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Sagoo FBAR case in 2026: What the Fifth Circuit's remand means for US expats
A federal court in Texas threw out a roughly $1.02 million willful FBAR penalty in September 2025 because the IRS assessed it without a jury. Law360 reported on October 22, 2026, that the Fifth Circuit has sent that case back to the trial court. The defense is now less certain, and for US expats with unreported foreign accounts, the safest move is still to come into compliance before a penalty is assessed.
At a glance
- Case: US v. Sagoo, No. 4:24-CV-01159 (N.D. Tex.)
- Penalty at issue: a $1,020,923 willful FBAR penalty, assessed December 2, 2022
- Ruling: dismissed with prejudice on September 19, 2025, on Seventh Amendment grounds
- Latest: On October 21, 2026, the Fifth Circuit vacated the district court's dismissal and sent the case back for reconsideration in light of the Supreme Court's FCC v. AT&T ruling.
- Still required: an FBAR when foreign accounts exceeded $10,000 combined at any time in the year
The Sagoo dispute matters most to US citizens and green card holders living abroad who hold bank, brokerage, or other financial accounts outside the US, including expat business owners with foreign business accounts. These are the people who must file FBARs and who face willful FBAR penalties when accounts go unreported. The case concerns how those penalties can be assessed, not whether the reporting duty exists.
In this guide, we cover what the Sagoo case is, how it has moved through the courts, what it does and does not change, what is still unknown, and what US expats with foreign accounts can do now. This article reflects public reporting available as of late October 2026.
What is the Sagoo case?
US v. Sagoo is the federal case in which the government sued to collect a $1,020,923 willful FBAR penalty. A federal court in the Northern District of Texas dismissed that suit with prejudice on September 19, 2025, according to the Journal of Accountancy's January 2026 report on the dismissal. The ruling turned on the Seventh Amendment.
According to the Journal of Accountancy, the court held that the IRS violated the Seventh Amendment by setting the penalty without a neutral factfinder. It reasoned that a jury trial held after the assessment could not cure that defect. The court followed the Fifth Circuit's 2025 AT&T decision in reaching that result.
The Journal of Accountancy also reports that the government conceded, under the Supreme Court's 2024 decision in SEC v. Jarkesy, that Sagoo was entitled to a Seventh Amendment jury trial for FBAR penalties. The government argued that a de novo jury trial in federal court would satisfy that right. The district court rejected that position.
What has happened so far?
The Sagoo case can be traced through 5 key dates, from the original assessment to the most recent reported appellate step. The Supreme Court's June 4, 2026 reversal of the Fifth Circuit's AT&T ruling is described in the government's September 25, 2026 filing, as Law360 reported on September 28, 2026.
| Date | What happened |
|---|---|
| Dec 2, 2022 | The IRS assessed a $1,020,923 willful FBAR penalty for 2011, 2012, and 2013 (accounts in Kenya, India, and England) |
| Sep 19, 2025 | A federal court in the Northern District of Texas dismissed the government's collection suit with prejudice |
| Jun 4, 2026 | The Supreme Court reversed the Fifth Circuit's AT&T ruling, according to the government's later filing |
| Sep 25, 2026 | The government asked for the Sagoo dismissal to be vacated, and the case sent back |
| Oct 21, 2026 | The Fifth Circuit vacated the district court's dismissal and remanded the case for reconsideration in light of the Supreme Court's FCC v. AT&T ruling |
The table shows a dismissal the government worked to undo: the Fifth Circuit vacated it on October 21, 2026, and sent the case back to the district court to reconsider the Seventh Amendment issue in light of the Supreme Court's FCC v. AT&T ruling.
Does Sagoo mean FBAR penalties can't be enforced?
These 4 points explain why Sagoo has not removed the risk of FBAR penalties:
- It is one district court ruling. Sagoo is a single decision from one federal district court. According to a Tax Notes summary of a separate government filing, the government has called Sagoo an outlier, saying no other court has held that an FBAR penalty assessment violates the Seventh Amendment in the 15 months after Jarkesy.
- The penalty ceiling is unchanged. The maximum willful FBAR penalty under 31 U.S.C. § 5321(a)(5)(C)(i)(I) remains the greater of $165,353 (the 2025 inflation-adjusted figure) or 50% of the account balance at the time of the violation. Sagoo did not alter that statute.
- The filing duty is unchanged. As TFX's FBAR penalties guide explains, a US person must file an FBAR when the combined value of their foreign financial accounts exceeded $10,000 at any time in the calendar year. Nothing in the Sagoo litigation changes that threshold.
- The constitutional question is unresolved. The government is contesting the jury-trial reasoning, and the Fifth Circuit has reportedly ordered a new look at the case. Neither development settles whether Seventh Amendment arguments will succeed in future FBAR cases.
What is still unknown?
These 4 questions remain open:
- How the district court will rule on reconsideration. The Fifth Circuit's October 21, 2026 order vacated the dismissal outright and sent the case back for the district court to revisit its Seventh Amendment analysis in light of FCC v. AT&T. No reporting yet indicates how that reconsideration will come out.
- How the district court will rule on reconsideration. No available reporting indicates whether the Northern District of Texas will reach the same result if it takes up the case again.
- Whether other courts will follow Sagoo. According to the Tax Notes summary, the government says no other court has held that an FBAR penalty assessment violates the Seventh Amendment. Whether that changes depends on future rulings.
- How the Supreme Court's AT&T reversal plays out. According to Law360's report on the government's September 25, 2026 filing, the government argues that the Supreme Court's June 4, 2026 reversal of the Fifth Circuit's AT&T ruling undercuts the reasoning in Sagoo. How courts will apply that reversal to the Seventh Amendment argument has not been decided.
What does this mean for US expats with foreign accounts?
The Sagoo litigation concerns a penalty the IRS had already assessed, years after the reporting failures at issue. The dispute is over how that assessment was made, not over whether the accounts had to be reported.
Expats who have not been assessed a penalty are in a different position. For them, the existing compliance programs remain available regardless of how the Sagoo case ends.
TFX's guide to the Streamlined Foreign Offshore Procedures describes a program for non-willful taxpayers who meet a non-residency test. According to the guide, participants certify non-willfulness, file 3 years of returns and 6 years of FBARs, and pay any tax and interest owed, with a 0% penalty.
For FBAR-only problems, where income was already reported and tax paid, filing the missing FBARs directly may still apply. The IRS removed its public Delinquent FBAR Submission Procedures page and no-penalty assurance in mid-2026, so this is no longer a guaranteed no-penalty route – a tax professional can walk you through what the IRS now expects
What should you do now?
These 4 steps can help you assess your position:
- Check the $10,000 threshold for each past year. Add up the highest balances of all foreign financial accounts for each calendar year. If the combined total exceeded $10,000 at any point, an FBAR was required for that year.
- Gather statements for every year that may be missing. Collect account statements showing maximum balances for each year an FBAR may not have been filed. These records are needed for any compliance route.
- Choose the compliance route that matches the facts, with a professional. The Streamlined procedures require a non-willful certification, so they are not designed for willful conduct. Taxpayers whose conduct may have been willful typically need legal counsel before filing anything.
- Do not plan around Sagoo as a defense. The dismissal is from a single district court, the government is challenging its reasoning, and the Fifth Circuit has reportedly ordered a new look. Its value as a defense is uncertain.
FAQ
Not exactly. On October 21, 2026, the Fifth Circuit vacated the district court's dismissal and sent the case back for reconsideration in light of the Supreme Court's FCC v. AT&T ruling. That is a procedural step, and no court has finally decided whether FBAR penalties require a jury trial before they are assessed.
It is the civil penalty for willfully failing to report foreign accounts. The statutory maximum is the greater of $165,353 (the 2025 inflation-adjusted figure) or 50% of the account balance at the time of the violation.
Yes, if the combined value of their foreign financial accounts exceeded $10,000 at any time during the calendar year.
That is a question for a tax attorney. The argument succeeded in one district court, but the government is contesting it, and the outcome is unsettled.
Depending on your facts, the Streamlined Foreign Offshore Procedures or the late FBAR submission with reasonable cause may apply. Willful cases need legal advice before anything is filed.
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