory condition of civil liability, we have generally taken it to cover not only knowing violations of a standard, but reckless ones as well." Neither party pointed to authority for a different standard in the FBAR statute.
Ms. Norman argued that if recklessness counts, every failure to file becomes willful and the nonwillful penalty is meaningless. The court disagreed with a simple example: an FBAR violation "would generally not be willful where a taxpayer did not know about, and had no reason to know about, her overseas account."
The IRM is not binding
She also pointed to an Internal Revenue Manual provision describing willfulness as knowledge plus a conscious choice not to comply. The court said the IRM "is not legally binding on courts," and noted that the IRM itself recognizes that failing to learn of the requirement, combined with efforts to conceal and the amounts involved, may support a willfulness finding.
The facts
The court summarized it this way: she signed a return falsely denying a foreign account, knowing she owned one and controlled it; before that, she took steps to keep the account confidential; and after the audit began, she made numerous misstatements. Two of her defenses deserve attention because people raise them all the time.
First, she said she was following her mother's advice. The court answered in one sentence: "Actions can be willful even if taken on the advice of another."
Second, she said she never read her 2007 return. The court quoted the Sixth Circuit: a taxpayer "who signs a tax return will not be heard to claim innocence for not having actually read the return, as he or she is charged with constructive knowledge of its contents." Not reading it, the court said, "supports that she acted recklessly."
The old $100,000 regulation
From 1986 to 2004, the statute capped willful penalties at $100,000, and a 1987 regulation echoed that cap. In 2004, Congress raised the willful maximum to the greater of $100,000 or 50 percent of the account balance. Treasury never updated the regulation. The court held that the statute's use of "shall" made the new maximum mandatory and that "subsequently enacted or amended statutes supersede prior inconsistent regulations." Any other rule "would inappropriately prevent all newly created or amended statutes from taking effect until all inconsistent regulations are amended or repealed."
The opinion also said the regulation was not entitled to Chevron deference because the statute is unambiguous. The Supreme Court later overruled Chevron in Loper Bright Enterprises v. Raimondo (2024), but since Norman rested on the plain text, that change does not help the taxpayer's argument.
What It Means for Taxpayers Today
The willful FBAR penalty does not require a confession. The government can win by showing that you acted in reckless disregard of the requirement, and courts look at a familiar list: numbered accounts, instructions that keep the bank from creating U.S. reporting, cash withdrawals, closing accounts when the bank starts cooperating with the IRS, and a signed return answering "no" to the foreign account question.
That last one is the trap. Schedule B asks about foreign accounts. If you sign a return that answers the question wrong, you are charged with knowing what it says. "My preparer handled it" and "I never read it" do not help much, and in Norman they helped the government.
Also notice the procedural route. Ms. Norman paid the full penalty and sued for a refund in the Court of Federal Claims. That is one way into court on an FBAR penalty. The other common path is waiting for the government to sue to collect, as in United States v. Horowitz and United States v. Rum.
And how you deal with the IRS once questions start matters. The court counted Ms. Norman's false statements during the audit against her. The cover-up made the original problem look worse.
Practical Takeaways
If you have an unreported foreign account, the first question is not "how do I make this go away." It is "what does the record already show about what I knew and did?" Bank records, return questionnaires and Schedule B answers often exist before you ever talk to anyone. If the facts point toward nonwillful conduct, Bittner v. United States caps the penalty per report. If they point toward recklessness, the stakes are the account balance. Tell the truth from the first conversation. Correcting misstatements later is far worse than never making them.
The Bottom Line
Norman established, for the Federal Circuit, that reckless disregard is willfulness for civil FBAR penalties, and that the old $100,000 regulation does not cap the penalty. Signing a return you did not read is not a defense. It is evidence.