Tax court recently overruled the IRS (Ensyc Technologies, TC Summ. OP. 2012-55) and stated that forgetting to mail the return can be a “reasonable cause” for filing late and having the penalty waived.
The case revolved around an accountant who, each year, prepared the tax return for an S Corporation and mailed it to the company’s president to sign and mail to the IRS. One year he thought he had mailed the return to the company’s president to sign and mail to the IRS, but he had mistakenly filed it away instead. He did mail the K-1s to the shareholders, who used the data on their timely filed 1040s. Six months later, he mailed the corporate tax return, and the IRS assessed a penalty for late filing.
This case shows why you should never just pay the penalty amount the IRS says you owe without running it by your tax preparer first. There may be a valid excuse that can be argued in order to abate the penalty. Our experience is that about half the time the penalty is either reduced substantially or eliminated in full.
Like any good CPA, I need to add a disclaimer: Unfortunately, it is impossible to offer comprehensive tax info over the Internet, no matter how well researched or written. And remember, I love my readers, but having me bookmarked on your computer doesn’t make you a client: Before relying on any information given on this site, contact a tax professional to discuss your particular situation.