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3. Addition for Failure To Pay Estimated Tax
Petitioner admits that he did not pay estimated taxes on his
income. He is therefore liable for an addition to tax under
section 6654(a). Respondent properly included the failure to pay
estimated taxes addition in the notice of deficiency. Where, as
in the case at hand, no valid return for the taxable year was
filed,5 these amounts are to be assessed, collected, and paid as
taxes under section 6665(a)(1), and are subject to the deficiency
procedures. Sec. 6665(b)(2). Because petitioner failed to file
a valid return for the 1998 taxable year, it was proper for
respondent to include the section 6654(a) addition in the notice
of deficiency, and we have jurisdiction to determine whether
petitioner is liable for the addition. We sustain respondent’s
determination that petitioner is liable for a failure to pay
estimated taxes addition under section 6654(a).
5It’s worth noting that respondent included the sec. 6654(a)
addition to tax in the notice of deficiency even though
respondent apparently thought that petitioner had filed a valid
income tax return. We would have no jurisdiction to review the
sec. 6654(a) addition to tax if petitioner had filed a valid
income tax return. Sec. 6665(b). See also Estate of DiRezza v.
Commissioner, 78 T.C. 19 (1982), for a discussion of the
legislative history of sec. 6665(b)’s identical predecessor,
former sec. 6659. In any event, it’s improper for respondent to
include in the notice of deficiency (unless in the alternative)
both a sec. 6654(a) addition for failure to pay estimated tax and
a sec. 6662 accuracy-related penalty. The sec. 6662 penalty
applies only if a valid return is filed, and the deficiency
procedures can be used in connection with a sec. 6654(a) addition
only if a valid return is not filed.
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Last modified: May 25, 2011