IRC Section 6651(a)
The United States Tax Court in George Anton Remisovsky and Ellen Jones-Remisovsky, T.C. Memo 2022-89, filed on August 30, 2022, entered judgment in favor of the government because the taxpayer had not proved that their failure to file and pay their return was due to reasonable cause and not due to willful neglect per IRC Sections 6651(a)(1) and (2). The tax return at issue in this matter is the taxpayers’ form 1040 for tax year 2013. Taxpayer husband was a medial doctor and taxpayer wife was a retail manager. On May 25, 2016, taxpayers filed their 2013 return, after the government prepared a substitute for return for them. Ultimately, the taxpayers requested a Collection Due Process hearing after a final notice of intent to levy was issued. While reviewing a collection alternative with the Appeals Officer, the taxpayer husband alleged that alcoholism and depression was reasonable cause for failing to satisfy their 2013 tax obligations. The husband said he had been hospitalized for alcoholism in 1990 and suffered a relapse in 2012. He stated he was able to continue practicing medicine because he was a “binge drinker while active.” He also supplied a letter from a psychiatrist who was treating him for depression. The letter stated that he had a “history of being alcoholic, although he has had periods of sobriety,” and that “his cognitive capacity to comply with his financial obligations and to pay his taxes in timely fashion were severely diminished.” The Tax Court went through the standard review associated with their review of a Collection Due Process hearing. Regarding the penalty abatement issue, the court stated that to prove reasonable cause for failure to pay and file, the taxpayer must generally prove that he acted with ordinary business care and prudence and was nevertheless unable to file or pay. The Court stated that the evidence showed a generalized struggle with depression and alcoholism, but there was no testimony that the taxpayer suffered from these at the relevant times – such as early 2014 when the return was due, or in May 2016 when the return was filed without payment. Fundamentally, taxpayer husband managed to practice medicine during this time, and his spouse presented no evidence that she was unable to file or pay. As this case illustrates, abatement analysis always includes a review of when the relevant issues affected the taxpayer.