I.R.C. section 6651
The United States Court of Federal Claims granted summary judgment in favor of the IRS to sustain penalties in the case of Shih-Fu Peng and Roisin Heneghan v. The United States, No 16-1263T, Filed October 24, 2018. The plaintiffs were assessed late filing penalties in relation to their 2012 tax return. They allege that their return was filed late due to four reasons: 1) The father of one of the taxpayers died in July 2012, 2) their child was born in January 2013, 3) The grandmother of one of the taxpayers died in October 2013, and 4) their accountant was at times unresponsive while trying to prepare their 2012 return. Of course the Court applied the standard of I.R.C . 6651(a)(1)-(2) in determining if relief was appropriate – was the failure to file due to reasonable cause and not due to willful neglect? Their argument relating to the accountant failed as they only argued that he was the reason they did not file their extension. Ultimately, their return was filed after the extension due date. As such, even if they were correct, their return was still filed late. As for the other events that delayed the taxpayers’ filing, the Court indicated that it has recognized personal hardship as reasonable cause for failure to timely fund under some circumstances – such as an illness or debilitation that, because of its severity or timing, make it virtually impossible for the taxpayer to comply. The Court also explained that a taxpayer could supply evidence of incapacity caused by mental or emotional circumstances. Unfortunately for these taxpayers, it was not clear that their life events made it “virtually impossible,” for them to comply with the filing deadline. As such, no relief was granted.