When may a taxpayer's agent sign returns?

As a general rule, a taxpayer must personally sign his income tax return (Regs. Sec. 1.6061-1 (a)). Regs. Secs. 1.6012-1 (a)(5) and 1.6061-1(b), however, permit an agent to sign for a taxpayer under three narrow circumstances in which the taxpayer:

* Is unable to prepare the return because of disease or injury.

* Is continually absent from the U.S. for at least 60 days prior to the filing due date.

* Requests permission, in writing, from the district director, and the district director approves the request for good cause shown.

A properly completed Form 2848, Power of Attorney, that establishes the agent's authority, must accompany a return.

In Elliott, 113 TC No. 7, the Tax Court served notice that a taxpayer's failure to strictly adhere to the Sec. 6012 regulations may invalidate his return and support a late-filing penalty. In Elliott, a lawyer timely submitted his client's 1990 income tax return to the IRS in October 1991 .The lawyer purported to sign on the client's behalf under a power of attorney, but a Form 2848 was not attached to the return. In addition, the taxpayer did not seek permission for his lawyer to sign. (There was no indication that he was disabled or out of the U.S.)

Shortly after receipt, the Service sent the return back, requesting a power of attorney. The lawyer did not resubmit the return with a properly completed Form 2848 until the latter half of 1993. In October 1995, less than three years later, the IRS sent the taxpayer a deficiency notice for 1990.

The taxpayer contended that the period of limitations for assessment had expired. Citing Miller, 237 F2d 830 (5th Cir. 1956), he asserted that his 1990 return was properly signed and timely filed. In Miller, the Fifth Circuit held that a return signed in a taxpayer's name by one purporting to have authority and who, in fact, has authority, triggers the statute of limitations.

The Tax Court disagreed, holding that the deficiency notice was timely, because the 1990 return, as originally submitted, was improperly signed and, therefore, invalid. The court acknowledged that it had followed Miller in Booher, 28 TC 817 (1957), and Lombardo, 99 TC 342 (1992), aff'd sub. nom. Davis, 68 F3d 1129 (9th Cir. 1995). But Miller, it observed, was decided under the 1939 Code, which did not authorize the Service to regulate the signing of returns. In contrast, Sec. 6061-, requires taxpayers to sign returns in accordance with IRS forms and regulations.

The court also distinguished Lombardo on its facts. That case prevented a taxpayer from denying the validity of a return purporting to be signed for him by his lawyer. A Form 2848 accompanied the return, but the taxpayer did not seek the necessary IRS permission. The court held that the IRS was free to waive that requirement. In Elliott, on the other hand, no power of attorney was attached to the originally submitted return.

The court also upheld the validity of Regs. Sec. 1.6012-5. The regulation was legislative and, thus, could be set aside only if arbitrary, capricious or clearly contrary to the law. It found that the regulation did not fall into any of these categories.

Finally, the court sustained the late-filing penalty, citing Boyle, 469 US 241 (1985). In that case, the Supreme Court held that a taxpayer has a nondelegable duty to file a timely return and is responsible for late filing by an agent.

Critique

Elliott's facts are extreme. Still, the case serves as a warning that taxpayers and their agents must take the Service's signature rules seriously or risk an open limitations period and penalties. Left unaddressed by the Tax Court are the circumstances in which the IRS, by its conduct, may be found to have waived one or more of the requirements of the Sec. 6012 regulations. Also unresolved is whether a taxpayer whose return is otherwise timely submitted to the Service can avoid the late-filing penalty if he relied on the professional advice of an agent regarding the signature rules; see LaMeres, 98 TC 294 (1992), distinguishing Boyle and holding that reliance on professional advice as to what the tax laws require is different from delegating a filing obligation.

FROM RONALD A. STEIN, J.D., LL.M., CPA, CHICAGO, IL