Attorney-at-Law

CODE TC 520

In Uncategorized on 01/12/2017 at 21:15

No, this is neither a medical alert nor the latest computer alert that your e-mail has been hacked. This is the computer code IRS puts on your dossier when you file bankruptcy.

I’m going on the road again tomorrow, so I’m late with the sad tale of Silvia Santana, 2017 T. C. Memo. 14, filed 1/12/17, as told by His Honor Big Julie, a/k/a His Honor Judge Julian I. Jacobs, hereinafter HHBJJJIJ.

While Silvia and her trusty attorney were dukeing it out about Silvia’s deficiency, and reaching a negotiated decision, nobody told IRS that Silvia had filed a bankruptcy petition. I wonder if she told her trusty counsel; surely he would know about 11USC§362(a)(8) and the automatic stay therein.

Howbeit, IRS wakes up and agrees the decision must go. But IRS and Silvia agreed as to the deficiencies, waived SNOD and told IRS to go and collect.

Silvia’s petition is thereupon tossed. But some clerk forgot to clear Code TC 520 out of the computer thereat.

Because Silvia remained frozen, her returns for the next four (count ‘em, four) years never got applied to the old deficiency, neither did a previous overpayment just shy of the three-year SOL for claiming.

Notwithstanding the foregoing, IRS sent Silvia a NFTL promptly after Silvia exited bankruptcy. Silvia did nothing.

IRS applied all the refunds to the earlier year as of April 15 of the year for which the refund was due, even though the TC 520 wasn’t pulled until years later.

But interest was running.

When IRS hit Silvia with a NITL, she petitioned, claiming IRS charged her too much interest and contested the failure to pay additions to tax.

Appeals cut some of the additions, and 50% of the interest.

Silvia did get cash refunds for some EICs that were part of the deficiency, and that interest stands. She had the money.

Silvia claims reasonable cause for nonpayment.

HHBJJJIJ: “With respect to reasonable cause, we observe that petitioners have not provided the Court with their financial information. Thus, we cannot determine whether they exercised the ordinary care and prudence that they must to demonstrate reasonable cause. See, e.g., Taylor v. Commissioner, T.C. Memo. 2009-27 (where taxpayer failed to introduce evidence regarding her investment in a club or how the club’s failure affected her ability to pay her taxes, finding that ‘[b]ecause of the lack of evidence regarding petitioner’s investment in the club, we cannot conclude that the investment constituted reasonable cause for her failure to pay her 1998, 2000, and 2001 tax liabilities by their respective due dates’). Despite petitioners’ failure to provide Settlement Officer Andrews with the necessary information, she reduced, but did not eliminate, the section 6651(a)(3) addition to tax imposed on them. We will not disturb her determination.” 2017 T.C. Memo. 14, at pp. 16-17. (Footnote omitted).

Since Silvia could prove no reasonable cause, willful neglect is not discussed.

And since the NFTL should have awakened Silvia, she has no beef that she would have paid sooner had she known.

Takeaway- Don’t ignore IRS correspondence; it could be expensive.

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