Statute of Limitations Involving IRA Penalties

• Author: Seymour Goldberg
• Profession: Senior partner in the law firm of Goldberg & Goldberg, P.C., in Woodbury, New York
• Pages: 6-9

6

STATUTE

OFLIMITATIONS

INVOLVING IRA

PENALTIES

According to a 2011 Tax Court opinion in Paschall v. Commissioner, the

IRS may assess an excise tax penalt y for an excess contribution to an

IRA at any ti me if Form 5329 is not filed with t he IRS. See Pascha ll v.

Commissioner, 137 T.C. No. 2, July 5, 2011.

In Paschall, the taxpayer made excess contributions to his Roth IRA

for a number of years. The statute of limitat ions was barred for income

tax purposes, according to the court opinion.

The court held, however, that the statute of limitations for t he tax

on the excess contributions that were made to the taxpayer’s Roth IRA

was not barred by the statute of limitations because the taxpayer never

filed Form 5329 with the IRS.

According to the Tax Court opinion, if t he taxpayer fai ls to file

Form 5329 with the IRS, then in the absence of adequate disclosure to

the IRS of the fact s necessary to establish the liabilit y for this excise tax,

the IRS can assess this excise t ax at any time.

This case is important because many ta xpayers for whatever reason

make excess contributions to IR A accounts, particularly t raditional IRA

accounts.

In Paschall, the ta xpayer argued t hat the filing of his Form 1040

triggered the statute of limitations with respect to IRC §4973 excise

tax on excess contributions. I n the Tax Court’s opinion, the fil ing of

Form 1040 does not give sufficient notice to the IRS that tax on excess

contributions may be applicable.

Relying on several Supreme Court decisions, the Tax Court

stated:

goL88517_01_c01_p001-166.indd 6goL88517_01_c01_p001-166.indd 6 3/12/13 8:27 AM3/12/13 8:27 AM