Reasonable Cause to Avoid Failure to File Civil Penalties (8/25/12)

In my Tax Procedure class, we always study  United States v. Boyle, 469 U.S. 241 (1985), here, which rejected an executor's claim of reliance on an attorney as reasonable cause for late filing of the estate tax.  Most failure to file penalties have relief where the failure is due to reasonable cause and not willful neglect.  Since Boyle, the IRS is trigger happy to assert failure to file penalties upon the mere failure to file.  If reliance on the attorney is not reasonable cause, what is?  Well, at least a coma or other disability.  But, at least in the IRS's imagination, not much else.

Of course, Boyle did involve a commonly filed or at least commonly recognized return -- the estate tax return.  Hence, a reasonably prudent executor might be expected to know or at least inform himself of the filing date for an estate return.  There are any number of less common returns and forms with reasonable cause relief for penalties. Does Boyle command the penalties in those cases upon failure to file?

I have just posted on the Federal Tax Crimes Blog an entry titled Reasonable Cause Defense for Failure to File Form 3520 (8/25/12), here.  The entry discusses a recent decision in a case denying the Government summary judgment in a failure to file Form 3520 reporting transfers to a foreign trust.  The taxpayer in the case argued reasonable reliance on his accountant who allegedly knew all or enough of the facts to have advised the taxpayer and prepared the required Form for timely filing.  Boyle did not warrant summary judgment for for the Government in that case.  The case is proceeding to trial on the factual issue of reasonable cause.

The Federal Tax Crimes Blog entry and the case it discusses are not required reading for my students in the class, but readers of this blog interested in the topic might want to read it.