A Discussion of Deadlines to File Collection Due Process Appeals and Other Filings – IRS Deadlines

This installment of Tax and Vice discusses a Tax Court case involving a marijuana dispensary. To set the scene, a cannabis dispensary owner, Snoop Dogg, and Willie Nelson were having an epic sesh when they were rudely interrupted by IRS Agents. At issue is whether the testimony of the IRS Agents was literally clouded by the smoke in the air. Just kidding. This blog post is using marijuana as a gateway to talk about tax procedure, IRS Deadlines, Collection Due Process Appeals, and other IRS filings. In particular, this blog will discuss if IRS deadlines are set in stone and subject to equitable tolling. Equitable tolling is a legal doctrine that excuses a taxpayer or claimant from filing an appeal or other filing after a deadline.

The tax code is rife with deadlines. There are deadlines to file tax returns, deadlines to make tax payments, and deadlines to file appeals or other legal proceedings. The US Supreme Court held in Boechler that many of the deadlines to file appeals or other legal proceedings may be subject to equitable tolling.    This means that in many instances, the deadlines are not set in stone. A taxpayer may possibly be excused from making a filing after the deadline.

In Organic Cannabis Foundation LLC v. Comm’r (161 TC 4), the taxpayer (a cannabis dispensary) filed for what is called a Collection Due Process hearing (or CDP hearing) to challenge a tax lien filed against it.  By law, a taxpayer has a 30-day window in which to file a CDP hearing. The taxpayer in Organic Cannabis filed its appeal a day late. The Tax Court, largely motivated by the Supreme Court decision case in Boechler said equitable tolling might be available to the Taxpayer.

The important take away from cases like Organic Cannabis is that taxpayers cannot completely disregard deadlines. It is far easier and safer for a taxpayer to file appeals before the deadline than to convince a judge or IRS agent that they had a good excuse for being late. The Equitable tolling doctrine that allows a taxpayer to file late generally requires a taxpayer to show the taxpayer was working diligently and was prevented from timely filing due to extraordinary circumstances. Many taxpayers are not going to have adequate excuses. Nevertheless, life happens and taxpayers who may have experienced a setback like a severe illness, a natural disaster, or even misconduct or malfeasance on the part of the IRS may be eligible for equitable tolling.

Deadlines to file tax returns and pay taxes may be excused for reasonable cause. Reasonable cause is a different legal standard than equitable tolling but has some similarities. A taxpayer being asked to be excused from late filing or late payment penalties may have the penalties excused if the taxpayer can show they had reasonable cause for failing to timely file a tax return or timely pay a tax. Reasonable cause often involves circumstances like severe illnesses, natural disasters, and other hardships.

RJS LAW is a Tax Controversy Law Firm. We represent clients in their appeals before the IRS, FTB, CDTFA, and EDD. If you are having tax problems, please contact us at 619-595-1655 or on the web at RJS LAW for a free consultation if you are experiencing any type of tax problem.