T.C. Memo. 2010-278

UNITED STATES TAX COURT

MANUEL VERDUZCO, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 21807-08. Filed December 20, 2010.

Manuel Verduzco, pro se.

Daniel N. Price, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

THORNTON, Judge: Respondent determined deficiencies and

additions to tax with respect to petitioner’s Federal income

taxes for taxable years 2001 through 2003, as follows:
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Additions to Tax

Year Deficiency Sec. 6651(a)(1) Sec. 6651(a)(2) Sec. 6654

2001 $59,330 $7,472 $8,302 $1,214

2002 27,779 6,250 6,945 928

2003 21,372 3,955 1 443

1The notice of deficiency states that this amount

will be computed at a later date.

Unless otherwise indicated, section references are to the

Internal Revenue Code in effect for the years at issue, and Rule

references are to the Tax Court Rules of Practice and Procedure. 

Figures have been rounded to the nearest dollar. 

The parties have stipulated that petitioner’s deficiencies

are $44,803, $12,509, and $11,339 for taxable years 2001, 2002,

and 2003, respectively. Respondent has conceded the section 6654

addition to tax for 2001. Therefore, the sole issues remaining

for decision relate to petitioner’s liability for the other

additions to tax. 

FINDINGS OF FACT

The parties have stipulated some facts, which we incorporate

by this reference. When he petitioned the Court, petitioner

resided in Texas. 

Petitioner holds a bachelor’s degree in electrical

engineering and a master’s degree in technology management. He

served 12 years in the U.S. Air Force. For part of that time he

was deployed in Operation Desert Storm. In 1991 he was honorably

discharged. 
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By 1998 petitioner was director of communications and

information systems for the city of Las Cruces, New Mexico, a

management position in which he directly supervised three

technicians. In 1999 he began working for the Santa Clara Health

and Hospital System in San Jose, California, directly managing 5

employees and indirectly supervising about 200 other employees

and subcontractors who reported to him. In 2003 petitioner

became director of technology services, and later payroll office

administrator, for an independent school district in the El Paso

area. In addition, since at least 1999 and throughout the years

at issue petitioner has been sole proprietor of his own

technology consulting business. During the years at issue

petitioner was working 14 to 16 hours a day. 

In 2000 petitioner’s accountant informed him that he was

running behind on petitioner’s tax paperwork but that he would

catch up soon. By May 2001 the accountant informed petitioner

that he would no longer be able to maintain petitioner’s books

because his mother had passed away. Petitioner began to handle

his own recordkeeping until, at some unspecified date, he engaged

another accountant. 

After the events of September 11, 2001, and the commencement

of the Afghan war, petitioner began to experience anxiety, for

which his doctor prescribed medication. He was never diagnosed

with Gulf War illness syndrome or posttraumatic stress disorder. 
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In June 2003 petitioner’s father became very ill and was

diagnosed with several medical problems. It was then that

petitioner moved to El Paso, where he has actively cared for his

father while working full time. 

Petitioner did not file timely Federal income tax returns

for the years 2001 through 2003. Pursuant to section 6020(b)

respondent prepared substitutes for returns (SFRs) for

petitioner’s years 2001, 2002, and 2003. On the basis of the

SFRs respondent determined income tax deficiencies for the years

at issue and additions to tax for failure to file, failure to

pay, and failure to pay estimated tax.1 After receiving the

notice of deficiency petitioner petitioned this Court and later

submitted to respondent delinquent Forms 1040, U.S. Individual

Income Tax Return, for the years at issue as well for various

other years.2

OPINION

I. Burden of Proof

Respondent determined that with respect to each year at

issue petitioner is liable for additions to tax pursuant to

1In computing the additions to tax for 2001 and 2003,

respondent took into account petitioner’s wage withholdings

($26,122 for 2001 and $3,795 for 2003) and indicated that

petitioner had zero wage withholdings for 2002. 

2On these delinquent returns petitioner claimed wage

withholdings that do not differ materially from those respondent

used in computing the additions to tax.
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sections 6651(a)(1) and (2) and 6654. Respondent has the burden

of production with respect to these additions to tax. Sec.

7491(c). To meet this burden, respondent must produce evidence

showing that the additions to tax are appropriate. See Higbee v.

Commissioner, 116 T.C. 438, 446 (2001). Once respondent

satisfies this burden, petitioner has the burden of proof with

respect to exculpatory factors such as reasonable cause. See

id.; Ruggeri v. Commissioner, T.C. Memo. 2008-300. 

II. Section 6651(a)(1) Addition to Tax

Section 6651(a)(1) imposes an addition to tax for failure to

file a return by its due date unless the taxpayer can establish

that the failure is due to reasonable cause and not due to

willful neglect.3 The addition equals 5 percent of the net

amount due for each month that the return is late, not to exceed

25 percent. Sec. 6651(a)(1), (b)(1). 

The parties stipulated that petitioner did not timely file

his returns. In computing the section 6651(a)(1) addition to tax

as determined in the notice of deficiency, respondent took into

account petitioner’s wage withholdings for 2001 and 2003. In

this proceeding respondent has conceded that petitioner’s

deficiency for each year at issue is smaller than determined in

the notice of deficiency. If, as seems likely, the computations

3The substitutes for return that respondent made are

disregarded for this purpose. See sec. 6651(g). 
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show that petitioner’s tax liabilities as determined in this

proceeding exceed his prepayment credits, respondent will have

satisfied his burden of production and the section 6651(a)(1)

addition will apply unless petitioner can show reasonable cause

and a lack of willful neglect. See Higbee v. Commissioner, supra

at 446; Crocker v. Commissioner, 92 T.C. 899, 913 (1989). 

Petitioner ascribes his failure to file to a variety of

circumstances. He asserts that he had difficulty obtaining

bookkeeping and accounting services after his accountant stopped

working for him in May 2001. The record does not show

conclusively when petitioner obtained the services of his new

accountant. But the more fundamental consideration is that a

taxpayer has a personal and nondelegable duty to file a timely

return. United States v. Boyle, 469 U.S. 241, 249 (1985). 

Difficulty in finding a bookkeeper or accountant does not provide

reasonable cause for petitioner’s untimely filing. See Sparkman

v. Commissioner, T.C. Memo. 2005-136, affd. 509 F.3d 1149 (9th

Cir. 2007). 

Petitioner also asserts that his failure to file was due to

his caring for his ill father and to his own anxiety issues which

he contends impaired his ability to manage his affairs. 

Reasonable cause for failure to file may exist if the taxpayer’s

or a family member’s illness or incapacity prevents the taxpayer

from filing his or her tax return but not if the taxpayer is able
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to continue his or her business affairs despite the illness or

incapacity. See Ruggeri v. Commissioner, supra (and cases cited

therein). 

We are not persuaded that his father’s illness or

petitioner’s own anxiety issues prevented petitioner from filing

his 2001, 2002, and 2003 Federal income tax returns. His father

became seriously ill in June 2003, after the due dates had passed

for petitioner to file his 2001 and 2002 tax returns. The

evidence shows that throughout the relevant periods petitioner

was able to manage his business affairs, working 14 to 16 hours a

day, not only holding down a full-time job with significant

management responsibilities but also operating his sole

proprietorship. 

On cross-examination petitioner acknowledged that he had

failed to timely file Federal income tax returns for 1998 through

2005. This pattern of chronic noncompliance further weighs

against finding reasonable cause. See, e.g., Judge v.

Commissioner, 88 T.C. 1175, 1189-1191 (1987). 

We conclude and hold that petitioner lacked reasonable cause

for failing to file his returns for 2001, 2002, and 2003. 

Accordingly, petitioner is liable for the section 6651(a)(1)

additions to tax, insofar as the computations show that for any

month petitioner had net amounts due with respect to the years at

issue.
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III. Section 6651(a)(2) Addition to Tax

Section 6651(a)(2) imposes an addition to tax for failure to

pay the amount shown as tax on a return on or before the due date

unless the taxpayer can establish that the failure is due to

reasonable cause and not due to willful neglect. The addition is

calculated as 0.5 percent of the amount shown as tax on the tax

return but not paid, with an additional 0.5 percent for each

month or fraction thereof during which the failure to pay

continues, up to a maximum of 25 percent.4 If the amount

required to be shown as tax on the return is less than the amount

actually shown on the return, the addition to tax is calculated

by reference to the lesser amount. Sec. 6651(c)(2). For

purposes of computing the section 6651(a)(2) addition for any

month, the amount of tax shown on the return is reduced by the

amount of any part of the tax paid before the beginning of the

month and by the amount of any credit against the tax which may

be claimed on the return. Sec. 6651(b)(2).

The section 6651(a)(2) addition applies only if an amount of

tax is shown on a return. Wheeler v. Commissioner, 127 T.C. 200,

208 (2006), affd. 521 F.3d 1289 (10th Cir. 2008). The parties

have stipulated copies of SFRs that respondent filed for each

4The amount of the addition to tax under sec. 6651(a)(2)

reduces the amount of the addition to tax under sec. 6651(a)(1)

for any month to which an addition to tax applies under both

paragraphs. Sec. 6651(c)(1). 
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year at issue. These SFRs meet the requirements of section

6020(b). See id. at 209. In computing the section 6651(a)(2)

additions to tax as determined in the notice of deficiency,

respondent reduced the amounts of tax shown on the SFRs by

petitioner’s wage withholdings for 2001 and 2003. It is

undisputed that petitioner failed to pay any other part of the

tax shown on the SFRs. Respondent concedes that petitioner’s

deficiency for each year at issue is smaller than he originally

determined on the basis of the SFRs. If, as seems likely, the

computations show that after taking into account petitioner’s

decreased liabilities resulting from these decreased deficiencies

there are unpaid amounts of tax required to be shown on

petitioner’s returns, respondent will have met his burden of

production with respect to the section 6651(a)(2) additions to

tax. 

The addition to tax for failure to pay does not apply if the

taxpayer shows that the failure was due to reasonable cause and

not due to willful neglect. Sec. 6651(a)(2); see Higbee v.

Commissioner, 116 T.C. at 447. To prove reasonable cause for a

failure to pay the amount shown as tax on a return, the taxpayer

must show that he exercised ordinary business care and prudence

in providing for payment of his tax liability and nevertheless

was either unable to pay the tax or would suffer undue hardship
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if he paid the tax on the due date. Sec. 301.6651-1(c)(1),

Proced. & Admin. Regs. 

Petitioner was gainfully employed during the years at issue. 

He has not shown, or even expressly alleged, that his financial

situation during 2001, 2002, or 2003 prevented him from paying

his Federal income tax despite the use of ordinary business care

and prudence. 

We conclude and hold that petitioner did not have reasonable

cause for his failure to pay timely. Accordingly, petitioner is

liable for the section 6651(a)(2) additions to tax for failure to

pay the amounts shown on his Federal income tax returns for 2001,

2002, and 2003, insofar as the computations show unpaid amounts

of tax required to be shown on petitioner’s returns. 

IV. Section 6654 Addition to Tax

Section 6654(a) imposes an addition to tax for failure to

make timely and sufficient payments for estimated taxes. 

Respondent has conceded the section 6654 addition for 2001. To

satisfy his burden of production for the section 6654 addition

for 2002 and 2003, he must produce evidence sufficient to show

that petitioner had an obligation to make estimated tax payments

for those years. See Wheeler v. Commissioner, supra at 211. 

The section 6654 addition is calculated by reference to four

required installment payments of the taxpayer’s estimated income

tax. Sec. 6654(c)(1); Wheeler v. Commissioner, supra at 210. 
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Each required installment of estimated income tax is equal to 25

percent of the “required annual payment.” Sec. 6654(d)(1)(A). 

The required annual payment is generally equal to the lesser of: 

(1) 90 percent of the tax shown on the taxpayer’s return for the

year (or, if no return is filed, 90 percent of the taxpayer’s tax

for the year); or (2) if the taxpayer filed a return for the

immediately preceding taxable year, 100 percent of the tax shown

on the return. Sec. 6654(d)(1)(B); Wheeler v. Commissioner,

supra at 210-211. For purposes of applying section 6654, credits

allowed under section 31 for tax withheld on wages are deemed

payments of estimated taxes. Sec. 6654(g). 

Petitioner filed no return for 2001, 2002, or 2003. 

Therefore, petitioner’s required annual payments for 2002 and

2003 are determined by reference to 90 percent of his tax for

each of those years, as determined in this proceeding. 

Respondent has satisfied his burden of production for the section

6654 addition with respect to 2002 and has also satisfied it with

respect to 2003 insofar, as seems likely, petitioner’s section 31

credits for 2003 do not completely satisfy his required annual

payments for that year. 

Except in very limited circumstances not applicable in this

case, see sec. 6654(e)(3)(B), section 6654 provides no exception

for reasonable cause. Mendes v. Commissioner, 121 T.C. 308, 323

(2003). Instead, the section 6654 addition to tax is mandatory
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unless the taxpayer establishes that one of the exceptions in

section 6654(e) applies. Recklitis v. Commissioner, 91 T.C. 874,

913 (1988).

Petitioner has not shown that any of the statutory

exceptions under section 6654(e) applies. We hold that

petitioner is liable for the section 6654(a) additions to tax for

2002 and 2003. 

To reflect the foregoing and respondent’s concessions, 

Decision will be entered

under Rule 155.