The Internal Revenue Service’s Office of Professional Responsibility has prevailed in a Texas attorney’s appeal of an order for disbarment to practice before the IRS for willfully failing to file his federal tax returns.
The IRS alleged that Texas attorney Donald Petrillo willfully failed to file his federal individual income tax returns for 2001 through 2006 on a timely basis and to file his 2007 tax return. The untimely filings were from two to four years late. The Office of Professional Responsibility further alleged that Petrillo willfully failed to pay the outstanding tax balances due on the late returns he did file.
Petrillo did not deny the allegations in the complaint that he failed to properly file his returns and pay his income tax when he filed an answer to the complaint in July 2010. However, he asserted that the failure to timely file and pay “was not the result of willful conduct; but rather due to medical, factual and financial circumstances beyond the control of respondent.”
Using the standard for “willfulness” set forth in previously published Circular 230 cases (“a voluntary, intentional violation of a known legal duty”), the administrative law judge found that the various explanations given by Petrillo for his failures to file did not negate his willfulness.
However, the judge explicitly declined to adopt the IRS’s position that willful evasion of payment for purposes of Circular 230, Section 10.51(a)(6), should be analogous to trust fund recovery penalty assessments. Finding that the failures to file were significant enough by themselves, the judge ordered disbarment without addressing the failures to pay.
In his appeal, Petrillo argued that the judge applied a willful negligence standard rather than a willfulness standard; the judge applied the wrong standard for willfulness; material facts were in issue making summary judgment inappropriate; and he was denied due process because the standards were changed from willfulness to willful negligence after the complaint was filed.
The Appellate Authority determined that the administrative law judge had correctly and consistently applied the existing standard for willfulness to Petrillo’s conduct; that the judge had correctly determined from the deposition testimony and briefs that there were no material factual issues remaining to be heard; and that the judge’s findings of fact were well supported by the record and not clearly erroneous.
Finding, during the periods in issue, that Petrillo was not mentally or physically incapacitated; was gainfully employed; prepared tax returns for others; engaged in legal work for clients; and conducted his own personal business, the Appellate Authority concurred in the judge’s decision to disbar, noting that Petrillo had been previously suspended by the Office of Professional Responsibility from 1993 through 1997.
“This is yet another in a line of final agency decisions in the past two years which reiterate that practitioners cannot expect to be excused for not filing or late filing their own tax returns when the record reflects their active engagement in other tax and business matters on behalf of paying clients, or active involvement with their own personal activities which belie any debilitation,” said OPR director Karen L. Hawkins.
