Reasonable Cause to Avoid Tax Penalties

Introduction

What constitutes “reasonable cause” under Code section 6651 for purposes of avoiding penalties for failure to file a tax return or pay tax?

A failure to file a return will result in a mandatory penalty, unless the taxpayer establishes that the failure was due to reasonable cause and not willful neglect.[1] Reasonable cause has been interpreted to require the taxpayer to establish that it exercised ordinary business care and prudence but was, nevertheless, either unable to comply or that undue hardship would have resulted from compliance.[2] A taxpayer bears a “heavy burden of proving the failure to timely file was both due to reasonable cause and not due to willful neglect.”[3] “Absence of fault” is the key factor; thus, the taxpayer must prove that the failure was not intentional or a result of carelessness or reckless indifference.[4]

The Internal Revenue Manual’s Penalty Handbook sets forth a number of acceptable reasons that will be accepted by the Service as “reasonable cause.” These include, but are not limited to, death or serious illness of the taxpayer or an immediate family member, unavoidable absence of the taxpayer, destruction of business or records by casualty or civil disturbance, inability to obtain reasons for reasons beyond taxpayer’s control, financial incapacitation, ignorance of the law by taxpayer with limited education, misunderstanding of complex or ambiguous area of tax law, mistake, mail delivery problems, advice from a tax professional, postal delays, and marital problems.[5] These reasonable causes will be further analyzed in the memorandum.

While the vast majority of cases relate to income, gift, estate, and employment tax returns, the reasoning of these cases would logically apply to the late filing of information returns and statements.[6]

IRS Advice or Publications

Reliance on the advice of Service employees may constitute reasonable cause if the employee’s duties include advising taxpayer’s and the taxpayer gave the employee sufficient information and facts.[7] The reliance on advice or a publication may be utilized for the late filing penalty.[8] Taxpayers who wish to rely upon this defense should make a written record of the date, the employee’s name, the issue and facts presented, and the answer given.

Reliance on Professional to File

Unfortunately, the U.S. Supreme Court has held that the reliance of a taxpayer (an executor) on an agent (attorney) to prepare and file a tax return is not reasonable cause for late filing of a tax return.[9] A lay person knows that tax returns have fixed filing dates and that taxes are required to be paid when due. It requires no special training or effort to ascertain a deadline and make sure that it is met. In a concurring opinion, four justices of the Supreme Court suggest that reasonable cause may be found when the issue is the taxpayer’s own disability (e.g., senility or mental retardation) instead of the taxpayer’s reliance on his or her agent (accountant or attorney). The Supreme Court contrasted the situation in United States v. Boyle with one where an accountant or attorney advises a taxpayer on a matter of tax law, such as whether a liability exists. It is reasonable for a client to rely on such advice.

Although it is the Service’s position that reliance on others is generally not in keeping with the ordinary business care and prudence standard, when evaluating a request citing reliance on others,[10] the Service will consider the following information:

  1. Is the taxpayer claiming reliance on specific advice or general reliance on another to ensure compliance? If the taxpayer relied on specific advice, refer to the following section below.
  1. Was the taxpayer unable to comply because they did not have access to their own records?[11] If so, the taxpayer should consider citing his inability to obtain his records as the cause for failing to timely comply.
  1. Was the failure to comply due to a change in the tax law the taxpayer could not reasonable be expected to know?[12] If so, the taxpayer should consider citing his ignorance of the law as the cause for failing to timely comply.

Reasonable cause has been found, however, where a taxpayer reasonably relied on an attorney’s erroneous statement that an extension was, in fact, obtained.[13]

Reliance on Advice from Qualified Tax Advisor

Case law generally sets forth the following three requirements in order for a taxpayer to use reliance on a tax professional to avoid liability for a Code section 6662(a) penalty: (1) the adviser was a competent professional who had sufficient expertise to justify reliance; (2) the taxpayer provided necessary and accurate information to the tax adviser; and (3) the taxpayer actually relied in good faith on the adviser’s advice.[14] There are cases which provide examples of taxpayers that successfully argued reliance on a tax professional to avoid the penalty.[15]

Most taxpayers are not competent to discern error in the substantive advice of an attorney or accountant; thus, to require the taxpayer to challenge the attorney seek a second opinion would nullify the purpose of seeking the advice of a presumed expert in the first place.[16]

An expert’s advice that no tax liability was incurred[17] or that there was no liability for a return[18] is reasonable cause. These decisions and their reasoning probably still are valid even after Boyle.[19]

Merely turning matters over to a tax professional without more discussion, however, will not suffice. The tax professional must give affirmative advice that there is no liability and no return due.[20] Lastly, the tax advisor must be an independent and qualified professional disinterested in the matter (i.e., not a promoter of a specific transaction).[21]

The courts consider attorneys[22] and certified public accountants[23] to be qualified. In fact, even an informal opinion from a reputable attorney is sufficient to avoid the penalty.[24] In addition, there seems to be no absolute requirement that a member of either of these professions be a “tax expert.”[25]

Reliance on advice, offered as a defense, requires that the defendant solicited such advice in good faith.[26] In addition the defendant must actually have followed such advice.[27] The mere fact that an advisor’s conclusion was wrong does not mean that the taxpayer’s reliance was not “reasonable” for purposes of excusing the penalty.[28] Reliance on an accountant’s classification of income is reasonable where there is not sufficient evidence to impute to the taxpayer knowledge of the governing Regulation.[29] Any good faith reliance on the advice of a qualified tax professional regarding a substantive question of tax law will constitute reasonable cause.[30]

Delegation

The filing of a tax return has been declared to be a personal non-delegable duty of the taxpayer.[31] A taxpayer who delegates that duty to another including an attorney or accountant is still obligated to see to it that his or her return is timely filed. As a general rule, the taxpayer is not excused from the late filing penalty merely because he or she turned the matter over to his or her tax adviser, spouse, or some other responsible person where the latter files the return late or fails to file it without reasonable cause.[32] This includes the filing of an extension request.[33] Some early court decisions criticized or distinguished the rule that the duty to file is a personal non-delegable one by noting that this rule should only apply if the taxpayer has actual knowledge of the due date of the return in question.[34] These decisions have questionable vitality after Boyle.[35]

Oversight of Taxpayer or Employee

The fact that a return was not filed when due because of the oversight or forgetfulness of the taxpayer or of an employee of the taxpayer generally (though not always) has been rejected as reasonable cause for not imposing the delinquency penalty.[36] However, some courts have held otherwise.[37]

Malfeasance of Employee

The negligence, neglect, or malfeasance of an employee in failing to file a return on time is generally insufficient to establish reasonable cause.[38] The rule seems to be that the company is entitled to reasonable cause only where it can show it was incapacitated.[39]

Mistake, Ignorance, or Misunderstanding of Law

The inadvertent error of mislaying and failing to timely mail has been found to constitute reasonable cause.[40] Also, where a taxpayer mistakenly believes that a return has been mailed and objective actions taken support that position, such as mailing Schedules K-1 to shareholders, reasonable cause may be found.[41]

An erroneous though good-faith belief that no tax is due is not grounds for reasonable cause.[42] However, where the erroneous good faith belief is coupled with objective ambiguity in the applicable statute, reasonable cause has been be found.[43] Reasonable cause may also be objectively found where an inexperienced administrator, inexperienced attorney, and minor beneficiary filed the estate tax return late.[44]

Ignorance or misunderstanding of the law by a taxpayer or his or her employee has generally not been accepted as reasonable cause, except in unusual circumstances, in the absence of showing that the person entertaining the mistaken belief was qualified to give tax advice or a reasonable person would have believed that he or she was.[45] Further, the Tax Court has gone so far as to declare that a mistaken belief not based on the advice of a competent tax adviser is not reasonable cause no matter how reasonable the belief may be.[46] It is the Service’s position that forgetfulness is generally not in keeping with the ordinary business care and prudence standard.[47] Although this is the general rule,[48] in certain instances where the issues are complex and the belief or misunderstanding is genuine, reasonable cause has been found.[49]

Although it is the Service’s position that mistakes are generally not in keeping with the ordinary business care and prudence standard, when evaluating a request citing mistake as the reason for failing to timely comply,[50] the Service will consider the following information:

(1) When and how the taxpayer became aware of the mistake;

(2) The extent to which the taxpayer corrected the mistake;

(3) The relationship between the taxpayer and the subordinate (if the taxpayer delegated);

(4) If the taxpayer took immediate steps to correct the failure after it was discovered; and

(5) The supporting documentation.

Although it is the Service’s position that the ordinary business care and prudence standard requires taxpayers to make reasonable efforts to determine their tax obligations, when evaluating a request citing ignorance or misunderstanding of the law as the reason for failing to timely comply,[51] the Service will consider the following information:

(1) The taxpayer’s education;

(2) If the taxpayer has previously been subject to the tax;

(3) If the taxpayer has been penalized before;

(4) If there were recent changes in the tax forms or law which a taxpayer could not reasonable be

expected to know; and

(5) The level of complexity of a tax or compliance issue;

(6) If the taxpayer made a reasonable and good faith effort to comply with the law.

Lack of Necessary Return Information

For the most part, a lack of the necessary return information has been held not to constitute reasonable cause for filing the tax return timely.[52] A taxpayer should timely file with the best estimates or information available and later amend the return as permitted by law.[53]

Unavailability of Books and Records

Where the taxpayer alleges that the books and records necessary to prepare the tax return are unavailable, the courts have held that this is not reasonable cause in the absence of evidence that the taxpayer could not obtain them.[54] In one instance, the Service had in fact seized the taxpayer’s books and records and yet it was held not to constitute reasonable cause as the taxpayer did not prove when they were seized, nor that he did not have any copies of the records.[55]

When evaluating requests that cite the inability to obtain records as the reason for failing to timely comply, the Service will consider,[56] in addition to other facts, the following specific information:

(1) Why the records are needed to comply;

(2) Why the records were unavailable and what steps were taken to secure the records;

(3) When and how the taxpayer became aware that they did not have the necessary records;

(4) If other means were explored to secure the needed information;

(5) Why the taxpayer did not estimate the information;

(6) If the taxpayer contacted the IRS for instructions on what to do about the missing information;

(7) If the taxpayer promptly complied once the missing information was received; and

(8) Supporting documents such as copies of letters and responses reviewed in an effort to get the

needed information.

Health Problems of Taxpayer or Taxpayer’s Family

The Tax Court has ruled that a taxpayer may have reasonable cause for failure to timely file a return where the taxpayer or a member of the taxpayer’s family experiences an illness or incapacity that prevents the taxpayer from filing his or her return.[57] The Service also has recognized death or serious illness of the taxpayer as constituting reasonable cause.[58] Where, however, taxpayers have argued something less such as stress, overwork, and other health problems, they have been met with less success.[59]

The U.S. Court of Appeals for the Seventh Circuit has held that for an illness or debilitation to be deemed a reasonable cause, its severity and timing must make it virtually impossible for the taxpayer to comply, such as emergency hospitalization or other incapacity around tax time.[60] The taxpayer must have been incapacitated to a degree that he could not file his returns,[61] such as being quadriplegic.[62] If the taxpayer can show he was unable to function due to physical or even emotional disability, reasonable cause may be found.[63] Even evidence of a mental illness for which treatment was sought is insufficient unless it can be be shown to have rendered the taxpayer so incapacitated as to be incapable of exercising ordinary business care and prudence.[64]

When evaluating requests that cite death, illness, or unavoidable absence as the reason for failing to timely comply, the Service will consider,[65] the following specific information:

(1) The relationship of the taxpayer to the other parties involved;

(2) The date of death, duration dates and severity of illness, or dates and reasons for absence;

(3) How the event prevented compliance;

(4) If other business obligations were impaired;

(5) If, after a death, return from an unavoidable absence, or when an illness passed, the taxpayer

promptly attended to his or her tax duties.

It may be possible to introduce psychiatric studies showing that depression due to a family death lasts for six to twelve months (or whatever period of time best suits the taxpayer) to explain an extended delay between the death and time that the taxpayer came into compliance.

Health Problems of Adviser

As with the taxpayer, it has been held as a general rule that things such as overwork, stress, or illness of the tax adviser will not rise to the level of reasonable cause.[66]

Delegation of the duty to prepare and file the returns is not reasonable cause, even where the bookkeeper/manager suffers from severe depression and undergoes treatment.[67]

Constitutional and Religious Objections

Taxpayers (often tax protesters) have made frequent arguments that various aspects of the tax system are unconstitutional. If these arguments fail as they ordinarily have, the taxpayers argue that no penalty should be imposed because a good-faith argument that the tax system is unconstitutional is reasonable cause. These arguments have likewise failed.[68] In a similar vein, in a losing battle, taxpayers have raised religious objections to the tax system and the duty to file.[69] Taxpayers have also argued unsuccessfully that various penalties (civil fraud, late filing) violate the Fifth and Eighth Amendments.[70]

Pending Litigation

If the taxpayer is involved in litigation with the Service, this may, depending upon the circumstances, constitute reasonable cause.[71]

Spousal Disorder

Divorce, disagreement, and disorder between spouses have been listed with some success as a basis for reasonable cause.[72]

Financial Hardship

Financial hardship, a lack of funds or assets will not generally be considered reasonable cause for either a failure to file timely[73] or a failure to pay the tax.[74] It has been held that financial difficulties can never constitute reasonable cause for these purposes.[75] But the U.S. Courts of Appeals for the Second, Third, and Ninth Circuits have disagreed.[76] Although it is the minority view, courts in these circuits allow taxpayers to cite financial hardship as a basis to establish reasonable cause under Code section 6651.[77] The Third Circuit has expressly held that financial difficulties of a level that would require the taxpayer to go out of business if it used its limited funds to pay taxes give rise to a reasonable cause defense.[78]

At least one test has developed as to financial distress. Under this test, a taxpayer must be faced with a real choice between making payments to the IRS and going out of business and: (1) the duration of the financial crises was relatively limited in time; (2) the occurrence of one or more specific contingencies (such as payment of a contractual obligation) was expected to alleviate the crisis; (3) the taxpayer was prioritizing creditors and marshaling personal and other resources in order to avoid going out of business; and (4) the taxpayer was not unfairly enriching itself (or its owners) or unfairly favoring other creditors ahead of the IRS.[79]

Embezzlement of Funds

While ordinary financial hardship will not seemingly suffice, an embezzlement of corporate funds by the taxpayer’s CFO has been held to constitute reasonable cause for both the failure to file and the failure to deposit penalties.[80] But courts have found otherwise in similar situations.[81]

The test seems to be whether, by virtue of the embezzlement, the corporate taxpayer was left financially incapacitated and unable to file or pay its taxes on time.[82]

Postal Service Problems

If the taxpayer otherwise exercises due diligence and there is a problem with the postal service, that may constitute reasonable cause.[83] One need not worry about the postal service if the return is properly addressed, with the correct postage and sent certified mail, as under Code section 7502, timely mailing is considered timely filing. Unavoidable postal delays [84] and timely filing a return with the wrong office,[85] however, are reasonable cause for failing to file.

Fire, Casualty, Natural Disaster, or Other Disturbance

Although it is the Service’s position that fire, casualty, natural disaster, or other disturbance generally is not, by itself, sufficient to provide penalty relief, these types of events typically give rise to other justifiable reasons for failing to file, such as the inability to access destroyed records or hospitalization of the taxpayer.[86] It should be noted, however, that taxpayers in presidentially declared disaster areas automatically qualify for disaster relief and reasonable cause for failing to timely file.[87]

The Service will consider the following factors:

(1) Timing;

(2) Effect on the taxpayer’s business;

(3) Steps taken to attempt to comply;

(4) If the taxpayer complied when it became possible.

Extensions

One need not worry about the postal service if the return is properly addressed, with the correct postage and sent certified mail, as under Code section 7502, timely mailing is considered timely filing.[88]

Reasonable Cause Tested

Reasonable cause is tested at the time the tax is due;[89] however, events occurring after the due date are still relevant.[90] As stated in the Internal Revenue Manual, “reasonable cause does not exist if, after the facts and circumstances that explain the taxpayer’s noncompliant behavior cease to exist, the taxpayer fails to comply with the tax obligations within a reasonable period of time.”[91]

Reasonable Cause Applies In Full or Not at All

A Court of Appeals held that a court may not equitably reduce the late filing and late payment of penalties. The Court found that each penalty is fully enforceable unless the taxpayer had reasonable cause, in which case the penalty is to be abated in full.[92]

Administratively, the IRS may settle a penalty for less than the full amount based upon the hazards of litigation, or upon evidence that the taxpayer had reasonable cause for being late for a portion of the period involved. Under In re Sanford, both the IRS and taxpayers must take pause because if settlement fails and litigation ensues, then it would be an “all or nothing” proposition.

Specific Questions to Answer

The Internal Revenue Manual lists a few specific questions that taxpayers should provide an answer for to increase the likelihood of a complete and well-supported case for reasonable cause.[93] The questions include:

(1) What happened and when did it happen?

(2) During the period of time the taxpayer was non-compliant, what facts and circumstances

prevented the taxpayer from filing a return, paying a tax, and/or otherwise complying with the

law?

(3) How did the facts and circumstances result in the taxpayer not complying?

(4) How did the taxpayer handle the remainder of their affairs during this time?

(5) Once the facts and circumstances changed, what attempt did the taxpayer make to comply?

The Service will also require the taxpayer’s asserted reasons for failing to comply correspond with the events on which the penalties are based, a compliance history free of similar penalties, and a reasonably short period of time between the reasons cited for noncompliance and subsequent efforts to comply.[94]

Ten other questions that taxpayers should consider are:

  1. Do the taxpayer’s reasons address the penalty that was assessed?
  1. Does the length of time between the event cited as a reason and the filing or payment date negate the event’s effect?
  1. Does the continued operation of a business after the event that caused the taxpayer’s noncompliance negate the event’s effect?
  1. Should the event that caused the taxpayer’s noncompliance have been reasonably anticipated?
  1. Was the penalty the result of carelessness or did the taxpayer appear to have made an honest mistake?
  1. Has the taxpayer provided sufficient detail (dates, relationships) to determine whether he/she exercised ordinary business care and prudence?
  1. Is a non-liable individual being blamed for the taxpayer’s noncompliance? What is the nature of the relationship between the taxpayer and this individual? Is the individual an employee of the taxpayer or an independent third party such as an accountant or lawyer?
  1. Has the taxpayer documented all pertinent facts (i.e., death certificate, doctor’s statement, insurance statement for proof of fire, etc.)?
  1. Does the taxpayer have a history of being assessed the same penalty?
  1. Could the taxpayer have requested an extension or filed an amended return?

Conclusion

Although truly based on objective facts and circumstances, some of the reasons that have been accepted as reasonable causes include, but are not limited to, death or serious illness of the taxpayer or an immediate family member, unavoidable absence of the taxpayer, destruction of business or records by casualty or civil disturbance, inability to obtain reasons for reasons beyond taxpayer’s control, financial incapacitation, ignorance of the law by taxpayer with limited education, misunderstanding of complex or ambiguous area of tax law, mistake, mail delivery problems, advice from a tax professional, postal delays, and marital problems.

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[1] See IRC §§ 6651, 6656; also see U.S. v. Boyle, 469 US 241 (1985).

[2] See Treas. Reg. § 301.6651-1(c)(1); A Better Plumbing Serv., Inc. v. U.S., 533 F. Supp. 2d 1233 (N.D. Ga. 2008); Wilson v. C.I.R., T.C. Memo. 2012-229 (2012).

[3] See In re Craddock, 149 F.3d 1249, 1255 (10th Cir. 1998).

[4] See U.S. v. Boyle, 469 U.S. 241 (1985).

[5] See IRM § 20.1.1.3.2.2.

[6] See IRC §§ 6721, 6722, 6723.

[7] See Lawrence Block Co., Inc. v. C.I.R., 12 T.C. 366, 1949 WL 167 (T.C. 1949); Gillis v. C.I.R., T.C. Memo. 1986-576 (1986); Gentile v. C.I.R., 100 T.C.M. 451 (2010).

[8] See IRC § 6651(a)(1).

[9] See U.S. v. Boyle, 469 U.S. 241 (1985).

[10] See IRM § 20.1.1.3.2.2.4.

[11] See IRM § 20.1.1.3.2.2.3.

[12] See IRM § 20.1.1.3.2.2.6.

[13] See Estate of Lee v. C.I.R., T.C. Memo. 2009-84 (2009)

[14] See 106 Ltd. v. C.I.R., 684 F.3d 84 (D.C. Cir. 2012) (it is unreasonable to rely on the advice of a tax attorney who was a tax shelter promoter and not independent counsel); Stobie Creek Investments, LLC v. U.S., 82 Fed. Cl. 636, aff’d, 608 F.3d 1366 (Fed. Cir. 2010); Neonatology Associates, P.A. v. C.I.R., 115 T.C. 43 (2000) aff’d, 299 F.3d 221 (3d Cir. 2002) (taxpayers did not establish that they received advice from competent professional who had sufficient expertise to justify reliance); Brown v. C.I.R., 693 F.3d 765 (7th Cir. 2012) (taxpayers did not make reasonable efforts to determine their tax liability and made no effort to research legal basis for their position or to obtain opinion from accountant or tax attorney until IRS challenged their position); Kim v. C.I.R., 679 F.3d 623 (7th Cir. 2012) (taxpayer could not take advantage of “reasonable basis” exception to substantial-understatement penalty, where taxpayer did not show what information he had furnished to his accountant or whether accountant had competently analyzed taxpayer’s situation).

[15] See Southgate Master Fund, L.L.C. ex rel. Montgomery Capital Advisors, LLC v. U.S., 659 F.3d 466 (5th Cir. 2011) (partnership acted with reasonable cause in relying on tax opinions issued by a law firm and an accounting firm; partnership disclosed all pertinent facts to firms and it carried out transactions consistently with their opinions); Romanowski v. C.I.R., T.C. Memo. 2013-55 (2013) (married taxpayers reasonably and in good faith relied on professional advice from tax attorney and return preparer when deducting expenses; preparer advised them expenses were deductible, and preparer was independent and experienced CPA to whom taxpayers provided all requested information); Rawls Trading, L.P. v. C.I.R., T.C. Memo. 2012-340 (2012) (corporate taxpayers relied in good faith on advice of accountant in relation to income tax liability for transactions); Blackwood v. C.I.R., T.C. Memo. 2012-190 (2012) (married taxpayers acted with reasonable cause and in good faith when they excluded from their gross income $100,000 settlement payment that wife received where taxpayers relied on advice of counsel that settlement was excludable from gross income); Ajah v. C.I.R., T.C. Summ. Op. 2010-90 (2010) (non-precedential) (passive rental real estate Code provisions represented complex area and, although one taxpayer was attorney running her own firm, she was not tax attorney and thereby sought guidance and advice and relied upon their accountant’s analysis of the relevant documents and information); Longoria v. C.I.R., T.C. Memo. 2009-162 (2009) (taxpayer acted reasonably and in good faith, relied on advice of CPA in reporting settlement payment as nontaxable income); Perkins v. C.I.R., T.C. Memo. 2008-41 (2008) (court concluded that petitioner demonstrated that she actually relied in good faith on advice of her attorneys and therefore demonstrated reasonable cause and good faith for the underpayment); Mezrah v. C.I.R., T.C. Memo. 2008-123 (2008) (reasonable, good faith reliance on accountant who misclassified passive activity losses as ordinary losses where taxpayers lacked tax background); Klamath Strategic Inv. Fund, LLC v. U.S., 472 F. Supp. 2d 885 (E.D. Tex. 2007) aff’d, 568 F.3d 537 (5th Cir. 2009) (not liable for penalty where there was substantial authority for partnerships to rely on opinions rendered by tax professionals; reasonable cause exception was established by partners’ good faith reliance on the advice of qualified tax attorneys and accountants); Litman v. U.S., 78 Fed. Cl. 90 (Ct. Fed. Cl. 2007) (reasonable cause and good faith reliance on tax advice prevented imposition of negligence penalty on taxpayer); Thrane v. C.I.R., T.C. Memo. 2006-269 (2006) (taxpayer reasonably relied in good faith on tax return preparer’s professional expertise); Smith v. C.I.R., T.C. Memo. 2007-154 (2007) (relied in good faith upon the tax advice given by accountant when self-preparing tax return).

[16] See U.S. v. Boyle, 469 U.S. 241 (1985); Thomas v. C.I.R., T.C. Memo. 2001-225 (2001).

[17] See Hollingsworth v. C.I.R., 86 T.C. 91 (1986); Furman v. C.I.R., T.C. Memo. 1998-157 (1998) (taxpayers had reasonable cause for failing to file where they relied on advice of attorney that returns were not necessary).

[18] See Estate of Paxton v. C.I.R., 86 T.C. 785 (1986); U.S. v. Red Stripe, Inc., 792 F. Supp. 1338 (E.D.N.Y. 1992); Neptune Mut. Ass’n, Ltd., of Bermuda v. U.S., 13 Cl. Ct. 309 (1987) aff’d in part, vacated in part, 862 F.2d 1546 (Fed. Cir. 1988); Burruss Land & Lumber Co., Inc. v. U.S., 349 F.Supp. 188 (W.D. Va. 1972); McMahan v. C.I.R., 114 F.3d 366 (2d Cir. 1997).

[19] See U.S. v. Boyle, 469 U.S. 241 (1985).

[20] See Broker v. U.S., CIV. A. 00-1930 (E.D. Pa. 2000) (taxpayer showed reasonable cause where he relied on his CPA’s advice that the taxpayer would owe no federal taxes for the year in question, and that he did not need to make any estimated tax payments); also see Estate of Liftin v. U.S., 111 Fed. Cl. 13 (2013) (counsel advised estate’s executor that estate tax return could be filed late without incurring penalty; therefore advice was reasonable cause; however, counsel’s advice that estate could delay filing until it could submit accurate return was not reasonable cause for estate’s delay in filing, and estate’s nine-month delay in filing return without reasonable cause subjected the estate to maximum late-filing penalty). But see Estate of Young v. U.S., 110 A.F.T.R.2d 2012-7065 (D. Mass. 2012) (CPA’s advice that it would be “better” to file late could not excuse its failure to meet a known filing deadline); Russell v. C.I.R., T.C. Memo. 2011-81 (2011) (Court found that taxpayer’s testimony that her advisor advised her to file late tax return after waiting for losses from her husband’s business to be calculated, so as to avoid filing “fraudulent” or “perjurious” return, was not credible, and thus held that taxpayer did not establish reasonable cause based on reliance on such advice).

[21] See Van Dyke v. C.I.R., T.C. Memo. 1983-190 (1983); also see New Phoenix Sunrise Corp. v. C.I.R., 132 T.C. 161 (2009) aff’d, 408 Fed. Appx. 908 (6th Cir. 2010) (obtaining a written tax opinion from a well respected law firm that developed and was marketing a transactions did not amount to reasonable cause and good faith; attorneys were promoters rather than independent counsel).

[22] See C.I.R. v. American Ass’n of Engineers Employment, 204 F.2d 19 (7th Cir. 1953).

[23] See Credit Bureau of Greater New York v. C.I.R., 162 F.2d 7 (2d Cir. 1947); Hatfried, Inc., v. C.I.R., 162 F.2d 628 (3d Cir. 1947).

[24] See C.I.R. v. American Ass’n of Engineers Employment, 204 F.2d 19 (7th Cir. 1953).

[25] See Mayflower Inv. Co. v. C.I.R., 239 F.2d 624 (5th Cir. 1956).

[26] See U.S. v. Beech-Nut Nutrition Corp., 871 F.2d 1181 (2d Cir. 1989) (citing Williamson v. U.S., 207 U.S. 425 (1908).

[27] See U.S. v. Evangelista, 122 F.3d 112 (2d Cir. 1997) (citing Williamson v. U.S., 207 U.S. 425 (1908).

[28] See Flahertys Arden Bowl Inc v. C.I.R., 115 T.C. 19 (2000).

[29] See Henry v. C.I.R., 170 F.3d 1217 (9th Cir. 1999) (citing Treas. Reg. § 1.83-7(b)(2)).

[30] See Estate of Liftin v. U.S., 101 Fed.Cl. 604 (Fed. Cl. 2011).

[31] See U.S. v. Kroll, 547 F.2d 393, 396 (7th Cir. 1977) ( “When there is no question that a return must be filed, the taxpayer has a personal, nondelegable duty to file the tax return when due.”); also see Millette & Associates, Inc. v. C.I.R., 594 F.2d 121, 124-125 (5th Cir. 1979); Logan Lumber Co. v. C.I.R., 365 F.2d 846, 853-854 (5th Cir. 1966); Fleming v. U.S., 483 F. Supp. 284, 287 (E.D. Wis. 1980) aff’d, 648 F.2d 1122 (7th Cir. 1981); Daley v. U.S., 480 F. Supp. 808, 812 (D.N.D. 1979).

[32] See Lammerts’ Estate v. C.I.R., 456 F.2d 681 (2d Cir. 1972); Duttenhofer’s Estate v. C.I.R., 410 F.2d 302 (6th Cir. 1969); Ferrando v. U.S., 245 F.2d 582 (9th Cir. 1957); Pfeiffer v. U.S., 315 F. Supp. 392 (E.D. Cal. 1970); Estate of Mayer v. C.I.R., 43 T.C. 403 (T.C. 1964) aff’d, 351 F.2d 617 (2d Cir. 1965); Estate of Geraci v. C.I.R., T.C. Memo. 1973-94 (1973) aff’d, 502 F.2d 1148 (6th Cir. 1974).

[33] See Tesoriero v. C.I.R., T.C. Memo. 2012-261 (2012) (taxpayer was not entitled to presumption of delivery as to his Form 4868 for automatic extension of time to file his return, and taxpayer’s reliance on his accountant did not constitute reasonable cause sufficient to avoid imposition of addition to tax).

[34] See Rohrabaugh v. U.S., 611 F.2d 211, 216 (7th Cir. 1979); Gray v. U.S., 453 F. Supp. 1356, 1360-1361 (W.D. Mo. 1978).

[35] U.S. v. Boyle, 469 U.S. 241 (1985).

[36] See Beck Chemical Equipment Corp. v. C.I.R., 27 T.C. 840 (1957) acq., 1957-2 C.B. 3; Pioneer Auto. Service Co. v. C.I.R., 36 B.T.A. 213 (1937); Hornsby v. C.I.R., 26 B.T.A. 591 (1932); Winston v. C.I.R., 22 B.T.A. 1194 (1931); Standard Fruit Product Co. v. C.I.R., 8 T.C.M. (CCH) 733 (1949).

[37] See Levine v. C.I.R., T.C. Memo. 1963-230 (1963); Hammonton Inv. and Mortg. Co. v. C.I.R., T.C. Memo. 1959-212 (1959).

[38] See Valen Mfg. Co. v. U.S., 90 F.3d 1190 (6th Cir. 1996); Conklin Bros. of Santa Rosa, Inc. v. U.S., 986 F.2d 315 (9th Cir. 1993) (corporate controller’s misconduct was held not to constitute reasonable cause); San Diego Drywall, Inc. v. U.S., 72 A.F.T.R.2d 93-6171 (S.D. Cal. 1993) aff’d, 56 F.3d 73 (9th Cir. 1995); Berlin v. C.I.R., 59 F.2d 996 (2d Cir. 1932); In re Howe Now, Inc., 85 A.F.T.R.2d 2000-2121 (Bankr. W.D. Ark. 2000) (employee’s misuse of company funds not reasonable cause for failure to file and pay withholding taxes); Atlas Therapy, Inc. v. U.S., 66 F. Supp. 2d 1203 (N.D. Ala. 1999) (no abatement of penalties even though employee in charge of payroll actively concealed his failure to file returns and pay taxes).

[39] See East Wind Industries, Inc. v. U.S., 196 F.3d 499 (3d Cir. 1999); Matter of American Biomaterials Corp., 954 F.2d 919 (3d Cir. 1992) (reasonable cause existed where corporate officers who controlled the corporation and were in charge of filing and paying taxes embezzled funds thereby incapacitating the business and leaving it unable to file and pay the taxes); IRS CCA 200915045 (2009).

[40] See Willis v. C.I.R., 736 F.2d 134 (4th Cir. 1984).

[41] See Ensyc Technologies v. C.I.R., T.C. Summ.Op. 2012-55 (2012).

[42] See Cook v. C.I.R., T.C. Memo. 2012-167 (2012); Fleming v. C.I.R., T.C. Memo. 1985-165 (1985); Grant v. C.I.R., T.C. Memo. 1980-242 (1980).

[43] See U.S. v. Northumberland Ins. Co., Ltd., 521 F.Supp. 70 (D.N.J. 1981).

[44] See Vaughn v. U.S., 536 F.Supp 498 (W.D. Va. 1982).

[45] See Woolsey v. U.S., 138 F.Supp. 952 (N.D. N.Y. 1955) aff’d, 230 F.2d 948 (2d Cir. 1956); Irby v. C.I.R., 30 T.C. 1166 (1958) decision aff’d as modified, 274 F.2d 208 (5th Cir. 1960); Singer v. C.I.R., T.C. Memo. 1979-383 (1979).

[46] See Stevens Bros. Foundation, Inc. v. C.I.R., 39 T.C. 93 (1962) aff’d in part, rev’d in part and remanded, 324 F.2d 633 (8th Cir. 1963) acq., 1965-2 C.B. 3.

[47] See IRM § 20.1.1.3.2.2.7.

[48] See Bassett v. C.I.R., 67 F.3d 29 (2d Cir. 1995) (upholding the penalty against the parents of a minor who was incapable of filing and ignorant of the filing requirement because the parents were under a duty to file on the minor’s behalf).

[49] See Dillin v. C.I.R., 56 T.C. 228 (1971), acq., 1975-2 C.B. 1; Estate of Swan v. C.I.R., 24 T.C. 829 (1955), acq., 1956-2 C.B. 4, aff’d in part, rev’d in part, 247 F.2d 144 (2d Cir. 1957); Comenout v. C.I.R., T.C. Memo. 1982-40 (1982), aff’d, 746 F.2d 1484 (9th Cir. 1984).

[50] See IRM § 20.1.1.3.2.2.4.

[51] See IRM § 20.1.1.3.2.2.6.

[52] See Baldwin v. C.I.R., T.C. Memo. 1986-342 (1986); Beran v. C.I.R., T.C. Memo. 1980-119 (1980), acquiescence recommended, AOD-1980-159 (1980); also see Estate of Liftin v. U.S., 111 Fed. Cl. 13 (2013) (counsel’s advice that estate could delay filing until it could submit accurate return was not reasonable cause for estate’s delay in filing); Estate of Young v. U.S., A.F.T.R.2d 2012-7065 (D. Mass. 2012) (Court stated that estate had an obligation to file a timely return with the best available information and that it could not claim reasonable cause based on advice that it was necessary to wait for complete information); Russell v. C.I.R., T.C. Memo. 2011-81 (2011) (Court found that taxpayer’s testimony that her advisor advised her to file late tax return after waiting for losses from her husband’s business to be calculated, so as to avoid filing “fraudulent” or “perjurious” return, was not credible); Estate of Cederloff v. U.S., 106 A.F.T.R.2d 2010-6292 (D. Md. 2010) (personal representative’s belief that he could not properly value decedent’s estate before the estate tax return filing deadline was not reasonable cause for filing a late estate tax return; a return “as complete as possible” must be filed before the expiration of the extension period).

[53] See Jacobson v. C.I.R., T.C. Memo. 2003-227 (2003); In re Craddock, 149 F.3d 1249 (10th Cir. 1998).

[54] See Arcade Realty Co., Inc. v. C.I.R., 35 T.C. 256 (1960), acq., 1961-2 C.B. 3; Strawder v. C.I.R., T.C. Memo. 1958-82 (1958); Thrower v. C.I.R., T.C. Memo. 2003-139 (2003) (taxpayer’s incarceration at time his return was due was not reasonable cause for failure to timely file, nor was alleged unavailability of records; taxpayer did not apply for extension of time to file his tax return, and did not show that he could not have prepared timely return with reasonable degree of accuracy based on information available to him as of due date of tax return).

[55] See Young v. C.I.R., T.C. Memo. 1989-480 (1989), aff’d, 937 F.2d 609 (6th Cir. 1991).

[56] See IRM § 20.1.1.3.2.2.3.

[57] See Hobson v. C.I.R., T.C. Memo. 1996-272 (1996) (reasonable cause found where taxpayers cared for a child suffering from multiple sclerosis and an invalid, amputee parent, and taxpayer husband’s job forced taxpayers to live apart for part of the year); Tabbi v. C.I.R., T.C. Memo. 1995-463 (1995) (reasonable cause found where taxpayers’ son had heart surgery and taxpayers spent four months continuously in the hospital with him, and taxpayers filed their return two months after their son’s death); Carnahan v. C.I.R., T.C. Memo. 1994-163 (1994), aff’d, 70 F.3d 637 (D.C. Cir. 1995) (reasonable cause found where taxpayer was confined to hospitals for severe mental illness); Jones v. C.I.R., T.C. Memo. 1988-542 (1988) (reasonable cause found where taxpayer was disabled for 42 weeks of the year); Harris v. C.I.R., T.C. Memo. 1969-49 (1969), acq. rec., 1969 WL 20931 (I.R.S. AOD 1969) (reasonable cause found where taxpayer’s activities were severely restricted, and taxpayer was in and out of hospitals due to various severe medical ailments including stroke, paralysis, heart attack, bladder trouble, and breast cancer); Hayes v. C.I.R., T.C. Memo. 1967-80 (1967), acq. rec., 1967 WL 16260 (I.R.S. AOD 1967) (reasonable cause found where two children were seriously ill with pneumonia, taxpayer wife suffered a ruptured appendix requiring an emergency operation, taxpayer husband suffered a mental and physical collapse requiring hospitalization and to be wheelchair-bound); Estate of Kirchner v. C.I.R., 46 B.T.A. 578 (1942) (reasonable cause found where estate’s executrix was confined to bed with a stroke, suffered from diabetes, developed gangrene in her leg, and had little to no knowledge of business affairs).

[58] See I.R.M. § 20.1.1.3.2.2.1, “Death, Serious Illness, or Unavoidable Absence.” But see Hardin v. C.I.R., T.C. Memo. 2012-162 (2012) (despite suffering from a number of mental disorders, taxpayer lacked reasonable cause; mental disorders did not stop him from carrying on his other business affairs); Jordan v. C.I.R., T.C. Memo. 2005-266 (2005) (petitioner’s drug addiction for which he underwent only three weeks of rehabilitation, coupled with his other medical problems and related memory loss, did not give him reasonable cause); Wesley v. U.S., 95 A.F.T.R.2d 2005-2647 (N.D. Fla. 2005) (taxpayer, an attorney, filed the 1997, 1998, and 1999 tax returns late and alleged health problems which culminated in a heart attack and hospitalization in 2000; court held that there was no reasonable cause as to 1997 and 1998, but there was reasonable cause as to 1999); In re Sykes & Sons, Inc., 188 B.R. 507 (Bankr. E.D. Pa. 1995) (holding that corporation was not reasonable when it allowed its terminally ill principal to ignore the corporation’s duty to file, pay, and deposit taxes).

[59] See Smith v. C.I.R., T.C. Memo. 1984-114 (1984) (health including hospitalization); Myers v. C.I.R., T.C. Memo. 1980-437 (1980) (excessive drinking); Avery v. C.I.R., T.C. Memo. 1976-129 (1976), aff’d, 574 F.2d 467 (9th Cir. 1978) (family problems and stress); Gasman v. C.I.R., T.C. Memo. 1967-42 (1967) (family problems-divorce).

But see Stine v. U.S., 106 Fed. Cl. 586 (2012) (taxpayer’s symptoms did not constitute a continuous state of disability that would provide her with reasonable cause for her failure to file the returns, and taxpayer’s performing at least five financial transactions fundamentally similar to filing a return demonstrated that she was not incapacitated); McLaine v. C.I.R., 138 T.C. 228 (2012) (taxpayer’s alcoholism did not constitute reasonable cause sufficient to avoid additions to tax); Kowsh v. C.I.R., T.C. Memo. 2008-204 (2008) (taxpayer failed to show that his depression and sleep apnea incapacitated him to such extent that he was unable to file tax return and pay proper amount of taxes; taxpayer offered no evidence to corroborate his accounts of depression or anxiety, no doctors testified, taxpayer did not provide any affidavits from medical professionals, and taxpayer’s failure to timely file continued for years beyond due date of return); Hazel v. C.I.R., T.C. Memo. 2008-134 (2008) (any incapacity taxpayer may have suffered due to drug and alcohol problems did not constitute reasonable cause for his failure to file; taxpayer was not hospitalized during time he should have filed his return, he did not present medical records, opinion of his doctor, or any evidence of his incapacity other than his own inconsistent and self-serving testimony).

[60] See Matter of Carlson, 126 F.3d 915 (7th Cir. 1997).

[61] See Ramirez v. C.I.R., T.C. Memo. 2005-179 (2005).

[62] See Erickson v. C.I.R., 172 B.R. 900 (Bankr. D. Minn. 1994).

[63] See Lykes v. C.I.R., T.C. Memo. 2004-159 (2004).

[64] See Tamberella v. C.I.R., T.C. Memo. 2004-47 (2004).

[65] See IRM § 20.1.1.3.2.2.1.

[66] See Judge v. C.I.R., 88 T.C. 1175 (1987), acq., 1988-2 C.B.1; Faulkner v. C.I.R., T.C. Memo. 1980-90 (1980).

[67] See Mason Motors Co. v. U.S., 8 F. Supp. 2d 1177 (D. Minn. 1998) (bookkeeper’s intentional misconduct did not excuse the taxpayer from complying).

[68] See U.S. v. Jones, 628 F.2d 402 (5th Cir. 1980); Kirschbaum v. C.I.R., T.C. Memo. 1989-526 (1989); Raczkowski v. C.I.R., T.C. Memo. 1984-146 (1984); Boland v. C.I.R., T.C. Memo. 1983-689 (1983).

[69] See Muste v. C.I.R., 35 T.C. 913 (1961), acq., 1961-2 C.B. 3; McCurry v. C.I.R., T.C. Memo. 1988-447 (1988); Grossman v. C.I.R., T.C. Memo. 1986-439 (1986).

[70] See U.S. v. Dunkel, 182 F.3d 923 (7th Cir. 1999); Murillo v. C.I.R., 166 F.3d 1201 (2d Cir. 1998); Thomas v. C.I.R., 62 F.3d 97 (4th Cir. 1995); McNichols v. C.I.R., 13 F.3d 432 (1st Cir. 1993) (Taxpayer pled guilty in criminal case involving drugs and agreed to forfeit property. In the subsequent civil case the taxpayer argued that the deficiencies and penalties coupled with the forfeiture amounted to an excessive fine under the Eighth Amendment and double jeopardy under the Fifth Amendment. The Circuit Court did not agree.); Hackworth v. C.I.R., T.C. Memo. 2004-173 (2004), aff’d, 155 Fed. Appx. 627 (4th Cir. 2005) (no Fifth Amendment double jeopardy violation arose from denial of loss deduction for cash that taxpayer forfeited to State of South Carolina as result of violation of South Carolina’s gambling laws, to which he pled guilty and paid fine; denial of deduction, i.e., item that gave rise to income tax deficiency, was not criminal punishment); Morse v. C.I.R., T.C. Memo. 2003-332 (2003), aff’d, 419 F.3d 829 (8th Cir. 2005) (civil tax penalty for fraud is not a punishment for purposes of the Double Jeopardy Clause of the Fifth Amendment); Boyd v. C.I.R., T.C. Memo. 2003-286 (2003) (taxpayer was not deprived of due process or equal protection under Fifth Amendment by IRS’s disallowance of his election to itemize deductions, where his spouse did not make election on her separate return; no fundamental right of taxpayer’s was at stake, taxpayer did not overcome strong presumption of constitutionality afforded tax legislation, and absolute logical consistency between persons subject to tax would not be an indispensable condition for constitutionality of tax statutes); Ryan v. C.I.R., T.C. Memo. 1998-62 (1998).

[71] See Olivares v. C.I.R., T.C. Memo. 1983-649 (1983); Madden v. C.I.R., T.C. Memo. 1980-350 (1980); Upton v. C.I.R., T.C. Memo. 1973-217 (1973); Constantino v. U.S., 56 A.F.T.R.2d 85-6551 (N.D. Cal. 1985). But see Broadhead v. C.I.R., T.C. Memo. 1972-196 (1972), acq. rec., 1974 WL 36276 (I.R.S. AOD 1974).

[72] No Reasonable Cause: Cayabyab v. C.I.R., T.C. Memo. 2012-89 (2012); Lykes v. C.I.R., T.C. Memo. 2004-159 (2004) (marital problems, divorce, and financial setbacks did not prevent taxpayer from filing); Electric & Neon, Inc. v. C.I.R., 56 T.C. 1324 (1971), acq. rec., 1973 WL 34706 (I.R.S. AOD 1973) acq., 1973-2 C.B. 1, aff’d, 496 F.2d 876 (5th Cir. 1974); Zajaczkowski v. C.I.R., T.C. Memo. 1990-503 (1990), aff’d, 976 F.2d 729 (4th Cir. 1992).

Reasonable Cause Found: Fairchild v. C.I.R., T.C. Memo. 2001-237 (2001); Fleming v. C.I.R., T.C. Memo. 1984-130 (1984); Connor v. C.I.R., T.C. Memo. 1982-302 (1982).

[73] See IRC § 6651(a)(1).

[74] See IRC §§ 6651(a)(2), (3). See Harvey & Sons, Inc. v. I.R.S., 94 A.F.T.R.2d 2004-7258 (D. Mass. 2004) (the district court agreed that financial distress can constitute reasonable cause for not paying and set out a four part test which it held the taxpayer did not meet); Q.E.D., Inc. v. U.S., 55 Fed. Cl. 140 (2003) (evidence supported conclusion that taxpayer’s intentional failure to pay its employment taxes when due did not comport with the exercise of ordinary business care and prudence and was not excused by a claim of undue hardship); Brewery, Inc. v. U.S., 33 F.3d 589 (6th Cir. 1994); Fran Corp. v. U.S., 164 F.3d 814 (2d Cir. 1999); Jones v. C.I.R., 25 T.C. 1100 (1956), judgment rev’d, 259 F.2d 300 (5th Cir. 1958) acq., 1958-2 C.B. 3; Vasta v. C.I.R., T.C. Memo. 1989-531 (1989).

[75] See Brewery, Inc. v. U.S., 33 F.3d 589 (6th Cir. 1994).

[76] See Van Camp & Bennion v. U.S., 251 F.3d 862 (9th Cir. 2001); Fran Corp. v. U.S., 164 F.3d 814 (2d Cir. 1999); East Wind Industries, Inc. v. U.S., 196 F.3d 499 (3d Cir. 1999).

[77] See East Wind Industries, Inc. v. U.S., 196 F.3d 499 (3d Cir. 1999) (which distinguished Brewery holding its bright line test inconsistent with the reasonable cause exception); also see Custom Stairs & Trim, Ltd., Inc. v. C.I.R., T.C. Memo. 2011-155 (2011) (holding that taxpayer exercised ordinary business care and prudence in cutting benefits and payroll, selectively and prudently paying business expenses, and attempting to sell its real property to provide for the timely payment of its tax liability following the financial fallout to its construction business after the impact of Hurricane Ivan); In re The Hillard Development Corp., 99 A.F.T.R.2d 2007-3150 (Bankr. S.D. Fla. 2007) (late payment of taxes was not due to “willful neglect” but rather from its unfortunate position of being underfunded and unable to pay the taxes while it was wrestling to maintain very basic business operations); Broker v. U.S., CIV. A. 00-1930 (E.D. Pa. 2000) (taxpayer had reasonable cause where taxpayer relied on his CPA’s advice that no federal tax would be due, subsequently did not have sufficient assets to pay the liability, and could not timely obtain a loan to pay the taxes).

[78] See East Wind Industries Inc. v. U.S., 196 F.3d 499 (3d Cir. 1999); Fran Corp v. U.S., 164 F.3d 814 (2d Cir. 1999).

[79] See Francis P. Harvey & Sons, Inc. v. I.R.S., CIV.A.03-40097-FDS (D. Mass. 2004).

[80] Matter of American Biomaterials Corp., 954 F.2d 919 (3d Cir. 1992); Dana Corp. v. U.S., 764 F. Supp. 482 (N.D. Ohio 1991); Universal Concrete Products Corp. v. U.S., CIV. A. 89-7833 (E.D. Pa. 1990) (systematic deception by a controller).

[81] See Pacific Wallboard & Plaster Co. v. U.S., 319 F. Supp. 2d 1187 (D. Or. 2004), aff’d, No. 04-35511 (9th Cir. 2005) (employer’s alleged undue hardship did not excuse it from paying federal employment taxes, and thus employer was not entitled to abatement of negligence penalties, even if employer’s controller embezzled funds from company, where employer’s highest financial officers made conscious decision not to pay taxes for twelve consecutive quarters, despite making deductions from employees’ paychecks, employer failed to make partial payments when it had sufficient funds to do so, but instead loaned over $1 million to other companies controlled by employer’s president, and there was no evidence that employer tried to borrow additional funds, obtain infusion of capital by selling stock, or to delay repaying some loans or other obligations); Mason Motors Co. v. U.S., 8 F. Supp. 2d 1177 (D. Minn. 1998); San Diego Drywall, Inc. v. U.S., CIV. 90-0829-R(M) (S.D. Cal. 1993), aff’d, 56 F.3d 73 (9th Cir. 1995) (District Court held that despite the fact that the company exercised ordinary business care and prudence in supervising the comptroller who embezzled funds the company was liable for both the failure to file and the failure to pay penalties).

[82] See Conklin Bros. of Santa Rosa, Inc. v. U.S., 986 F.2d 315 (9th Cir. 1993); San Diego Drywall, Inc. v. U.S., CIV. 90-0829-R(M) (S.D. Cal. 1993), aff’d, 56 F.3d 73 (9th Cir. 1995); also see Lanco Inns, Inc. v. I.R.S., 01-CV-00510 (N.D. N.Y. 2006); Pediatric Affiliates, P.A. v. U.S., 05-3108 (MLC) (D.N.J. 2006); Pacific Wallboard & Plaster Co. v. U.S., 319 F. Supp. 2d 1187 (D. Or. 2004), aff’d, No. 04-35511 (9th Cir. 2005); In re Howe Now, Inc., No. 98-70980 (Bankr. W.D. Ark. 2000).

[83] See Langer v. C.I.R., T.C. Memo. 1990-268 (1990), aff’d, 980 F.2d 1198 (8th Cir. 1992); Wedemeyer v. C.I.R., T.C. Memo. 1990-324 (1990), aff’d, 959 F.2d 243 (9th Cir. 1992); B.D. Morgan & Co., Inc. v. C.I.R., T.C. Memo. 1988-569 (1988).

[84] See Curtis v. C.I.R., T.C. Memo 2014-19 (2014); Dickes v. C.I.R., T.C. Memo 2013-210 (2013).

[85] Id.

[86] See IRM § 20.1.1.3.2.2.2.

[87] Id.

[88] See Harrison v. C.I.R., T.C. Memo. 1998-417 (1998); Scott v. C.I.R., T.C. Memo. 1997-507 (1997), aff’d, 182 F.3d 915 (5th Cir. 1999); Arnaiz v. C.I.R., T.C. Memo. 1992-729 (1992).

[89] See Photographic Assistance Corp. v. U.S., No. 1:97-CV-3561-RCF (N.D. Ga. 1998); Industrial Indem. v. Snyder, 41 B.R. 882 (E.D. Wash. 1984).

[90] See Estate of Hartsell, T.C. Memo. 2004-211 (2004).

[91] See IRM § 20.1.1.3.2.

[92] See In re Sanford, 979 F.2d 1511 (11th Cir. 1992); also see S.E.I.U. v. U.S., 598 F.3d 1110 (9th Cir. 2010) (held that statutory penalty for late filing of informational returns by tax-exempt organization is either fully enforceable or fully unenforceable; court held that If a tax-exempt organization fails to file an informational return on time for reasonable cause, the IRS has no discretion whether to impose or reduce the penalty; rather, the IRS is flatly prohibited from imposing any penalty at all).

[93] See IRM § 20.1.1.3.2.

[94] See IRM § 20.1.1.3.2.2.

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