With Tax Day having come and gone, you’ve (hopefully) finished filing and paying your taxes. Well, maybe it’ll take away a bit of the sting of doing so to learn that the Internal Revenue Service (IRS) was just handed a decisive defeat in court over its ongoing attempts to treat all taxpayers who make mistakes in filing their taxes as criminals and tax evaders.
As I’ve noted once or twice of late, the IRS has been even more of a mess than usual this tax season. Persistent, fundamental failures to implement technology that the rest of the country figured out a decade ago has led the agency to provide grossly inadequate customer service and take eons to process returns and paperwork.
But the IRS operates by a code of “do as I say, not as I do.” Despite its endless excuses to Congress over why it can’t perform its most basic functions, the IRS believes in no such mitigating circumstances for taxpayers with even the slightest delay. One North Dakota firm, Boechler P.C., found that out the hard way when it filed an appeal to the U.S. Tax Court just a single day late.
Back in 2015, Boechler received a request for paperwork from the IRS that it had already sent. After Boechler ignored the request it assumed was irrelevant, the IRS followed up with a $19,250 penalty for “intentional disregard” and a notice that it intended to seize the firm’s assets.
After the IRS’s office of appeals upheld the penalty, Boechler filed an appeal with the U.S. Tax Court. Unfortunately, Boechler filed the appeal one day after the 30-day deadline to file an appeal expired.
The IRS argued that, because the appeal was filed late, the taxpayer lost all right to legal recourse. Even though courts have discretion to waive most process deadlines, the IRS argued that cases concerning tax collection are special, as they could delay incoming government revenue.
But the Supreme Court was having none of that argument. In a 9-0 decision, the Court sided with Boechler, determining that the Tax Court had jurisdiction to waive the deadline to file an appeal if it chose. As the National Taxpayers Union Foundation had argued in its amicus brief, to the extent that cases concerning taxpayers’ interactions with the IRS should be considered “special,” taxpayers should receive more due process protections, not less.
The fact that the Court ruled against the IRS unanimously is also noteworthy. Federal agencies enjoy a great deal of deference from courts, which are generally inclined to give them the benefit of the doubt. For the IRS to lose without a single Supreme Court justice siding with it is a sign of just how spurious the IRS’s legal arguments were.
That being said, it hadn’t even been a year since the last time the IRS lost a Supreme Court case by a 9-0 margin. That case, CIC Services v. IRS, concerned an IRS attempt to enforce a regulation even though it had simply decided to ignore the requirement under federal law to provide the public an opportunity to weigh in on proposed regulations. There too, the IRS lost in a unanimous decision that the IRS was not above the law.
While the legal questions and arguments at issue in these cases may seem esoteric, they reveal a theme whereby the IRS views taxpayer rights and due process protections as an irritating impediment to collecting revenue from would-be tax cheats. As a result of viewing itself as the proverbial hammer, any taxpayer standing in the way of this duty, even if by merely making a mistake on their returns or holding the IRS to account to the law, reveals themselves to be a nail in need of pounding back into place.
The efforts of members of Congress and the administration to urge the IRS to crack down on the “tax gap” bear some blame for this attitude. When elected officials continually urge the IRS to squeeze more revenue out of taxpayers, and offer the agency evermore invasive tools to do so, they can’t be surprised when the IRS takes an adversarial attitude towards taxpayers.
So as little fun as you probably just had paying your taxes, taxpayers can take heart that courts are finally growing wise to the IRS’s pattern of behavior. Taxpayers deserve an IRS that recognizes that the “S” in its name is as important as the “R.”
