In Uncategorized on 10/01/2019 at 16:27

STJ Daniel A (“Yuda”) Guy has a designated hitter that points up a real defect in the deficiency procedure that is a pillar of Tax Court jurisdiction. It’s the story of Rajan R. Kamath, Docket No. 5307-19S, filed 10/1/19.

Raj didn’t file returns for some four (count ‘em, four) tax years, until he got SFRs and 30-day letters. Whereupon Raj banged in the returns, which IRS processed. IRS assessed the taxes shown on Raj’s self-reported returns.

So, as IRS found no difference between what Raj belatedly reported and what Raj owed, no deficiencies. But not to leave Raj with nothing to show for his efforts, IRS did give him a couple additions to tax for late payment, late filing and failure to file estimateds (hi, Judge Holmes).

Raj petitions. STJ Yuda regretfully tosses Raj’s petition.

Check out Section 6665(b).

“…the additions to tax under section 6651 are not attributable to a ‘deficiency in tax described in section 6211’. Sec. 6665(b)(1). Likewise, the additions to tax under section 6654 are not subject to the deficiency procedures because petitioner filed delinquent tax returns for the years in issue. See Wilson v. Commissioner, 118 T.C. 537, 540-541 (2002) (the Commissioner may summarily assess additions to tax under section 6654 arising from delinquently filed tax returns). It follows that the notice of deficiency is invalid and we are obliged to grant respondent’s motion to dismiss.” Order, at p. 3.

So Raj is out, and has to go the file-for-a-refund-and-sue-in-USDC route. But in a small-claimer, even if the delinquent had reasonable cause and made a good-faith effort that in a tax deficiency case would carry the day, how many taxpayers have the wherewithal to do that?

STJ Yuda understands, but is helpless.

“As a final matter, petitioner asserts that it is inequitable to deny him the opportunity to petition this Court. As we have previously said in similar cases: ‘We recognize the difficult position in which petitioners are placed by not being able to come to the Tax Court to test the validity of the respondent’s action in asserting the penalty. Nevertheless, that is the law and we must take it as we find it.’ Wilson v. Commissioner, 118 T.C. at 541 (quoting Estate of Scarangella v. Commissioner, 60 T.C. 184, 186-187 (1973)).” Order, at p. 3.

It’s a forlorn hope, but maybe Congress could do something to help. Yeah, I know, but “hope springs eternal.”

Failing that, maybe self-reporters in such a situation as Raj’s might go a couple bucks short (hi again, Judge Holmes) on their belated returns, to draw IRS into a real deficiency, and get their day in court.

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