Day 4: Ottumwa! The big first week of The ISU Center for Agricultural Law and Taxation Farm and Urban Tax Schools concludes for the Day 1 teaching team of me, Kristy Maitre and Roger McEowen at Indian Hills Community College in Ottumwa, Iowa today. The Day 2 team of Paul Neiffer, Dave Repp and Patty Fulton will finish up in Red Oak this morning.
It’s been some driving this week:
If you missed us, there are still four two-day schools left. We hit Mason City next Monday; Maquoketa November 23; Denison December 7; and Ames December 14. The Ames session is available as a webinar. Register today!
Sure enough. Few of us (generally only tax preparers) double-check the income reported on our W-2s. We take the employer’s word for it. So does the IRS. That’s the lesson a Californian learned this week in Tax Court.
The taxpayer faced some extra hurdles in filing his 2010 tax returns, according to the Tax Court:
Petitioner was arrested the second week of January of 2011 and was incarcerated until June 2012. Petitioner’s motorhome and van were seized, and he lost all of his records after his arrest and incarceration.
Petitioner did not file a timely return for 2010. On April 1, 2013, the Internal Revenue Service (IRS) prepared a substitute for return for 2010 under section 6020(b). The IRS issued a notice of deficiency for 2010 dated July 8, 2013.
Considering the circumstances, you can understand the non-filing, even while realizing he still needed to. But he was nagged by doubts (my emphasis).
As indicated, petitioner conceded all of the income determined in the notice of deficiency with the exception of wage income of $3,767 from Audio Visual Projection Services, Inc., and $404 from Swank Audio Visuals, LLC. These employers issued petitioner 2010 Forms W-2 for the respective amounts. Petitioner explained that because all of his records were lost and his employers often paid him late or not at all, he does not know whether he was paid for all of the work that he performed in 2010.
It’s an interesting defense. He didn’t say he wasn’t paid; he just wasn’t sure. But the court was sure enough (citations omitted, my emphasis):
In unreported income cases, the Commissioner must base the deficiency on some substantive evidence that the taxpayer received the unreported income. If the Commissioner introduces some evidence that the taxpayer received unreported income, the burden shifts to the taxpayer. The Forms W-2 from Audio Visual Projection Services, Inc., and from Swank Audio Visuals, LLC, are sufficient evidence to shift the burden of proof to petitioner.
We also note that section 6201(d) provides that in any court proceeding, where a taxpayer asserts a reasonable dispute with respect to any item of income reported on an information return and the taxpayer has fully cooperated with the Secretary, the Secretary has the burden of producing reasonable and probative information concerning the deficiency in addition to the information on the return. The key term in the foregoing sentence is “a reasonable dispute.” This Court has concluded that a taxpayer does not raise a reasonable dispute for purposes of section 6201(d) merely by testifying that he is uncertain, cannot remember, or does not know.
Adding insult to uncertain memory, the Tax Court upheld penalties for late filing; being in jail is apparently no excuse.
TaxGrrrl bravely live-blogged the GOP debate this week. A handy place to check out what they had to say on taxes.
Kyle Pomerleau, Senator Ted Cruz’s Comment About His Border-Adjusted Tax, Explained (Tax Policy Blog).
Jenice Johnson, Candidates Tax Cuts Unequivocally Skew Toward the Wealthy (Tax Justice Blog). It’s just math. The wealthy pay pretty much all of the taxes, so they will “reap” any tax cuts.
Scott Greenberg, Carson Calls for Eliminating the Mortgage Interest and Charitable Deductions (Tax Policy Blog).
Paul Neiffer, When Will We Know Section 179 Amount?. My intrepid tax school colleague ponders the likelihood and timing of the “extender” bill for this year.
Tri-state sales tax webinar! The Iowa Department of Revenue will have a free webinar covering “Sales and Use Tax Basics” for Iowa, South Dakota and Nebraska. It’s easy to get nexus for sales tax. There are plenty of Iowa businesses that need to take care of sales taxes elsewhere.
Ying Sa, My IRS is little (IowaBiz.com). “Many immigrant-owned small businesses begin with a focus on just selling. The rest, such as an income statement, balance sheet and tax compliance, is sometimes unknown to them.”
Insureblog, Worse Insurance, Higher Cost. “The fact is, your insurance is going to get worse and you are going to pay more for it.”
Robert D. Flach, QUESTIONS ANSWERED. Robert answers a reader question on deducting state property taxes.
Russ Fox, The Real Winners of the World Series of Poker (2015 Edition). Hint: the winner’s first initial is “I.”
Janet Novack, Here’s How Congress Just Cut Social Security For Baby Boomer Couples. The end of “file and suspend.”
TaxProf, The IRS Scandal, Day 917,
Stuart Gibson, The European Predictability Paradox (Tax Analysts Blog). “Paradox will rule the European tax world, in which certainty will become uncertain and the predictability accorded by advance rulings will become entirely unpredictable.”
Renu Zaretsky, “To make money you have to spend money…” Today’s TaxVox headline roundup covers the Dell-EMC merger, international tax reform hopes, and lots more.
News from the Profession. CPAs Admit That They’re Not Good Business People (Caleb Newquist, Going Concern).