Delinquency Penalties: Boyle in the Age of E-Filing

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The issue of when a taxpayer can be insulated from the imposition of civil penalties when the taxpayer depends and relies on the advice of a tax professional is an issue that we have discussed many times on PT and which fills many pages in the Saltzman Book treatise IRS Practice and Procedure. This month the American College of Tax Counsel (ACTC) filed an amicus brief in the Fifth Circuit case Haynes v US, which looks at the issue with a modern twist: can a taxpayer who uses an authorized e-filer expecting that the return be timely filed avoid a delinquency penalty if in fact there was an error in the processing of the e-filed return but the IRS or the preparer did not notify the taxpayer of the error until a couple of years passed and penalties accrued?


As many PT readers know, Boyle creates a bright line that prevents taxpayers from arguing reasonable cause based on good faith reliance on an advisor when it comes to meeting tax-filing deadlines. Boyle is a Reagan era case, well before today’s e-file world. The brief, which is exceptionally well done, explains that many e-file reject returns would clearly be accepted as returns under the Beard test if they were sent in via snail mail. The current e-file regime essentially makes it easy for rejects, as IRS has required taxpayers to identify prior year’s AGI or a special PIN to verify the return (a task not all are up for).

As I have discussed previously when IRS rejects an e-filed individual income tax return that cannot be rectified taxpayers “must file the paper return by the later of the due date of the return or ten calendar days after the date the IRS gives notification that it rejected the electronic portion of the return or that the return cannot be accepted for processing.” (as per the Handbook for Authorized E-file Providers of Individual Income Tax Returns). If there is no timely notification and little way for the taxpayer to independently check whether the return was rejected, it seems unfair to apply Boyle in these circumstances.

The ACTC brief (note: Keith and I are ACTC fellows though we did not participate in the drafting of the brief; Peter Connors of Orrick and Professor Jon Forman at Univ of Oklahoma Law School led the charge for ACTC ) makes the case much more forcefully. As the brief discusses, the act of e-filing is not nearly as simple as placing a paper return in the mail. Requiring a taxpayer to independently check to ensure that the return has been accepted, absent major developments in the so-called Future State of tax account information, seems to me unfair. By requiring a taxpayer to double check with the preparer or IRS to ensure that the e-filed return has been accepted places additional burdens on taxpayers using a preparer. If anyone should have that responsibility, it is the preparer, and a preparer who fails to ensure that the IRS has accepted the return should face the penalty music, not the taxpayer.

We will watch this case with interest and keep readers posted.

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Professor Book is a Professor of Law at the Villanova University Charles Widger School of Law.


  1. Thanks for linking to the amicus brief, I had been meaning to run it down.
    I have a case now where the preparer has proof the return was uploaded, but the IRS has a totally different date (years later) for the filing.

  2. The facts are incorrect, and the errors undercut the principal argument. The brief refers to “the first electronic filing pilot program in 1986,” (Page 7) and then states that “the Boyle case was decided in 1985, prior to the first electronic filing pilot program for individual taxpayers” (Page 19). But electronic filing was available as early as 1978. The following is from an Associated Press article published in the Indiana (Pennsylvania) Gazette on November 13, 1979 — it was likely also published elsewhere, but this is the first that came up in my search.

    “WASHINGTON (AP) — Spending an extra $30 or so can get you a federal tax refund in three weeks or less.
    That money will buy you the services of an electronic return filer — an accountant, tax-return preparer, bank or other institution that can transmit your completed tax forms via telephone line. In most cases, the electronic filer will fill out your return for another fee or transmit one you have completed yourself.
    Regardless of who does the calculations, the Internal Revenue Service says that within three weeks after your electronic return is received, your refund check will be in the mail. That is about half the time required for old-fashioned paper returns filed early in the year. . . .
    The IRS likes electronic filing because it cuts down on errors, paperwork and processing time. A year ago, 2 million electronic returns were predicted, but 4.2 million were eventually filed. this year, the IRS is predicting 6 million couples and individuals will file electronically.
    In fact, the system has become so successful that the IRS no longer offers to provide callers a list of area businesses that will transmit returns. The agency suggests you check advertisements or ask friends for recommendations.
    Electronic filing is available for most people who expect a refund whether they file Form 1040EZ, 1040A or the long form 1040. Since you cannot sign an electronic return, you must sign a Form 8453, which the electronic transmitter will mail to the IRS.”

    I remember those days, and I remember how IRS effectively excluded sole practitioners from using the system by requiring that we use a bidirectional modem, which was both cost prohibitive and obsolete.

    I have no idea where the 1986 date comes from. Perhaps that was the first year that home computers could be used for self-prepared returns, transmitted through vendors like Intuit. Most people assume that electronic-filed return data goes directly to IRS. But most, if not all of the returns (both DIY and professional) are transmitted first to a third-party service, which then massages them to make sure they will be acceptable before forwarding them to IRS. The acknowledgments of the return’s receipt — known universally among preparers as “acks” — come back by the same route.

  3. The 1986 date apparently comes from a lengthy April 6, 1986 article in the New York Times exploring many IRS issues. In one paragraph, it states, “This year, a pilot test is being conducted of an electronic filing system in which private tax preparers transmit their clients’ data directly to service center computers. Early results showed that the data is transferred with only a 3 percent error rate.”

    The story does not indicate whether this is 1040 data, or something else (like 1099s or corporation returns). The NY Times may be a good place to start a search for IRS history, but other sources should also be consulted. Didn’t the IRS used to have an in-house historian? But wasn’t she fired?

  4. “In short, Appellants’ certified public accountant electronically transmitted the
    Appellant’s income tax return to the IRS on October 17, 2011. ROA.674. Even
    though the IRS acknowledges that it received that tax return electronically on the
    relevant due date, the IRS takes the position that no return was electronically “filed”
    with it.”

    What exactly does the “with it” mean at the end of the above statement?

    • Norman Diamond says

      ‘Even though the IRS acknowledges that it received that tax return electronically on the relevant due date, the IRS takes the position that no return was electronically “filed” with it.’

      ‘What exactly does the “with it” mean at the end of the above statement?’

      I think the IRS is “it.”

      The return was lodged but not filed. Almost the electronic equivalent of mailing a paper document by registered or certified mail and getting a signed return receipt, but then oddly getting an admission instead of denial that the document was received.

  5. Ah, makes sense, at least grammatically. So, the IRS really is saying: We rejected a return that was never filed. Great logic.

    “Almost the electronic equivalent of mailing a paper document by registered or certified mail and getting a signed return receipt, but then oddly getting an admission instead of denial that the document was received.”

    Yes, very oddly. It’s as if the IRS is saying that they received the electronic return, opened it up, ran some cursory tests on it, found it didn’t satisfy the digital protocol, and rejected the submission. That sure sounds like the IRS received a filed return, which purported to be a return, and rejected it.

    As pointed out in the brief, such a return would satisfy the Beard Test. But here we have the IRS creating a new test that only applies to e-filed returns. And this new test also acts to nullify the Beard Test, which is still good law as far as I know.

  6. After further review, I confess to screwing up and jumping to conclusions. The clipping on which I relied was dated 1979 from what I have found to be a reliable online source available by subscription ( but the article is actually from 1991. I apologize for the error and will avoid quick answers to involved questions, a habit I probably learned in my IRS Taxpayer Service days.

    I still remember working in the National Office division that was exploring electronic filing in 1976. I do not remember it taking 10 years for the concept to be implemented, but that’s typical for much government work. I think information returns (like 1099s) were filed on magnetic media at that time. But the Boyle case involved an estate tax return, and those can still not be filed electronically. With so few required, they may never be.

    The problem I should have pointed out with the Haynes case is that no penalty would have been assessed, had the plaintiffs paid their tax when their electronic return was rejected by IRS before its due date. The 2011 return showed an AGI of $417,280 and a tax owed of $81,116. Only $33,457 had been paid by the time the paper return was filed a year later. The final tax payment of $40,000 was not made until February 2014. (Transcript, accessed through Pacer, is attached to the IRS motion for summary judgment in the District Court case.)

    The lesson here may be that if you want to wait for IRS to send you a bill for tax owed on an electronically-filed return, don’t wait more than a year. Nowadays you can pay your tax either with an electronic debit filed with the return, or with a paper voucher mailed to IRS.

    While important for taxpayers, this case is probably more significant for malpractice insurance companies. If practitioners are liable not just for errors in preparing returns, but in making sure they are filed, then more claims will be made. Eventually, of course, these costs will increase premiums and perhaps client fees.

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