I’d thought epistolary jousting was gone when IRS finally took my (and others’) advice and issued whistleblower shootdowns that said “game over, we’re done, petition.” But IRS seems to have revived the sport when it comes to denying appeals from Section 6699(a) S Corp late-filing chops.

CSTJ Lewis (“Great is the Name and Great is the Fame”) Carluzzo, manifesting his magnanimous  character, shuffles through the IRS’ paper barrage, with intermittent counterbattery fire from Brighton Construction Enterprise, Docket No. 35599-21SL, filed 12/19/22. Brighton was late for two (count ’em, two) consecutive years. Appeals claims Brighton had a prior opportunity to dispute when they try to raise reasonable cause at the CDP on the NITL.

I won’t try to summarize the volleying. There are letters without dates, with strange references, and with omitted enclosures. There is a back-and-forth between IRS offices in KY and PA, but nowhere is it clear in the record that the liability issue had been considered anywhere.

So CSTJ Lew has three (count ’em, three) choices: review the record de novo and decide that Brighton had reasonable cause; reject the NITL without reviewing whether Brighton had reasonable cause; or remand for Appeals to consider reasonable cause.

“Fairness to petitioner suggests that we do not go with the first option. For various reasons we can understand why the parties did not focus on the point, but the record is not complete enough to make a finding on reasonable cause. Fairness to respondent suggests that the second option might preclude respondent from collecting a tax that might rightfully be due.

“Perhaps influenced by a children’s fairy tale, it occurs to us that the third option is just right.” Order, at p. 12.

Back to Appeals.

Here’s CSTJ Lew’s roadmap: ” (1) If upon further review and investigation respondent’s settlement officer establishes that petitioner had a meaningful prior opportunity to challenge the penalty assessments by participating in an Appeals conference that considered its claims for abatement, then respondent may supplement the record with that information, and petitioner would, as respondent argues here, be precluded from raising the issue in this proceeding. Because we have already found that in all other respects respondent’s settlement officer has proceeded as required by section 6330, that would result in decision being entered for respondent; (2) if upon further investigation or review, respondent’s settlement officer is unable to establish that petitioner had a meaningful prior opportunity to challenge the penalty assessments at an Appeals conference, then respondent’s settlement officer should conduct a further administrative hearing that addresses petitioner’s claim to reasonable cause in support of petitioner’s requests for abatements. After further consideration, if the parties agree, a stipulated decision could be submitted to the Court [edited by me: nudge nudge, wink wink]; or  (3) if after further administrative review, the parties are unable to resolve petitioner’s abatement claim, then the Court will allow either party to supplement the record with additional evidence directed to petitioner’s claim of reasonable cause and proceed accordingly.” Order, at pp. 13-14.