The Internal Revenue Service is demanding that an 82-year-old grandmother whose family fled Nazi Germany in the 1930s pay more than $2 million in penalties because she failed to report her father’s endowment to the agency on time.
Monica Toth, a resident of the Boston area, is now asking the US Supreme Court to prevent the government from collecting the money, which she claims would violate the Eighth Amendment that protects citizens from excessive fines.
Toth’s father fled Jewish persecution in Nazi Germany in the mid-1930s and relocated to Argentina, according to the news site Reason.
Toth moved from her birthplace of Buenos Aires to the US when she was 22 years old, working as a homemaker. In 1980, Toth became a naturalized US citizen while her parents stayed behind in Argentina.
Her father, a successful businessman, died in 1999. Shortly before his death, he opened a Swiss bank account in her name and gifted her around $4.2 million.
Toth’s dad, traumatized by the family experience in Germany, placed the funds in a Swiss bank account in case his daughter once again needed to flee persecution at the hands of her own government.
By law, any US national or permanent resident with a foreign bank account which holds more than $10,000 must fill out a one-page form known as the Foreign Bank and Financial Accounts report (FBAR) and submit it to the IRS each year.
Toth, who apparently did not know about the requirement, retroactively filed five years’ worth of reports in 2010, according to the Institute for Justice, a libertarian-leaning nonprofit whose aim is to “end widespread abuses of government power.”
The IRS audited Toth, who promptly paid a modest sum of back taxes totaling just under $40,000. That appeared to settle the matter. Or so Toth thought.
According to her attorneys, the government determined that Toth’s failure to file her reports on time constituted a “reckless” and “willful” violation of the Bank Secrecy Act of 1970 — requiring her to pay a maximum civil penalty of more than $2 million, or 50% of the value of Toth’s bank account.
Now Toth is suing the federal government, claiming that its demand for the $2.1 million payment is excessive and violates the Eighth Amendment of the Constitution.
But two lower federal courts have already sided with the government’s explanation that the required payment was not a “fine” but a “penalty” and is thus not protected by the Eighth Amendment.
“Across the country, Americans suffer from abusive fines,” said Toth’s attorney, Brian Morris.
“The Eighth Amendment is their protection. But if the government can escape judicial scrutiny of ruinous fines by clever wording, nothing would be out of the government’s reach.”
An IRS spokesperson told The Post that the agency does not comment on pending litigation.
The IRS is due to receive an additional $80 billion in government funding to beef up staffing and tax collection.
The infusion of cash is a key plank of the Inflation Reduction Act, which was passed by the Democrat-led legislature and signed into law by President Biden.