In a recent U.S. Tax Court case, penalties were upheld against a taxpayer for not filing his tax returns on time. The taxpayer had filed an extension for two years and finally filed the returns three days after the extended due dates. 

The tax code imposes an addition to tax for failing to timely file a return. For a late filing of not more than a month, it’s equal to 5% of the tax required to be shown on the return. 

Beyond the late filing, the Tax Court also held that the taxpayer had underreported his company’s gross receipts, as well as deducted personal expenses paid from the company’s bank account on the company’s tax return. He also failed to properly substantiate other alleged business expenses. 

The court stated the taxpayer acted negligently and with disregard of the rules and regulations because he didn’t explain his late filings or show they were “due to reasonable cause and not willful neglect.” (T.C. Memo 2018-126

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LBMC tax tips are provided as an informational and educational service for clients and friends of the firm. The communication is high-level and should not be considered as legal or tax advice to take any specific action. Individuals should consult with their personal tax or legal advisors before making any tax or legal-related decisions. In addition, the information and data presented are based on sources believed to be reliable, but we do not guarantee their accuracy or completeness. The information is current as of the date indicated and is subject to change without notice.