Individuals Liable for Fraudulent Failure to File Penalties (Batsch, TCM)

CCH Tax Day Report

Married individuals, who had a history of maintaining frivolous, tax-protestor positions, were liable for the fraudulent failure to file penalty. The IRS met its burden of proof by showing that the individual’s had an obligation to file returns and that various badges of fraud existed. The individuals had a longtime pattern of failing to file returns, failing to report substantial amounts of income, failing to maintain records or cooperate with the taxing authorities and implausible or inconsistent behavior. Because the individuals refused to testify, they did not show any nonfraudulent explanation for their behavior. Their arguments about the validity of the statutory notices were directed at event that occurred after the tax years at issue and did not reflect their state of mind at the times the returns were due. Further, the individuals’ maintenance of discredited tax-protestor arguments negated good faith. Thus, they offered no defense to the inference of fraudulent intent drawn from the circumstantial evidence and objective facts.

Related cases at P.L. Hyde, CA-8, 2012-2 ustc ¶50,429, and 101 TCM 1637, Dec. 58,660(M), TC Memo. 2011-131.

R.F. Batsch, TC Memo. 2016-140, Dec. 60,657(M)

Other References:

Code Sec. 6651

CCH Reference – 2016FED ¶39,475.298

Tax Research Consultant

CCH Reference – TRC FILEIND: 18,102

CCH Reference – TRC IRS: 66,106.20

CCH Reference – TRC PENALTY: 6,112



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