Reliance on an agent held not to constitute reasonable cause.

• Jurisdiction: United States
• Date: 01 October 1997
• Author: Pflieger, Deborah J.

In McMahan, 114 F3d 366 (1997), the Second Circuit found that reliance on an agent to file an application for an extension of time to file a Federal income tax return did not constitute reasonable cause for purposes of the failure to file penalty imposed by Sec. 6651(a)(1). As a result of this finding, the taxpayer (and quite probably, in turn, his agent) was liable for a penalty of $141,028.

On April 14, 1983, McMahan's attorney, who prepared and filed his 1978-1981 Federal income tax returns, prepared and filed Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, extending the deadline to file McMahan's 1982 tax return until Aug. 15, 1983. Several weeks prior to the extended due date, both McMahan and his executive secretary questioned the attorney about the status of the return, and were assured that the attorney...