My accountant dropped the ball. I hear it constantly, and often it is true. The accountant had everything, promised to file, and did not. Or the accountant told the client something about the law that turned out to be wrong.

Those two stories sound similar. Legally, they are opposites. One is almost never reasonable cause. The other often is. The line between them was drawn by the Supreme Court more than forty years ago, and the IRS still follows it.

The Boyle rule

In United States v. Boyle, 469 U.S. 241 (1985), an executor hired an attorney to handle his mother's estate. The attorney told him an estate tax return was required but did not tell him the deadline. The executor checked in repeatedly and was assured the return would be filed in plenty of time. It was filed three months late, apparently because the filing date had been left off the attorney's calendar. The IRS assessed the failure-to-file penalty.

The Supreme Court held that the failure to make a timely filing of a tax return is not excused by the taxpayer's reliance on an agent, and such reliance is not reasonable cause for a late filing under IRC 6651(a)(1). The Court called for as bright a line as could be drawn. Congress placed the duty on the taxpayer, and hiring someone to help does not move it.

The Court's point was simple. You do not need special training to know that returns have due dates and that taxes must be paid when due. Anyone can find a deadline and meet it.

The exception Boyle preserved

The same opinion drew the other half of the line. The Court said the case was not one in which a taxpayer relied on erroneous advice of counsel concerning a question of law, and noted that courts have frequently held reasonable cause is established when a taxpayer reasonably relies on an accountant's or attorney's advice that it was unnecessary to file a return, even if the advice turns out to be wrong.

The Court explained why. When an accountant or attorney advises a taxpayer on a matter of tax law, such as whether a liability exists, it is reasonable for the taxpayer to rely on that advice. Most taxpayers are not competent to second-guess it, and requiring them to do so would defeat the purpose of hiring an adviser.

So the distinction is between delegating a ministerial task, such as filing on time, and relying on substantive advice about what the law requires. The first is your job. The second is why you hire a professional.

How the IRS applies it

The Internal Revenue Manual follows the same line. IRM 20.1.1.3.2.2.5 says that relying on another party to comply on your behalf is generally not a basis for reasonable cause, particularly for filing or paying obligations, because the taxpayer is responsible for meeting their tax obligations and that responsibility cannot be delegated.

IRM 20.1.1.3.3.4.3 addresses advice from a tax advisor. It says reliance on a tax advisor generally relates to the reasonable cause exception for the accuracy-related penalty under IRC 6664(c) and Treas. Reg. 1.6664-4(c). In very limited instances, reliance may provide relief from other penalties when the advisor gave advice on a substantive tax issue. The manual says relief based on advisor reliance is limited to issues generally considered technical or complicated, and that the responsibility to file, pay or deposit generally cannot be excused by reliance on an advisor.

The manual's example is a good one. An employer researched IRS publications on contract labor, gave the advisor clear documentation of the workers' duties, and asked for an opinion on whether they were contractors or employees. The advisor said contractors. The IRS later decided they were employees. That is reliance on substantive advice about a technical question.

Reliance arguments have the most room in accuracy-related penalty cases, where the question is whether you reported something correctly, not whether you met a deadline. IRC 6664(c) excuses the penalty for any portion of an underpayment if you show reasonable cause and that you acted in good faith, and the regulations address reliance on professional advice specifically.

That analysis has its own requirements about the adviser's competence, the information you provided, and whether your reliance was reasonable and in good faith. I cover it in reasonable cause and good faith under section 6664.

What the IRS will ask

IRM 20.1.1.3.3.4 lists questions for any advice-based request:

  • Was the advice in response to a specific request, and did it relate to the facts in that request?
  • Did the taxpayer reasonably rely on the advice?

It also says that if the taxpayer provided adequate and accurate information, relief extends to the period during which the taxpayer relied on the advice, until the taxpayer is placed on notice that the advice is no longer correct.

That gives you the shape of the evidence. You want the question you asked, the facts you gave, and the answer you got, ideally in writing, dated before the return was filed. An engagement letter, an email exchange or a written memo is far stronger than a recollection of a phone call.

Cases that look like advice but are not

Some facts sound like substantive advice but turn out to be delegation:

  • My accountant said he would file an extension. Filing an extension is a ministerial act. If it was not filed, that is generally reliance on an agent.
  • My bookkeeper was supposed to make the payroll deposits. Same answer. The manual treats depositing and paying as non-delegable.
  • My preparer told me the due date was later than it was. This one is less clear. Boyle expressly declined to decide whether relying on an adviser's wrong statement about the available time is reasonable cause, noting that lower courts had split.

And some facts sound like delegation but contain a real advice issue. If your accountant told you that you were not required to file a particular return, that is advice on whether a liability or filing requirement exists. That is the category Boyle protects.

Disclosure is part of reasonable reliance

Reliance only works if the adviser had the facts. The manual's advice section says relief extends to the period of reliance if the taxpayer provided the adviser with adequate and accurate information. Advice built on facts you withheld is not advice you can reasonably rely on.

This is where many reliance defenses quietly fail. The taxpayer did get advice, but the adviser never saw the second bank account, the side income or the related-party loan. Before you build a defense on reliance, confirm that what you told the adviser matches what the IRS now knows. If it does not, the defense is weak, and raising it may draw attention to the gap.

The practical path

If your penalty is for late filing or late payment and the only story is that the professional did not do it, look elsewhere for relief. Check first-time abatement. Check whether another reasonable cause fact applies, such as records held by the professional and not returned. You may also have a claim against the professional, but that is between you and them; it does not bind the IRS.

If your penalty is for an inaccurate return and you relied on a competent adviser's substantive advice after full disclosure, you may have a strong defense. Gather the paper trail and present it.

If the advice came from the IRS itself, a separate statute may require abatement. See erroneous IRS advice.

Hire professionals for their judgment. Keep the deadlines yourself.