In a legal saga with implications for small businesses and self-employed individuals, Florida surgeon Wayne Lee’s quest for damages from his CPA over unfiled tax returns has hit a roadblock. The Eleventh Circuit’s recent ruling underscored the applicability of the Boyle doctrine to electronically filed returns, shedding light on the responsibilities of taxpayers, particularly those in the small business and self-employed sectors.
Small businesses and self-employed individuals rely heavily on tax professionals to manage their financial obligations. The ruling serves as a wake-up call, highlighting the need for active involvement in the tax filing process. Whether submitting returns electronically or through traditional paper methods, the taxpayer must exercise due diligence.
Wayne Lee, a small business owner, entrusted his tax affairs to a certified public accountant (CPA) to navigate the complexities of filing returns for tax years 2014-2016. Unfortunately, his CPA failed to e-file the returns, resulting in a cascade of penalties and tax liabilities for Lee.
Representing himself and a myriad of small businesses and self-employed individuals, Lee initiated a legal battle against his CPA. Beyond seeking damages for negligence in failing to file tax returns, Lee pursued a refund suit, arguing that he had exercised ordinary business care and prudence by relying on his CPA, as many small businesses and self-employed individuals often do.
The Eleventh Circuit’s ruling sent ripples through the small business community, emphasizing the importance of understanding and complying with tax regulations. Referencing the Boyle doctrine, established by the Supreme Court in 1985, the court made it clear that the responsibility for timely filing rested squarely on the taxpayer, irrespective of whether returns were submitted electronically or on paper.
Lee contended that signing Form 8879, authorizing e-filing, relieved him of responsibility. The court clarified that the form was an authorization, not the actual filing, and did not exempt Lee from ensuring timely submission.
Lee argued that circumstances beyond his control, like those mentioned in Boyle’s footnote 6, justified his late filing. The court dismissed this claim, emphasizing that Lee was not subject to a disability preventing him from overseeing the filing process.
Lee claimed that Congress shifted the e-filing burden to tax preparers. The court refuted this, emphasizing that as an experienced individual, Lee retained control and could have personally ensured timely filing.
In upholding the district court’s summary judgment, the Eleventh Circuit held that Boyle’s doctrine applies to e-filed returns like paper-filed returns. Also, Lee needed to demonstrate reasonable cause for failing to file his taxes promptly and to pay his taxes when due.
A separate concurring opinion provided valuable insights for small businesses and the self-employed. It recommended independent confirmation of filing with the IRS and, notably, considering filing on paper. For those in the small business and self-employed sectors, this guidance offers a strategic approach to navigating the intricacies of tax compliance.
As the legal dust settles, small businesses and self-employed individuals are urged to reassess their approach to tax compliance. Active engagement, independent verification, and a proactive stance in ensuring timely filings can shield them from the potential pitfalls illuminated by this legal tussle. In the ever-evolving landscape of tax regulations, the onus is on individual taxpayers, small businesses, and the self-employed to stay informed and vigilant.
Source ( Journal of Accountancy News).
