Taxpayer Wins on the Failure to Pay Tax Penalty, Loses on the Failure to File a Tax Return Penalty

Posted on March 03, 2018

In a recent case in the United States Tax Court, the taxpayer lost his argument that the IRS should not assess a failure to timely file a federal tax return penalty against him failed. However, due to a technicality, he won on his argument that the IRS should not assess a failure to pay tax penalty against him. The taxpayer, J.S. Plato, separated from his wife in December of 2007. On April 15, 2008, the due date of the 2007 tax return, he left a joint tax return for 2007 and a check in the amount of $46,073.00 “under the mat at the front door” of his wife’s residence for her to sign and mail to the IRS. He did not file for an extension of time to file the tax return for that year, but asked his wife to do so. Further, Mr. Plato took no further action regarding his 2007 tax return until the IRS issued a Notice of Deficiency many years later. Mr. Plato argued that he had reasonable cause for not timely filing his tax return and that his actions were not due to willful neglect because he signed the joint tax return on the due date and left it along with a check “under the mat” of his wife’s residence. Mr. Plato also argued that his actions in attempting to file the joint tax return coupled with his history of compliance with filing tax returns amounts to reasonable cause. The United States Tax Court held against Mr. Plato because he did not ask the IRS for an extension of time to file the tax return and merely left the tax return under his wife’s doormat. The Tax Court also examined the IRS’ decision to assess the failure to pay tax penalty against Mr. Plato. However, because of an error on the IRS’ part, the Court held in favor of the taxpayer. Has the IRS assessed a failure to file or failure to pay penalty against you? Call us, we can help.

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