The U.S. Supreme Court, in a unanimous decision, has reversed an Eighth Circuit decision upholding the Tax Court’s refusal to hear a taxpayer’s challenge to an IRS assessment.
The case, Boechler v. Commissioner, rejected the agency’s contention that a taxpayer who filed an appeal one day late lost the ability to challenge the penalty.
“While the findings in this case relate to the deadline pursuant to Section 6330(d)(1) [which imposes a 30-day limit to file a petition to the Tax Court for review of a collection due process determination], it stands to reason that other deadlines, such as the 90-day deadline, may be called into question for such treatment under the same premise,” said Robbin Caruso, partner and co-leader of the national tax controversy group at Top 100 Firm Prager Metis.
The issue began with an IRS notice to Boechler PC, a North Dakota law firm, of a discrepancy in its tax filings. When Boechler did not respond, the IRS assessed an “intentional disregard” penalty of almost $20,000 and notified Boechler of its intent to levy Boechler’s property to satisfy the penalty. Boechler requested and received a collection due process hearing before the IRS Independent Office of Appeals, but the office sustained the proposed levy. Under Section 6330(d)(1), Boechler had 30 days to petition the Tax Court for review. Boechler filed its petition one day late. The Tax Court dismissed the petition for lack of jurisdiction and the Eighth Circuit affirmed, holding that Section 6330(d)(1)’s 30-day filing deadline is jurisdictional — meaning the court had no authority to grant relief from it, and so the deadline could not be “equitably tolled” so that a deadline or statute of limitations does not bar a claim.
The Supreme Court reversed the decision, holding that Section 6330(d)(1)’s time limit to file a petition for review of a collection due process determination is a non-jurisdictional deadline subject to equitable tolling.
“It’s not in the record, but the taxpayer failed to send a copy of W-2 information to the IRS after sending it to the Social Security Administration. He didn’t understand that he was required to send it to the IRS as well,” said Joe Bishop-Henchman, executive vice president at the National Taxpayers Union Foundation and counsel of record on the brief. (The NTUF and the National Federation of Independent Business jointly filed an amici curiae brief in support of Boechler.)
“When the North Dakota firm ignored a request for paperwork they had already sent, the IRS followed up with a $19,250 ‘intentional disregard’ penalty and a notice to levy,” he explained. “After the IRS Independent Office of Appeals predictably upheld the penalty, the taxpayer appealed to the U.S. Tax Court both that there was no tax discrepancy and that the penalty was excessive.”
In its decision, the Supreme Court found that the IRS did not meet its burden to overcome the presumption in favor of equitable tolling.
“This is in line with our brief, where we said that the IRS was wrong in its contention that tax law is special and not subject to equitable relief that applies to other law,” said Bishop-Henchman. “Even if tax law were special, that would mean that taxpayers should have more due process rights, not fewer.”
While not discussed in the findings, this case could provide a helpful second bite at the apple to a person who, for instance, was very ill, or can show they never received the notice, or is lower-income and had no representation, observed Caruso.
“But it’s not a done deal for the taxpayer,” she said. “The court made it clear that the taxpayer now merely has the opportunity to show they are entitled to consideration of equitable tolling.”
