1985 U.S. Supreme Ct. case of Boyle Again Confirmed
U.S. Supreme Ct. Case of Boyle
The 1985 Supreme Court case United States v. Boyle (469 U.S. 241, discussing IRC Sec. 6651(a)(1) and (2), confirmed that the IRS can impose delinquency penalties for failing to file a tax return or pay a tax unless the taxpayer can establish that the failure was due to reasonable cause and not willful neglect.
What If the Taxpayer Relied Upon His Attorney?
Boyle engaged an attorney to file his mother’s estate tax return. Boyle periodically checked with the attorney and was told that the return would be filed by the statutory due date. However, due to a clerical error at the attorney’s office, the return was not timely filed and the IRS assessed late filing penalties. Boyle appealed the assessment of the penalties saying that his reliance upon the attorney demonstrated reasonable cause by him and not willful neglect. The Court stated that while it was “reasonable” for Boyle to assume that the attorney would meet the statutory deadline with respect to matters between the two of them, it did not relieve the taxpayer of his obligation to file the return on time. The court noted that it required no special training or effort on the taxpayer’s part to ascertain a deadline and ensure that it is met. That the attorney, as respondent’s agent, was expected to attend to the matter did not relieve Boyle of his duty to meet the filing deadline. In other words, taxpayers have a nondelegable duty to be aware of tax deadlines. An agent’s incompetence or willful misconduct will not excuse the taxpayer from delinquency penalties.
What If the Taxpayer Was Incarcerated and Relied Upon His Attorney?
Jeffrey Allen Lindsay (U.S. Court of Appeals, 5th Circuit) was incarcerated and executed a POA (Power of Attorney) with an attorney to manage his affairs, including filing his tax returns. The attorney assured Lindsay he was doing so. However, he failed to do so and embezzled hundreds of thousands of dollars from Lindsay.
Lindsay eventually filed his tax returns and paid the assessed delinquency penalties. He filed a claim for refund; IRS rejected and he filed a suit in district court. The Court of Appeals found for the IRS, citing Boyle.
Lindsay had claimed that he exercised ordinary business care and diligence by giving his attorney his power of attorney and by directing the attorney to file his income tax returns and to pay his taxes. Lindsay routinely asked the attorney whether he was handling Lindsay’s tax obligations, and the attorney confirmed he was. In Lindsay’s view, he had a reasonable cause for late filings and delayed payments because he used ordinary business care and prudence. He was unable to file his returns and pay his income taxes due to circumstances beyond his control, i.e., his incarceration and his attorney’s malfeasance. Unfortunately for Lindsay, the Court found for the IRS. While on the surface it appears that Lindsay had reasonable cause relying upon an attorney while he was incarcerated, it does not meet the IRS’s standard of reasonableness as confirmed by the U.S. Supreme Court.
Lindsay, like many other taxpayers, found that the courts agree with the IRS when it comes to trying to recover delinquency penalties that can be directly linked to an agent’s misconduct or incompetence. The burden is solely upon the taxpayer and that responsibility cannot be delegated to another person.
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About F. Bryan Haarlander, EA, CTRS:
Bryan Haarlander is an IRS licensed Enrolled Agent and who owns and operates a specialized tax services firm serving clients in the western suburbs of Philadelphia, PA, which includes the cities of Chester Springs, Coatesville, Collegeville, Devon, Downingtown, Exton, Frazer, King of Prussia, Paoli, Philadelphia, Phoenixville, Pottstown, Radnor, Reading, Wayne, West Chester in Berks, Chester, Delaware, Montgomery and Philadelphia Counties, as well as clients in Delaware, New Jersey, New York and throughout the continental USA.
A Certified Tax Resolution Specialist, Bryan is well-known for his IRS tax resolution expertise and his book How to Resolve Your IRS Tax Debt Problems.