Blame the preparer? Wait, that’s me! I’ve tried to do plumbing myself. I have learned that it is cheaper in the not-very-long run to pay a plumber.
An insurance consultant learned a similar lesson about tax preparation in Tax Court last week. His client specialty was accountants. Whether out of thrift or because he didn’t want to be seen playing favorites, he used TurboTax. It went badly in Tax Court.
The taxpayer claimed disallowed deductions for alimony and for a net operating loss. The court determined that he reported too much Alimony, and that he whiffed entirely on the NOL. The deficiency was big enough to bring the 20% “accuracy related” penalty into play. Judge Holmes considers the issue:
The burden then swings to [the taxpayer] to show that his mistakes were reasonable and in good faith. See sec. 6664(c)(1). He cannot. He admitted during trial that he deducted items he shouldn’t have, and that he overstated certain losses. He tried to blame TurboTax for his mistakes, but “[t]ax preparation software is only as good as the information one inputs into it.” Bunney v. Commissioner, 114 T.C. 259, 267 (2000). We therefore find for the Commissioner on this issue.
While the decision doesn’t say what the penalty amount is, it is no less than $1,000, and is probably well over that. That money might have been better invested in an actual accountant who would understand what a net operating loss is.
The Moral? As it ever was, garbage in, garbage out. And cheap tax preparation is often the most expensive kind.
Cite: Bulakites, T.C. Memo. 2017-79
Kristine Tidgren, First-Time Homebuyer Savings Accounts Are Coming to Iowa (Ag Docket):
The benefit of the new law is that account holders may exclude from their Iowa adjusted gross income (AGI) yearly deposits into FTHSAs in amounts up to $2,000 a year. Married taxpayers who file a joint return may exclude up to $4,000 a year if that money is deposited into a joint account. These exclusion amounts will be adjusted yearly for inflation. Yearly interest earned on these accounts is also excluded from Iowa income. Individual account holders may not exclude from income more than $20,000 in FTHSA deposits during their lives. Although there are limits to the amount of deposits that may be excluded from an account holder’s income, there is no limit to the amount of non-tax-preferred deposits he or she may make to an FTHSA.
Let the games begin.
Robert D. Flach has a fresh Buzz roundup!
Russ Fox, Do You Need a License to Sell Bitcoins?. “Do I need a license to sell Bitcoins to a friend? The answer is likely no. But if I go into the business of selling Bitcoins the answer appears to be yes.”
TaxGrrrl, Anonymous Coinbase Users Seek To Intervene In IRS Efforts To Access Bitcoin Info
Jason Dinesen, Glossary: Non-Deductible IRA Contributions
Kay Bell, Tax audit lessons from ‘Mom’ on, of course, Mother’s Day. “You don’t see the connection? Then you missed the season finale last week of the CBS show ‘Mom.'”
Robert Wood, How IRS Audits Can Become Criminal Investigations. “Many big, messy and expensive tax disputes come down to trying to morph personal into business to get a write-off.”
Jack Townsend, New DOJ Charging and Sentencing Recommendation Guidance. “The perceived evils giving rise to the new guidance do not seem present in most tax crimes cases.” But they may apply anyway.
Carl Smith, Taxpayer Who Detrimentally Relied on IRS Erroneous Filing Information Properly Tossed from Tax Court (Procedurally Taxing)
Mike Feehan, Aetna out. Who’s still in? Anyone? Anyone? “It’s not like Aetna hasn’t been warning of doing exactly this, and for pretty much the same reasons, for months – many months, years even.”
TaxProf, Grewal: Congress Handcuffs The IRS. Quoting the University of Iowa tax law professor: “Nonetheless, the IRS may face hardships, because its funding remains significantly below its 2010 level ($13.6 billion) while its responsibilities have greatly expanded in recent years, especially because of the Affordable Care Act.”
Roberton Williams, Caught Again By The AMT (TaxVox). “I wrote a big check to the IRS last month, but that’s not what bothers me. I don’t like having to calculate my taxes twice with two sets of complex tax rules. And no matter what I do, short of getting a huge raise or quitting my job, I’m stuck on the AMT.”
Roger McEowen announces his Summer Farm Tax/Farm Estate and Business Planning Conference. If you can’t make it to Sheridan, Wyoming, the conference will be webcast.
Lew Taishoff, LEW. “CSTJ Peter (“Modesty”) Panuthos is stepping down as Boss of the small judges of the small court, effective 9/1/17. He has served for twenty-five (count ‘em, twenty-five) glorious years as Chief, out of a total of thirty-four years on the USTC bench.”
TaxProf, Higher Taxes Lead To Consistently Worse Results In MLB, NBA, NFL, And NHL. Quoting a study by Erik Hembre, University of Illinois at Chicago:
Results of the analysis [Income Taxes and Team Performance: Do They Matter?] show that higher taxes consistently predict worse performance in every league — not just the N.B.A. but also Major League Baseball, the N.H.L., and the N.F.L. over the past 20 years. The findings do not change if I use championships or finals appearances instead of regular season wins, and no single city, team or year drives the results.
Taxes matter. They aren’t everything, but they are a thing.
Peter Reilly, Mississippi Taxing – Nuclear Power And Accusations Of Racism. “After nearly thirty years, the claims of racial bias still have not gotten a hearing.”
Dylan Grundman, South Carolina’s Gas Tax Deal: Could Have Been Worse, Could Have Been Better (Tax Justice Blog). “South Carolina lawmakers this week raised the state’s gas tax for the first time in 28 years, a time period that tied for the third-longest in the nation.”
Scott Drenkard, Tom VanAntwerp, How Stable is Cigarette Tax Revenue? (Tax Policy Blog). “Across almost all states, tax rate hikes are met with a momentary bump in revenue, followed by a falloff in collections in future years.”
Annette Nellon, 10th Anniversary Blog Post. Congratulations, Annette!
Career Corner. What’s Your Job Search Plan? (Marsha Leest, Going Cconcern)
