I received a call from a client this past week. He is keen on getting his taxes caught-up.
… we conclude that petitioners did not exercise ordinary business care and prudence and that they have not established reasonable cause for failing to file their 2012 tax return timely.”
COMMENT: if you see the words “ordinary business care and prudence” or “reasonable cause,” rest assured that someone is being penalized. Those are code words when one is trying to remove or reduce penalties.
- Mr and Mrs Parekh filed 2009 only after the IRS prepared a substitute tax return for them.
- They were late in filing 2010 and 2011.
- They did not extend their 2012 return. They eventually filed it in 2014.
Now that there was tax due the IRS also assessed a penalty.
Parekh went to Appeals. He wanted the penalty for late filing abated.
He always had refunds. How was he supposed to know that 2012 was different?
Here is Parekh:
I figured, reasonably so I thought, that since I’d be getting a refund it was OK to file late ***. In fact, I had considered the de facto deadline for filing to be three years if one is getting a refund since after that the refund is forfeited. As I take a quick look at some tax advice websites that is pretty much what they say.”
The Appeals officer noted that petitioners had also been delinquent in filing their 2009-2011 returns and that, as of […], they had not filed a return for 2013 or 2014 either.”
The Court did not like the attorney slapping the India thing into the record at the last minute.
Even if we were to credit petitioner husband’s testimony about his heavy travel schedule, it is inconceivable that he could not have found two days in which to fulfill petitioners’ filing obligation, as opposed to filing that return 15 months late.”
Did Parekh’s track record with the IRS hurt him with the Court?
And there is the risk if you routinely file your returns late – perhaps because you expect a refund or because you have always gotten refunds. Have your taxes spike unexpectedly, and it is unlikely you will avoid the penalties that will come with them.