Introduction
The case of Huang (*), involving a pro se taxpayer seeking to avoid late-filing penalties for international information returns (Section 6039F of U.S. Code), has shed light on the challenges the IRS (Form 3520 penalties) faces in handling international tax filings. The timeline for late filing penalties, particularly for such returns, often raises serious questions about whether the taxpayer can demonstrate reasonable cause for non-compliance. The Supreme Court has historically upheld results grounded in professional reliance and the doctrine that taxpayers cannot ignore the specific reporting requirements of international filers—making motions to dismiss penalties inerializer likely to challenge multiple issues, with the Court deciding in earlier cases that late penalties imply a lack of constructive cause.
Reasonable Cause Considerations
The reasonable cause defense to late-formed penalties, which is widely invoked in U.S. jurisdictions, has complex nuances. At its core, reasonable cause relies on the taxpayer showing that, even if a previous action (e.g., filing a relief tax return by deadline) occurred, if the outcome of a subsequent action (e.g., filing a late form or otherwise) would realistically cause the taxpayer to fail to meet the reporting requirements of the statute—such as receiving all required information by the deadline. The Court has upheld reasonable cause in many cases, but it also has upheld its interpretation of the statute, which prohibits United States persons from filing timely returns without reporting proper records to the recipient. In cases involving international filers, courts have grappled with the issue raised by הם prior to late filers, but it remains one of the tools the IRS may sue for failure to demonstrate reasonable cause in those cases.
Procedural Challenges
The same reasonable cause holding has extended to procedural matters, particularly in cases involving refund payments. The Administrative Procedure Act and section 6751(b) impose a much stricter hurdle for timely filing of penalties. In cases involving international information returns, the procedural legacies of the variance doctrine have appeared strongest. The variance doctrine requires taxpayers to disclose each ground for a refund (e.g., failure to file timely, failure to provide proof of dependency, etc.) to the IRS at least one year prior to filing a lawsuit. Courts often resolve procedural issues by demonstrating an adequate disclosure of these grounds under the doctrine. However, in multiple cases involving international filers, courts have avoided such litigation to prevent prolonged grueling proceedings and minimize costs.
Case Outcome
In Yellow Huang v. United States (No. 3:24-cv-062998-RS (N.D. Cal. 2025)), the Court dismissed Huang’s complaint on procedural grounds and ruled in favor of the United States, holding that reasonable cause was demonstrated for her reliance on TurboTax as advised by her tax advisor, even though her Form 3520-filing actions were not timely. The Court’s order addressed both reasonable cause and procedural challenges, highlighting the difficulties in avoiding penalties for international filers.
Failure of Procedural Defense
Couple with the corporation’s failure to adequately raise procedural challenges, the Court held that the reasonable cause standard application in this case was without merit. The Court’s decision underscored the tension between the need to avoid taxes (either by timely filing or by assuring the IRS of being a constructive causecluder) and the risks of litigation and procedural complications.
Takeaway
The Huang case has revealed the complexities involved in defending against penalties for international information returns. The Supreme Court’s interpretation of the statute and the variance doctrine highlight the importance of demonstrating reasonable cause when challenging late penalties, even in the face of procedural hurdles. This case underscores the challenges faced by the IRS in handling international tax filers and the need for taxpayers to uphold the enforceability of its controls regarding international information returns. As the world continues to navigate the complexities of the U.S. tax system, these cases serve as reminders of the depth and subtlety involved in the税务ing of international filers.
