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25, the couple e-mailed Paszkiewicz for relief from the penalties under either
his advice. Paszkiewicz advised them Advice contrary to argument. It also claimed that under
to wait until April 30 to see if the pay- the substantial-variance rule, the district
ment had been debited from their ac- IRS form instructions court did not have jurisdiction over the
count and, if not, that he would contact is unreasonable, and case because the Oosterwijks’ formal re-
the IRS. fund claim did not adequately cover the
On April 29, Aspasia emailed Pasz- a taxpayer’s reliance factual bases and legal arguments raised
on the advice
kiewicz and told him that the payment in their refund suit.
remained in the couple’s bank account. cannot substantiate
At this point, Paszkiewicz discovered The district court’s decision
reasonable cause.
that he had not e-filed the extension The district court held that while the
request. He told the Oosterwijks he had substantial-variance rule did not pre-
not filed the extension and (erroneously) vent it from ruling on the Oosterwijks’
advised them that if they filed the six- reasonable-cause claims, their accoun-
month extension request at that time, tant’s failure to file an extension and his
they would have until Oct. 15, 2018, to IRS memorializing one of the phone erroneous advice regarding the accrual
file their tax return, and the penalties for conversations in which they raised the of late-filing penalties did not give the
late filing would stop. reasonable-cause defense for the late fil- Oosterwijks reasonable cause for failing
The Oosterwijks thus immediately ing, citing Paszkiewicz’s failure to e-file to timely file their return. Therefore, it
mailed a paper Form 4868 and a check an extension request and his erroneous dismissed the case.
for $1.8 million to the IRS, and the pay- advice regarding the failure-to-file pen- Jurisdiction: Under the substantial-
ment posted to the Oosterwijks’ 2017 alty accrual. variance rule, any legal theory that is
Form 1040 account on May 4, 2018. In June 2019, the Oosterwijks paid not expressly or impliedly contained
Believing, based on Paszkiewicz’s advice, the penalties they owed and in July in an application for refund cannot be
that there was no rush to file their re- 2019, they filed Form 843, Claim for considered by a court in a refund suit.
turn, the couple did not e-file their 2017 Refund and Request for Abatement, claim- The reasons for this requirement are to
return until June 29, 2018, after almost ing a refund for the penalties sustained prevent surprise and to give the IRS ad-
two months had passed. The IRS pro- earlier by the IRS because, they said, equate notice of the taxpayer’s claim and
cessed the return on Sept. 10, 2018. they had reasonable cause for their late its underlying facts so that it can make
Much to the Oosterwijks’ dismay, filing. Having received no response from an administrative investigation and de-
on Oct. 15, 2018, in addition to as- the IRS, the Oosterwijks filed a refund termination regarding the claim.
sessing a failure-to-pay penalty for one suit in district court in May 2021. The Oosterwijks’ formal refund
month, the IRS assessed a failure-to-file In their suit, the Oosterwijks first claim on Form 843, filed in July 2019,
penalty based on the date their return asked for relief from all late-filing penal- did not identify reliance on erroneous
was filed, June 29, 2018, rather than ties (covering the period from the return advice as a basis for reasonable cause,
on May 4, 2018, the date on which the due date to June 29, 2018) because although they raised this theory with
couple mailed the $1.8 million payment. Paszkiewicz’s failure to e-file the exten- IRS Appeals on a phone call and in
The failure-to-file penalty was over sion and their limited access to e-filing their March 22, 2019, letter. Instead,
$250,000. gave them reasonable cause for filing the Form 843 directly referred only to
The Oosterwijks did not qualify for their return late. The couple also argued reasonable cause due to Paszkiewicz’s
first-time penalty abatement because that they separately had reasonable cause failure to e-file their return. Because
they had used it to have a $7 penalty for relief from the penalties accruing in the formal refund claim did not in-
abated in 2014. The couple filed for May and June because they would have clude reliance on erroneous advice as
penalty relief, which was denied, but filed a return immediately upon learning a basis for reasonable cause, the IRS
later, on appeal, the IRS agreed to abate that the extension had not been filed but argued that the substantial-variance
half of the failure-to-pay and failure-to- for Paszkiewicz’s erroneous advice that rule prevented the district court from
file penalties. filing an extension after the due date and having jurisdiction over the Ooster-
The Oosterwijks afterward had paying the tax liability would stop the wijks’ case.
several phone conversations about accrual of failure-to-file penalties. The court said it was a close ques-
the issue with the IRS. On March The IRS countered that the Ooster- tion but that the substantial-variance
22, 2019, they also sent a letter to the wijks did have not reasonable cause for rule did not bar it from ruling on the

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