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RUNNELLS FARMERS LEARN: IRS HAS NO INTEREST IN ABATING INTEREST

March 31, 2005

Two Runnells, Iowa couples learned yestarday that a ponderous IRS bureaucracy doesn't give the Tax Court enough reason to waive interest on tax liabilities.

The couples were members of a farm partnership. After an IRS exam, the couples were assessed additional tax on the partnership income. The used the IRS Appeals process to contest the assessments.

The case lingered at the appeals level for several months, but the taxpayers apparently failed to come to an agreeement, so the IRS issued a "statutory notice of deficiency." This "90-day letter" is a ticket to Tax Court. Several times in the process the taxpayers were told that interest was running as long as the tax was unpaid.

The taxpayers apparently didn't contest the IRS adjustments, but they argued that the interest was unreasonable. The case went back to appeals. It was assigned to one appeals officer, and then reassigned because the first officer was too swamped to get to it. The new appeals officer abated some of the interest, but left a total of about $6,300 of interest owing.

The Tax Court said the delays in the appeals process weren't enough to waive the remaining interest:

Petitioners could have paid as early as the date
of the original notices of deficiency in February 2000, or they could have paid upon settlement of the original Tax Court cases in October 2000. When petitioners made voluntary payments in May 2001, they could have paid the entire amounts due and requested refunds in their abatement claims. Finally, petitioners could have paid when they received their final tax bills in December 2001 and January 2002, respectively. However, petitioners did not pay the entire amounts due until December 10, 2002. Petitioners’ delayed payments of their liabilities are not attributable to error or delay by any officer or employee of the IRS in performing a ministerial act.

Cite: Bartelma v. Commissioner, T.C. Memo 2005-64

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