Note: The following is an excerpt from the introduction to the article as published in The Tax Lawyer. Author citations have been omitted for brevity. Tax Section members may read the article in its entirety in Adobe Acrobat format.
Allnutt v. Commissioner: The Taxpayer's Responsibility
Cara M. Cotter
Critics of the federal income tax frequently emphasize the Code’s complexity and the high costs associated with compliance. In 2005, for example, taxpayers spent over $111 billion on their efforts to comply with the federal income tax. Even for taxpayers with the best intentions, accurately and timely filing one’s tax returns is difficult and burdensome. Despite the costs of complying with the federal income tax system, the Service, courts, and Congress strictly insist that the responsibility for satisfying procedural requirements lies with the taxpayer.
In Allnutt v. Commissioner, the taxpayer argued that his situation merited an exception to the procedural requirements for filing a tax return. The taxpayer, relying on erroneous advice from counsel, failed to properly file his income tax returns. When the Service issued a notice of deficiency, the taxpayer cited his good faith reliance on the advice of counsel. The Tax Court and the Fourth Circuit denied relief, refusing to recognize individualized equities and insisting on the need for stern deadlines in the tax context.
The purpose of this Note is to elaborate upon the courts’ treatment of the taxpayer. Part II presents the relevant statutes and regulations in effect at the time of the taxpayer’s filing. Part III describes the facts of the taxpayer’s situation and the courts’ reasoning. Part IV summarizes the history of equitable tolling in the tax code, revealing that courts and Congress have historically been reluctant to recognize individualized equities in tax cases. Part V compares the courts’ approach in Allnutt to the analysis applied throughout other areas of the Code. Part VI concludes that the need for an administrable tax code justifies strict enforcement of procedural requirements. Finally, Part VII briefly discusses the likelihood of a similar result under the amended Regulation 6091, which provides instructions on how taxpayers may properly file tax returns.