Sen. Jim Justice of West Virginia and his spouse, Cathy, reached an settlement with the I.R.S. to pay over $5 million in again federal earnings taxes. This settlement comes hours after the Division of Justice’s Tax Division filed a civil lawsuit in federal courtroom towards the Justices for the unpaid taxes. The senator claims that the lawsuit was politically motivated.
Justice, a Republican, took workplace in January 2025, changing Democrat-turned-independent Joe Manchin who selected to not run for reelection. Previous to that, he was the governor of West Virginia, initially as a Democrat after which switching to the Republican get together.
The grievance filed on November 24, 2025, alleges that the Justices owe $5,164,739.75 for earnings taxes from 2009 that have been assessed on November 25, 2015. In 2009, Justice offered considered one of his coal corporations to Russian coal firm Mechel for $436 million in cash and shares.
Wanting on the dates could elevate questions. First, if the earnings tax was from 2009, why was it assessed on November 25, 2015? Generally, the taxes are assessed when the taxpayer recordsdata their tax returns, with the earliest date being April 15 of the next 12 months. Some folks file extensions and file by October 15 of the next 12 months.
If the tax was assessed 5 years after the due date, it is actually because the tax returns have been filed 5 years late or as a result of there was a reassessment resulting from a tax audit. Because the case has been settled, it’s assumed that the Justices are usually not difficult the evaluation date.
The following standard query can be whether or not the IRS can legally gather on a tax that’s 15 years previous. By regulation, the IRS has 10 years from the date of evaluation to gather the steadiness in full. The date of evaluation is used as a substitute of the due date of the tax return as a result of the tax quantity due is unknown till the taxpayer recordsdata the tax return. In uncommon circumstances of recurring nonfilers, the IRS can subject substitute for returns (SFR) which acts as an alternative return with out claiming any eligible deductions. When these SFRs are filed by the IRS, that turns into the evaluation date and the 10-year time restrict begins then.
The ten-year restrict is administratively prolonged in sure circumstances, normally when the IRS is forbidden by regulation to gather. The 2 commonest circumstances are when the taxpayer recordsdata chapter and when the taxpayer recordsdata an Provide in Compromise which proposes to settle the debt for lower than they owe. When both a chapter or Provide in Compromise is filed, assortment actions are stopped till chapter is lifted or a settlement supply is rejected.
However in excessive circumstances, the federal government can prolong the 10-year assortment statute of limitations by submitting and profitable a civil lawsuit, which is what they did with the Justices. The 2009 tax was assessed on November 25, 2015, and the lawsuit was filed on November 24, 2025, in the future earlier than the gathering statute would have expired.
In recent times, the IRS has revered the 10-year statute of limitations. The IRS seldom resorts to civil lawsuits to be able to prolong the gathering time restrict. The IRS should think about resolving a debt internally, along with the financial worth of the lawsuit. If the IRS feels a lawsuit is suitable, they refer the case to the Tax Division of the Division of Justice, which additionally considers the feasibility of the lawsuit earlier than doing so.
So was this lawsuit politically motivated? The senator didn’t present particulars or proof to assist this declare.
However Sen. Justice’s public picture could have performed a component within the IRS determination. In response to the IRS Internal Revenue Manual, as soon as a choice is made to litigate, assortment personnel ought to take each effort to make sure its success. As a result of they imagine a well timed and profitable courtroom motion can have a constructive affect on voluntary compliance.
Whereas the case has been settled hours after it started, it’s unclear when the tax might be paid.
Steven Chung is a tax legal professional in Los Angeles, California. He helps folks with fundamental tax planning and resolve tax disputes. He’s additionally sympathetic to folks with massive pupil loans. He might be reached by way of e mail at [email protected]. Or you may join with him on Twitter (@stevenchung) and join with him on LinkedIn.
