Attorney-at-Law

IRS CAN’T ADD

In Uncategorized on 06/03/2019 at 16:33

Judge Buch is faced with IRS’ numerate shortcomings, just as he’s trying to finish up with master frivols Peter E. Hendrickson & Doreen M. Hendrickson, Docket No. 6863-14, filed 6/3/19.

See my blogpost “Cracked,” 2/11/19, for the lead-in to today’s episode. So Pete & Doreen face off on the Rule 155 beancount for the Section 6651(a) chops, because IRS got Pete’s filing status wrong in the SFRs, and the Section 6663(a) fraudulent filing chop doesn’t apply, because what Pete & Doreen filed wasn’t a return. Their nonfiling, however, was fraudulent.

OK, so it seems IRS got the multipliers right. For Section 6651(a) fraudulent nonfiling – nonpaying, it’s the monthly .15 (15%) fraudulent nonfiling, minus the regular .05 (5%) nonpaying, where both nonfiling and nonpaying, and fraud is in play, per Section 6651(a)(1) and (a)(2). And the chop maxes out at five months, thus 72.5% (15% – 0.5% times 5 months = 72.5%).

“Although the Commissioner used the correct multiplier, it is unclear whether he applied that multiplier to the correct amount. The Commissioner’s calculation as to the amount of the section 6651(a)(1) and (f) addition to tax matches the amount of the penalty shown on the notice of deficiency. But the fraud penalty is applied to the amount of an underpayment (sec. 6663) whereas an addition to tax for a fraudulent failure to file is applied to the tax required to be shown on the return (sec. 6651(a)(1)). The Commissioner’s computation of the addition to tax for fraudulent failure to file contains the conclusory statement ‘Manually Computed Penalty’ with no computations shown. And from the amount of the addition to tax, it is not readily apparent that the Commissioner applied the multiplier to the tax required to be shown on the return. It is also unclear whether the Commissioner took into account payments or withholding as required by section 6651(b)(1). Accordingly, the Commissioner will need to resubmit computations of the section 6651(a)(1) and (f) addition to tax….” Order, at pp. 3-4.

And although IRS omitted the tax Pete & Doreen paid for one of the years at issue, it didn’t affect the underpayment amount, so that error was harmless. But for two (count ‘em, two) other years, IRS seems to have left off withholding, without explaining why it was proper so to do.

So it’s a Mulligan all around.

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