Opinion
7885-21
07-05-2022
PAULA ANN BENNETT, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER
Kathleen Kerrigan, Chief Judge.
Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is
ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy of the pages of the transcript of the trial in the above case before Judge Kathleen Kerrigan at Omaha, Nebraska (Remote), containing her oral findings of fact and opinion rendered at the trial session at which the case was heard.
In accordance with the oral findings of fact and opinion, a decision ill be entered under Rule 155.
Bench Opinion by Judge Kathleen Kerrigan April 19, 2022
Paula Ann Bennett v. Commissioner Docket No. 7885-21
THE COURT: The Court has decided to render the following as its oral findings of fact and opinion in this case. This bench opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code and Tax Court Rule 152; and it shall not be relied upon as precedent in any other case. Rule references in this opinion are to the Tax Court Rules of Practice and Procedure, and section references are to the Internal Revenue Code, as amended and in effect at all relevant times. All monetary amounts are rounded to the nearest dollar.By notice of deficiency dated November 16, 2020, respondent determined a deficiency in petitioner's federal income tax for 2017 of $82,164 and additions to tax pursuant to section 6651(a)(1) of $18,487, pursuant to section 6651(a)(2) of $14,379, and pursuant to section 6654 of $1,967. After petitioner filed her petition, she met with the Office of Appeals, and she submitted an income tax return for 2017. Respondent agrees to the amount of tax reported on this return. The only issues for our consideration are whether petitioner is liable for the additions to tax.
Trial in this case was conducted during the Court's remote Omaha, Nebraska trial session on April 18, 2022. Petitioner represented herself. Respondent was represented by Lisa K. Hunter. The parties' stipulation of facts and first supplemental stipulation of facts were admitted into evidence along with the attached exhibits. The Court finds the following facts:
FINDINGS OF FACT
Petitioner, a physician, resided in Iowa when she timely filed her petition. During 2017 she worked as an independent contractor for AB Staffing Solutions. She received income that was documented by third-party reports.
Petitioner filed an extension for time to file her 2017 return on April 15, 2018; however, she failed to file her 2017 income tax return. Respondent prepared a substitute for return for 2017 and executed Form 13496, IRC section 6020(b) Certification on February 18, 2020. Petitioner failed to make payments of estimated tax for her 2017 income tax liability and failed to pay her tax liability.
OPINION
Under 7491(c) the Commissioner bears the burden of production with respect to the liability of the taxpayer for additions to tax. See Higbee v. Commissioner, 116 T.C. 438, 446-47 (2001). If the Commissioner meets the burden, the taxpayer has the burden of providing that failure to timely file or pay was due to reasonable cause and not willful neglect. See § 6651(a)(1), (2); Higbee v. Commissioner, 116 T.C. at 447.
Section 6651(a)(1) imposes an addition to tax if the taxpayer failed to file an income tax return by the required due date, including an extension of time for filing. Whether "reasonable cause" and lack of "willful neglect" exist is a question of fact, and the burden of establishing these facts is on the taxpayer. United States v. Boyle, 469 U.S. 241 (1985). To prove reasonable cause for a failure to timely file, the taxpayer must show that he or she exercised ordinary business care and prudence and was nevertheless unable to file the return within the prescribed time. Crocker v. Commissioner, 92 T.C. 899, 913, (1989); Treas. Reg. § 301.6651-1(c)(1).
A taxpayer may have reasonable cause for failure to timely file a return where the taxpayer experiences an illness or incapacity that prevents the taxpayer from filing the return. Boyle, 469 U.S. at 248 n. 6; Jordan v. Commissioner, T.C. Memo. 2005-266. A taxpayer's illness or incapacity generally does not prevent the taxpayer from filing returns where he or she is able to continue business affairs despite the illness or incapacity. Jordan, T.C. Memo. 2005-266. Petitioner testified that she worked fewer hours in 2018 and 2019; however, she was still able to function as a physician. She further testified that she thought she would have a refund from prior years that could be used towards her 2017 tax liability. Petitioner did not show reasonable cause and is liable for the addition to tax pursuant to section 6651(a)(1) for the year in issue.
Section 6651(a)(2) imposes an addition to tax for failure to timely pay the amount of tax shown on a return, unless it is shown that such failure is due to reasonable cause and not due to willful neglect. This addition to tax applies only when an amount of tax is shown on a return. §§ 6651(a)(2), (g)(2). When a taxpayer has not filed a valid return, the section 6651(a)(2) addition to tax may not be imposed unless the Secretary has prepared a substitute for return. See Wheeler v. Commissioner, 127 T.C. 200, 210 (2006), aff'd, 521 F.3d 1289 (10th Cir. 2008). Respondent introduced into evidence a document that qualifies under section 6020(b) as a substitute for return for 2017. See Cabirac v. Commissioner, 120 T.C. 163, 170-72 (2003), aff'd without published opinion, 94 A.F.T.R. 2d (RIA) 2004-5490 (3d Cir. 2004).
Respondent has shown that petitioner has failed to pay her federal income tax obligation for 2017. Petitioner has not shown reasonable cause and is liable for the addition to tax pursuant to section 6651(a)(2).
Section 6654(a) imposes an addition to tax on underpayment of estimated tax unless an exemption applies. Respondent's burden of production under section 7491(c) with respect to the section 6654(a) tax has been met since petitioner had income tax liability for 2017 and made no estimated tax payments for that year. Generally, no reasonable cause exception exists for the section 6654(a) addition to tax. Treas. Reg. § 1.6654-1(a)(1). Petitioner does not meet any of the statutory exceptions under section 6654(e). Therefore, petitioner is liable for the addition to tax pursuant to section 6654(a).
This concludes the Court's oral Findings of Fact and Opinion in this case. A decision will be entered under Rule 155.
(Whereupon, at 10:25 a.m., the above-entitled matter was concluded.)
CERTIFICATE OF TRANSCRIBER AND PROOFREADER
CASE NAME: Paula Ann Bennett v. Commissioner
DOCKET NO.: 7885-21
We, the undersigned, do hereby certify that the foregoing pages, numbers 1 through 8 inclusive, are the true, accurate and complete transcript prepared from the verbal recording made by electronic recording by Donna Boardman on April 19, 2022 before the United States Tax Court at its remote session in Omaha, NE, in accordance with the applicable provisions of the current verbatim reporting contract of the Court and have verified the accuracy of the transcript by comparing the typewritten transcript against the verbal recording.
Meribeth Ashley, CET-507 4/25/22
Lori Rahtes, CDLT-108 4/25/22