Failure to File Penalties - Reasonable Cause

In John Probandt, v. Commissioner (2016) TC Memo 2016-135, I found this case interesting for the failure to file penalty discussion.


Mr. Probandt failed to file a tax return and was assessed failure to file penalties for his business venture. His argument for not filing was that he believed his income was lower than his expenses, and thus would not have a filing requirement. On audit, it was determined there was enough income to trigger a filing requirement for his business venture.


The court discusses how a regular person making the determination that his expenses are higher than his income is not enough reasonable cause. However, had he received professional advice or undertook any other investigation to determine if he had a filing requirement, then it would satisfy the reasonable cause standard.


Overall the case is a good read too for the substantiation requirements for M&E and also a discussion on the Cohan rule.


Relevant Cites: Probandt v. Commissioner TC Memo 2016-135