Are you accusing your tax filer for your convinced tax refund?

How a taxpayer claimed and lost in the tax court Morality: You really must bear the responsibility of your tax. Have you ever wondered if you can blame tax filers to avoid 20% penalty of IRS? Did you see a new version of "The Dog Ate My Homework" and "Devil Made Me Do It"? If your tax return is audited and you "lose", the IRS disguises a negligent fine in addition to the tax obligation very soon. Additional taxes you incur are called "missing", penalties are "penalties related to accuracy" and are imposed on 20% of the shortfall: if you pay $ 5,000 because you lost audit, The penalty is $ 1,000.

"You are caught!" You may cry. "There is enough problem to go to the tax court." A woman in California faced a penalty of $ 1,059.20. She does not want to pay taxes to a tax lawyer, [Pro Se] Before the tax court [TC Memo 2009-278]. And she lost.

what happened? She asked her longtime tax writer to prepare Form 1040 for 2005. 2005 Form SSA-1099 Social Security Benefit Statement indicating that she received $ 21,445 in 2005 Social Security Benefits However, she provides the Form 1099-DIV, dividends and distribution of 2005 to the preparation for 2005 I did not. This indicates that she received dividend income of $ 216, Form 1099 - INT, Interest Income of interest income

Now, in the words of the Tax Court, when preparing 2005 Form 1040: social security revenue 21,445 dollars, dividend 216 dollars, interest 24 dollars, we did not consider these three taxable items in the terms of the tax court ". I dropped $ 21,445, but I could not refrain from conflicts and interest income. Nonetheless, the taxpayer reported to the taxpayer the summary of the items included in the tax return, but was not returned to the taxpayer until the declaration was electronically submitted. IRS. (Tax return form preparer can not accept this)

Taxpayers were fully aware of the receipt of taxable social security benefits for the tax years 2002, 2003 and 2004. Nonetheless, she is preparing by preparing it, but when she is delivered after receiving the electronic application, she can not return it,

IRS used a document matching program to focus on unreported income, created a letter to calculate the deficit amount of $ 5,296, and imposed an accuracy-related penalty of $ 1,059.20. Linear calculation with 20% multiplied by $ 5,296. [IRC Sec. 6662 (a)].

The legal framework is as follows.

penalty
Subsection (a) of Section 6662 of the Internal Revenue Code means an accuracy related penalty of 20% of underpayment attributable to the cause specified in subsection (b).

As a cause of justifying penalty taxation,

o Significant discreet description of the income tax as defined in paragraph 6662 (d)
Substantial discreet expression is the amount of discreet expression

- [1] 10% of the taxes that need to be displayed when returning the tax year
- [2] $ 5,000.
- In this case, the shortfall is $ 5,296, which is over $ 5,000 and meets the second condition.

Penalty exception
If the taxpayer can demonstrate it, the penalty of section 6662 (a) is not imposed

o (1) Reasonable cause of underpayment and
(2) The taxpayer acted sincerely in regard to underpayment. Sec. 6664 (c) (1).

Subjective consideration
The rules promulgated under paragraph 6664 (c)

o Rational cause and sincerity decisions are made on a case-by-case basis, taking into account all relevant facts and circumstances. Sec. 1.6664-4 (b) (1), rules on income tax.
o Relying on the advice of a tax expert can prove a reasonable cause and integrity for the purpose of avoiding the penalty of section 6662 (a), but this is not necessarily so.

Naturally, the taxpayer tried to adapt her case to the above exception, relying on special facts and circumstances, advice of tax experts. Taxpayers can not achieve more than that.

The Tax Law stipulates the following three requirements for taxpayers to rely on tax specialists to avoid the responsibility of section 6662 (a) penalty.

o (1) Adviser is a competent expert with sufficient expertise to justify trust,
o (2) The taxpayer provided the advisor with necessary and accurate information.
o (3) The taxpayer relied faithfully on the judgment of the advisor in fact. "Neonatology Associates, PA v. Commissioner, 115 TC 43, 99 (2000), 299 F.3 d 221 (3 d Cir.

These requirements are also known as "prongs" in the "Trinity Test". Even if you depend on the creator or advisor unconditionally, it alone does not constitute a reasonable trust. Tax courts provide additional guidelines based on facts and circumstances. [Such guidelines are called dicta]

o Taxpayers must also exercise "diligence and discretion". Commissioner, 92 TC 958, 992-993 (1989), affd. Without public opinion 921 F.2 d 280 (9th Cir. 1991).
o "A general rule is that you can not circumvent the obligation to submit accurate returns by placing a responsibility on the agent Pritchett v. Commissioner, 63 TC 149, 174 (1974).
o Taxpayers are obliged to read the return amount so that all income items are reliably contained.

- Even if you place trust in employees who have complete information on the taxpayer's business activities, there is no reasonable reason if the investigation by the taxpayer is wrong. Metra Chem Corp. v. Commissioner, 88 TC 654, 662-663 (1987).

o "Even if all data is provided to the author, taxpayers are obligated to read the return and confirm that all income items are included Magill v.Commissioner, 70 TC 465, 479 -480 (1978), affd. 651 F.2 d 1233 (6 th 1981).

The court relying on the judgment of the preparatory judge sincerely and began to consider the third branch clause. In federal court rarely seen common sense indication, tax court,

o "We conclude that the petitioner has not relied on sincerity [the Preparer] Prepare their return correctly. The petitioner did not depend on good intentions [Preparer's] Advice since they have not examined their return before submitting to the IRS. [Emphasis added]

You have it! If you have not read the return, are not you really selling to someone?
- "Therefore, the petitioner's [The Preparer] These virtually do not determine reasonable trust and do not insist that they are not closely examining their return. "

How about Second Prong? The taxpayer must provide necessary and accurate information to the provider.

o Tax law court, "dependent defense, [Taxpayer] Not provided [Tax Preparer] Please attach the required form 1099 document on dividends and interest revenues for 2005.

- Of course, the amount is not important, with a dividend of $ 216 and interest of $ 24. But failing to pass these thieves shows thieves, taxpayers do not fill the second branch.

After reviewing the second and third issues, the tax court did not mind the first coat of arms, regardless of whether the tax advisor was a competent expert or not. It concluded that taxpayers are not showing faithful and reasonable reasons for the 2005 tax lack. Therefore, [the IRS] The petitioner (a) a decision that it is responsible for the penalty 6662 relevant to the accuracy for a practical conservative estimate of the 2005 income tax. "

That's it. A penalty of 20% will be maintained. Clearly, taxpayers were protesting the principle of fines. $ 1,059.20 is not a lot of money, it is not worth submitting a petition to listen to the affair at the tax court. We discussed this particular case as we clearly explain the principles involved in criminal proceedings and the burden of proof required by taxpayers.

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