One Day Late? NTUF Challenges Harsh IRS Rules

The IRS is behind. Their own dashboard reports that as of November 12, they have a backlog of 5.9 million unprocessed individual tax returns, taking an average of 260 days to respond to victims of identity theft, and is four months behind on fulfilling requests for taxpayer identification numbers. If you’re waiting on them to process a third-party authorization form, they cannot even give you a timeframe or estimate of where in the queue you are. The National Taxpayer Advocate reported that in 2020, the IRS answered only 24 percent of phone calls placed to it. Notably, checks to the IRS are being cashed on a timely basis.

While the IRS is not holding itself to deadlines and not answering phone calls, they expect something very different from taxpayers. Today, NTUF’s Taxpayer Defense Center filed a brief in support of a taxpayer who filed their appeal in the U.S. Tax Court one day late, only to see the IRS take the position that missing the deadline means the court has been deprived of jurisdiction and the taxpayer has forfeited all their defenses.

The case, Boechler, P.C. v. Commissioner, will be argued in front of the U.S. Supreme Court on January 12, 2022.  The taxpayer is a small firm in North Dakota that received a letter from the IRS in June 2015 saying that they failed to file a copy of W-2s with the Social Security Administration in 2012, which the IRS uses to compare the same information reported on Form 941. When the IRS got no response, they levied a $19,250 penalty on the firm. The firm appealed through IRS processes, and the appeals office sent them a letter dated July 28, 2017, ruling against them. On August 29, the taxpayer filed a petition with Tax Court, one day past the deadline.

The question before the Supreme Court is whether this deadline is “jurisdictional,” that is, meant by Congress to close the door on taxpayers who do not meet it (as the IRS argues), or whether, like many various process deadlines, courts are allowed to use their discretion to waive it in certain equitable circumstances (as the taxpayer and NTUF argue). On this issue, the U.S. Court of Appeals for the Eighth Circuit has sided with the IRS while the U.S. Court of Appeals for the D.C. Circuit has sided with the taxpayer. One argument offered by the government is that governments depend on tax revenue, letting taxpayers off the hook on deadlines disrupts revenue collection, and so taxpayers should lose.

NTUF’s brief (joined by the National Federation of Independent Business) filed today pushes back on this “tax exceptionalism” argument that the government should get more leeway when it comes to tax. Putting aside whether that view is even good policy, we explain how the statute and caselaw do not support it. “The IRS is Not Special,” reads one of our headers: “[E]quitable tolling and similar doctrines should be available absent clear commands from Congress to the contrary.”

Further, we write that even if tax law is special, that should mean taxpayers should get more due process rights, not fewer. “All must pay taxes. Unlike a Federal Energy Regulatory Commission regulation for building a power plant, an initial public offering under the Securities and Exchange Acts, or filing an Environmental Protection Agency Environmental Impact Statement to build a road, the Byzantine tax rules apply to everyone, and anyone can be hauled before the Service to explain their financial lives.” The IRS can garnish wages, levy bank accounts, file liens against homes—unlike other creditors, on their own initiative without prior judicial approval—and can seek criminal penalties like fines and jail time, and civil penalties like revoking passports if you owe and haven’t paid yet (as has been used against 436,400 Americans). “The door should not be closed on courts’ discretion when statutes do not prohibit it,” we conclude.

NTUF/NFIB’s joint brief is here. The case is Boechler, P.C. v. Commissioner, U.S. No. 20-1472.