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Instability to Use Tax Software Properly Does Not Constitute “Reasonable Cause”

Instability to Use Tax Software Properly Does Not Constitute “Reasonable Cause”

The court of claims In ALL STACKED UP MASONRY, INC. v. U.S., 26 AFTR 2d 2020-XXXX, (Ct Fed Cl), 10/22/2020 held that “Taxes are what we pay for civilized society.” Compania General De Tabacos de Filipinas v. Collector, 275 U.S. 87, 100 (1927) (Taft, C.J.). For good reason, there are few lawful justifications for failing to pay one's taxes. 

Plaintiff All Stacked Up Masonry, Inc. (“All Stacked Up”), a corporation, believes it has such an excuse. It brings this suit to challenge penalties and interest assessed by the Internal Revenue Service (“IRS”) following its failure to file the appropriate payroll tax documents and its failure to timely pay payroll tax liabilities for multiple tax periods.

All Stacked Up filed its Complaint seeking a refund of $95,590.67, the amount it previously paid to the IRS in tax penalties and interest for the periods ending December 31, 2013, through December 31, 2015. All Stacked Up asserts that its failure to comply with its tax obligations should be excused due to “reasonable cause” and thus, the penalties and interest it paid should be refunded. 

The basis of All Stacked Up's assertion of reasonable cause involves an injury suffered by the owner, Sean Spraungel. 

This Injury Caused All Stacked Up To Delegate Tax Preparation Responsibilities To An Employee, Who Could Not Properly Operate The Tax Preparation Software. 

The Employee's Failures Left All Stacked Up
Noncompliant With Its Tax Obligations.

Although Spraungel may have suffered significant injuries after falling on ice, and other employees of the corporation may have experienced user difficulties in operating tax preparation software, these excuses cannot establish “reasonable cause” necessary to abate tax penalties assessed by the IRS. 

Furthermore, even if All Stacked Up could show reasonable cause for failing to file a return or pay the taxes owed, part of All Stacked Up's claim would nevertheless be barred by the applicable three-year “look-back” period.

For the reasons set forth above, the Court hereby GRANTS the United States' motion to dismiss, (ECF No. 11), pursuant to RCFC 12(b)(6), and DISMISSES All Stacked Up's Complaint without prejudice. The Clerk is directed to enter judgment accordingly.

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Read more at: Tax Times blog

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