In Uncategorized on 01/05/2017 at 19:31

We all know the Section 6651(a)(2) addition to tax for failure to pay tax shown on return, 0.5% per month to a maximum of 25%.

Well, IRS apparently never issued a SFR, or didn’t get it into the trial notebook, in Brian E. Harriss, 2016 T. C. Memo. 5, filed 1/5/17.

Brian filed a return for the year at issue here, but all it showed was zero. Brian had salary and wages and an IRA distribution, but all his petition showed was the usual protester stuff, ending in zero.

IRS wants the aforesaid addition to tax, but Judge Vasquez finds IRS has a problem.

“The section 6651(a)(2) addition to tax applies only when an amount of tax is shown on a return filed by the taxpayer or prepared by the Secretary. Sec. 6651(a)(2), (g)(2); Cabirac v. Commissioner, 120 T.C. 163, 170 (2003), aff’d without published opinion, 94 A.F.T.R. 2d (RIA) 2004-5490 (3d Cir. 2004). Pursuant to section 7491(c), respondent has the burden of production with respect to this addition to tax. See Higbee v. Commissioner, 116 T.C. at 446.

“Respondent has not carried his burden here. Petitioner’s…return, which respondent received and processed, shows a tax of zero. There is nothing in the record to indicate that a substitute for return (SFR) meeting the requirements of section 6020(b) was ever prepared…. We therefore hold that petitioner is not liable for the section 6651(a)(2) addition to tax.” 2016 T. C. Memo. 5, at pp. 11-12. (Footnote omitted, but read it; IRS introduced a “literal transcript” over Brian’s objection, but it neither showed an SFR or any compliance with Section 6020(b)(1)).

Takeaway– If Section 6651(a)(2) is in play, get a copy of the return and any SFR and keep it handy. That goes both for petitioners and IRS.



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