One Day Late

Last week, the Tax Court ruled that a delinquent taxpayer was 1) properly denied the right to present evidence supporting his claim and 2) the IRS did not abuse their discretion in going forward with collection actions. In the fact pattern, the taxpayer sold his business. After his final quarter in business, he properly paid all of his taxes due to federal and state governments. In the two subsequent quarters, he was assessed a Trust Fund Penalty tax, based on operations from his old business (improperly). He was then given notice and the allowed 60 days from the date of the letter to respond.

On the 61st day, he responded, one day too late. He was later afforded a phone Collection Due Process hearing wherein he was not allowed to present evidence as the 60 day window for that had expired.

The Tax Court reviewed the above and found for the IRS on both determinations. The Tax Court agreed that the taxpayer was afforded the 60 day window. Once the 60 day period is allowed to lapse, that lapse cannot be rescinded under the statute. Second, because the final determination had been made, it was permissible for the IRS to proceed with collection.

Comment: There are two points to be made here with this Tax Court case. 1) One day in life really doesn’t make a difference, unless you’re dealing with the IRS. 2) If you sell a business, you must properly document that with the IRS. What could have easily been dealt with within the 60 day window became impossible on day 61.