CSTJ Lewis (“He Casts a Spell”) Carluzzo has some comfort for Jason Wakefield & Chere Wakefield, Docket No. 12186-20SL, filed 10/26/21*. Jason needs it; late filing, late paying, and no 1040-ES add-ons rain down on Jason, just as he’s suffering from physical ailments that keep him out of attics and crawlspaces. This keeps him from working, even though his sole-prop business was doing well. Besides, he had to pay Chere when their marriage broke up, although the record doesn’t show when he paid or how much.

Liabilities are self-reported, thus no SNOD, thus right to contest liability.

Jason was self-represented, and Chere stiped but didn’t show. CSTJ Lew is kind, but the law is the law.

“We are sympathetic to petitioner’s medical condition and the hardship due to his divorce during the relevant time. Serious illness of the taxpayer or a member of the taxpayer’s family can constitute reasonable cause for failure to file a timely return but only if the illness caused total or near total incapacity to act. On the other hand, if a taxpayer does not timely file but is able to continue to conduct his or her business affairs despite the illness or incapacity, the Court has rejected the taxpayer’s reasonable cause position. See, e.g., Ruggeri v. Commissioner, T.C. Memo. 2008-300, slip op. at 7-8 (and cases cited there at [sic; should be “thereat”]).

“Again, we are sympathetic to petitioner’s difficulties, but we are not persuaded that the challenges he faced satisfy the reasonable cause requirement of section 6651(a)(1). Despite those challenges, petitioner was able to engage in his business during the relevant period, even if only on a limited basis, and although hospitalized from time to time, it was never for an extended period. Consequently, petitioners are liable for the addition to tax imposed by section 6651(a)(1).” Transcript, at pp. 11-12.

That’s late filing. But Jason is no better off with late-paying. He says the big payout to Chere sinks him.

“However, the record is unclear with respect to the circumstances surrounding the payment or at least the timing of the payment, and petitioner did not argue any set of facts or circumstances that would lead the Court to find that he was unable to pay the tax or would have suffered undue hardship if he had paid the tax in full on its actual due date. Moreover, adverse economic conditions do not necessarily constitute reasonable cause.” Order, at p. 12.

CSTJ Lew says it’s a Tax Court truism that late pay is caused by financial difficulties. And no 1040-ES is almost inexcusable.

What Jason needed was the Gonzaga Bulldogs, or the Golden Gophers, or the Harvard Foggers, or the Texas Tech Technophobes, or the Fordham Rams, or Sandy Freund, Esq.’s Rutgers  Tax Knights, or any of the LITC law school bombers. He handed IRS a win on toast.

But CSTJ Lew has taken up the mantle of The Judge With a Heart, his now-retired  predecessor STJ Robert N. Armen, Jr.

“In closing we think it appropriate to mention an observation made by the U.S. Supreme Court, ‘[b]ad things happen if you fail to pay federal income taxes when due.’ Hinck v. United States, 550 U.S. 501, 502 (2007). From petitioner’s presentation at trial, we are certain that he shares that sentiment, especially when he learns of this bench opinion. Nevertheless, petitioners should keep in mind that the focus of this case is narrow; we address and resolve only the issue before us. The resolution of this case says nothing about petitioners’ entitlement to pursue any collection alternatives that might otherwise be available to them.” Transcript, at pp. 14-15.

So no issue preclusion on illness or economic hardship? LITCs, get tore in!  

*Jason & Chere Wakefield 12186-20SL 10 26 21