Opinion ID: 4523213
Heading Depth: 2
Heading Rank: 2

Heading: The Late-Filing Penalties

Text: As a result of their two-year delay in filing a federal return for Tax Year 2011, the Internal Revenue Service assessed the Hamiltons late-filing penalties pursuant to 26 U.S.C. § 6651(a)(1). The Tax Court sustained these penalties, concluding their failure to file stemmed from willful neglect, rather than reasonable cause. The Hamiltons also appeal that determination. 7 The Hamiltons have also argued the Tax Court erred in refusing to shift the burden of persuasion to the government. Although taxpayers ordinarily must carry the burden of persuasion with respect to any claimed deduction, a statutory exception may shift this presumption back to the government on factual issues the taxpayer supports with credible evidence. E.g., Esgar Corp. v. Comm’r, 744 F.3d 648, 653 (10th Cir. 2014) (citing 26 U.S.C. § 7491). To benefit from this burdenshifting exercise, an individual taxpayer must have: (1) complied with the requirements to substantiate any item; (2) maintained all required records; and (3) cooperated with reasonable requests for witnesses, information, documents, meetings, and interviews. Id. at 654 n.5 (cleaned up). The Tax Court concluded the Hamiltons failed to abide by these requirements, such that the burden should not shift. But we have observed “there is no need to rule on whether the burden shifts” when “evidence is not equally balanced.” Id. at 654. Since the evidence in this case strongly favors the government, we decline to consider this argument. -10- The Code provides a limited exception for “reasonable cause” from otherwise-steep penalties when taxpayers fail to timely file their returns. See 26 U.S.C. § 6651(a)(1). Because the presence or absence of reasonable cause requires a factual determination, we review the Tax Court’s treatment of latefiling penalties assessed under 26 U.S.C. § 6651(a)(1) for clear error. See In re Craddock, 149 F.3d 1249, 1255 (10th Cir. 1998) (citing United States v. Boyle, 469 U.S. 241, 249 n.8 (1985)). Precedent tells us the Hamiltons bear a “heavy burden” in seeking to demonstrate reasonable cause. See id. (quoting United States v. Boyle, 469 U.S. 241, 245 (1985)). Indeed, we have previously observed that “reasonable cause exists ‘if the taxpayer exercised ordinary business care and prudence and was nevertheless unable to file the return within the prescribed time.’” Id. (quoting Treas. Reg. § 301.6651-1(c) (emphasis in original)). Here, the stipulated record offers no explanation that would account for the Hamiltons’ failure to file timely their 2011 Tax Return. In briefing, they contend their attention was “consumed with [Mr. Hamilton’s] care and well[-]being.” Aplt. Br. 24. But the record discloses no evidence of incapacity, save for Mr. Hamilton’s injury. And—during this same period—Mrs. Hamilton successfully managed the complex task of obtaining the student-loan discharge. -11- In our view, the Tax Court did not clearly err in upholding the late-filing penalties assessed under 26 U.S.C. § 6651(a)(1).