At Tharrington Smith LLP, we are committed to providing exceptional legal representation, and our recent victory in the United States v. Stover case is a testament to our dedication to protecting our clients’ rights.
Background
The Fourth Circuit Court of Appeals recently ruled in favor of Arthur and Gigi Stover, vacating a summary judgment that had been granted to the U.S. government and remanding the case back to the trial court. The case revolved around whether the IRS waited too long to collect a substantial tax debt from the Stovers, which stemmed from a 2007 tax liability.
Key Legal Issue
To prove a taxpayer’s liability in Court, the IRS often replies on the taxpayer account transcripts to show what occurred and when. Are IRS transcript entries sufficient proof in the face of denials by the taxpayers?
The Factual Dispute
The IRS typically has ten years to collect unpaid taxes after an assessment (26 U.S.C. § 6502(a)(1)).
However, certain events can cause the time that the IRS has to collect to be paused (tolled). This would allow the IRS to collect unpaid taxes even after the ten years has ended. One way the clock can be paused is if a taxpayer requests an installment agreement, which would allow the taxpayer to make payments on a debt over time. As long as there is an installment agreement in place, or even just a request for one pending, the clock is paused.
The IRS claimed that the Stovers made such a request on December 12, 2008, which would have extended the collection deadline. To support this, the IRS produced account records indicating that the Stovers made the request on that date.
However, the Stovers denied that this was possible—that they, in fact, did not even learn that installment agreements were possible until they hired an attorney at the beginning of 2009. Arthur Stover testified that they did not request an installment agreement until spring of 2009—months after the IRS claims the request was made.
If the installment agreement had been requested in December of 2008, the IRS filed its suit on time and could collect the debt. But if the request was not made until 2009 (as the Stovers claimed), then the IRS had filed its collection suit too late.
Tharrington Smith’s Role and Court Ruling
The district court granted summary judgment in favor of the IRS, finding that the IRS account transcripts were controlling and dispositive; the Stivers’ denials notwithstanding.
After the ruling, the Stovers retained Douglas E. Kingsbery at Tharrington Smith LLP to prosecute an appeal to the U.S. Fourth Circuit Court of Appeals in Richmond, Virginia. Mr. Kingsbery argued that the IRS transcripts should not be presumed to be correct, and that a jury should be allowed to decide the dispute. The Court of Appeals agreed with Mr. Kingsbery, vacated the District Court ruling, and remanded the case for trial.
Key Takeaways
This case underscores several important legal principles:
- Deadlines and tolling provisions in tax law can determine a case’s outcome. – The entire case hinges on whether the statute of limitations had expired by the time the government filed its suit to try to collect the unpaid taxes.
- IRS account transcripts, standing alone, will not entitle the IRS to summary judgment in a collection suit where the taxpayer denies the critical events contained in the transcripts. – Rather, the IRS will have to prove its claims to a jury.
- Expert legal representation makes the difference. – Douglas Kingsbery’s advocacy ensured that our clients were not unfairly denied their defense.
Conclusion
The Stover case is an important precedent for taxpayers and legal professionals alike. It highlights the importance of challenging government actions when the facts do not align and underscores Tharrington Smith’s commitment to standing up for our clients in complex legal matters.
For more information about our tax litigation services, contact our criminal tax attorneys today.
Disclaimer: The information in this case study is for general informational purposes only and does not constitute legal advice. Tax laws and collection procedures are complex and depend on individual circumstances. If you need legal guidance regarding tax disputes or other legal matters, please contact our attorneys at Tharrington Smith LLP for personalized assistance.
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