Michael Karlin recently spoke with Wealth Management about the IRS penalties that three Americans who were held hostage in Russia could be facing upon their return to the United States. Following a prisoner swap orchestrated by President Biden in August 2024, Evan Gershkovich, Paul Whelan, and Alsu Kurmasheva were freed from Russian prison. Their imprisonments prevented them from filing their taxes, leading to penalties from the IRS.
Michael tells Wealth Management, “most of these penalties are subject to reasonable cause defenses, and I would think that being wrongfully (or even rightfully) imprisoned in a foreign country would qualify.”
He continues on to note that people who pay tax through employee withholding don’t have to pay estimated taxes, and in cases like these, there’s an exception under IRC Section 6664(2) that may fit the circumstances. “To the extent the [IRS] determines that by reason of casualty, disaster, or other unusual circumstances the imposition of such addition to tax would be against equity and good conscience.”
Michael concludes by adding that “if any of these people had foreign bank accounts that were required to be reported to FinCEN on a Report of Foreign Bank and Financial Accounts” (FBAR), there’s also a reasonable cause defense for penalties related to failures to file FBARs.”
Read the full story below:
Wrongfully Detained Americans Welcomed Back with IRS Penalties
