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 court docket in opposition to 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 occasion.
The criticism filed on November 24, 2025, alleges that the Justices owe $5,164,739.75 for earnings taxes from 2009 that had been assessed on November 25, 2015. In 2009, Justice offered one in every of his coal corporations to Russian coal firm Mechel for $436 million in money and shares.
Wanting on the dates might increase questions. First, if the earnings tax was from 2009, why was it assessed on November 25, 2015? Normally, the taxes are assessed when the taxpayer information their tax returns, with the earliest date being April 15 of the next yr. Some folks file extensions and file by October 15 of the next yr.
If the tax was assessed 5 years after the due date, it is actually because the tax returns had 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 widespread 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 stability in full. The date of evaluation is used as an alternative of the due date of the tax return as a result of the tax quantity due is unknown till the taxpayer information the tax return. In uncommon instances of routine nonfilers, the IRS can situation 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, often when the IRS is forbidden by regulation to gather. The 2 commonest instances are when the taxpayer information chapter and when the taxpayer information 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 instances, the federal government can prolong the 10-year assortment statute of limitations by submitting and successful 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 with a purpose to prolong the gathering time restrict. The IRS should contemplate 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 help this declare.
However Sen. Justice’s public picture might have performed a component within the IRS determination. In response to the IRS Inside Income Handbook, as soon as a call is made to litigate, assortment personnel ought to take each effort to make sure its success. As a result of they consider a well timed and profitable court docket 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 will probably be paid.
Steven Chung is a tax lawyer in Los Angeles, California. He helps folks with fundamental tax planning and resolve tax disputes. He’s additionally sympathetic to folks with massive scholar loans. He might be reached by way of electronic mail at [email protected]. Or you possibly can join with him on Twitter (@stevenchung) and join with him on LinkedIn.
