Even IRS Agents Get Caught

Ignorance not allowed.

Owen S. Arnoff, Enrolled Agent

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Tax Court says you can't rely on TurboTax as a defense

AKA - "The Geitner defense." And another one.

Courtesy of The TaxProf Blog:

The Tax Court yesterday rejected the taxpayer's use of the "Geithner defense" and held that blaming TurboTax for errors on her return did not excuse her from penalties. Lam v. Commissioner, T.C. Memo. 2010-82 (Apr. 19, 2010):

Petitioners' 2004 and 2005 joint Forms 1040 ... were prepared by Ms. Lam using TurboTax. In 2004 and 2005, she reported expenses related to her real estate business as well as unrelated losses on a single Schedule C for each taxable year. Adjustments to this schedule resulted in most of petitioners' deficiencies and primarily stemmed from the fact that respondent disallowed petitioners' reported rental losses and recharacterized the trading losses as capital losses. The rental losses were disallowed under § 280A because the property was used for personal use, as her father lived in the rental property rent free. The trading losses were allowable only as capital losses and were moved to Schedule D. ...

[The IRS] claims that petitioners were negligent in the preparation of their 2004 and 2005 federal income tax returns. ... At trial respondent argued that petitioners did not seek the help of a tax professional, consult the IRS, visit the IRS' Web site, or otherwise read any instructions for filing a Schedule C and thus petitioners did not behave reasonably in filing their 2004 and 2005 tax returns.

At trial Ms. Lam repeatedly argued that petitioners consistently filled out their tax returns using TurboTax and that she consistently confused capital gains and losses with ordinary income and expenses. Although the Court concludes the errors in petitioners' tax preparation were made in good faith, petitioners have not established that they behaved in a manner consistent with that of a prudent person. Before the trial petitioners stipulated that they did not consult a tax professional or visit the IRS' Web site for instructions on filing the Schedule C.

We do not accept petitioners' misuse of TurboTax, even if unintentional or accidental, as a defense to the penalties on the basis of the facts presented. ... At trial Ms. Lam did not attempt to show a reasonable cause for petitioners' underpayment of taxes. Instead, she analogized her situation to that of the Secretary of the Treasury, Timothy Geithner. Citing a Wikipedia article, Ms. Lam essentially argues that, like Secretary Geithner, she used TurboTax, resulting in mistakes on her taxes. In short, it was not a flaw in the TurboTax software which caused petitioners' tax deficiencies. "Tax preparation software is only as good as the information one inputs into it." [Bunney v. Commissioner, 114 T.C. 259, 267 (2000).] Because petitioners have not "shown that any of the conceded issues were anything but the result of [their] own negligence or disregard of regulations", they are liable for the § 6662(a) penalties.

Owen S. Arnoff, Enrolled Agent
Admitted to Practice Before the Internal Revenue Service
http://www.betterbusinessventures.com
Sacramento Tax Consulting
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Marriage penalties exist in new health care law

So says a former DOL economist.

Owen S. Arnoff, Enrolled Agent
Admitted to Practice Before the Internal Revenue Service
http://www.betterbusinessventures.com
Sacramento Tax Consulting
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Even legislators are baffled by the new health care law...

Big surprise.

Owen S. Arnoff, Enrolled Agent
Admitted to Practice Before the Internal Revenue Service
http://www.betterbusinessventures.com
Sacramento Tax Consulting
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2010 benefits of the health care bill

There are a few to be aware of.

Owen S. Arnoff, Enrolled Agent
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http://www.betterbusinessventures.com
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Overview of long and short-term impact of health care bill

Worth a look.

Owen S. Arnoff, Enrolled Agent
Admitted to Practice Before the Internal Revenue Service
http://www.betterbusinessventures.com
Sacramento Tax Consulting
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I guess the IRS won't be enforcing the health care manddate.

Or, will they? Stay tuned.

Owen S. Arnoff, Enrolled Agent
Admitted to Practice Before the Internal Revenue Service
http://www.betterbusinessventures.com
Sacramento Tax Consulting
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Tax Funnies

Famous tax quotes. Have a nice laugh.

Owen S. Arnoff, Enrolled Agent
Admitted to Practice Before the Internal Revenue Service
http://www.betterbusinessventures.com
Sacramento Tax Consulting
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The President's Tax Return

Wanna see 'em?

Owen S. Arnoff, Enrolled Agent
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http://www.betterbusinessventures.com
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The Most Comprehensive Poll on Taxes

Interesting questions ... interesting answers.

Owen S. Arnoff, Enrolled Agent
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http://www.betterbusinessventures.com
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1 vs. 172

Yep. It takes one page to explain how to use an iPad, but 172 just to barely scratch the surface of the 1040

Owen S. Arnoff, Enrolled Agent
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http://www.betterbusinessventures.com
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Another Reason to Know the Tax Code if You Use TurboTax

The New York Times has this interesting article.

Owen S. Arnoff, Enrolled Agent
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So What's With This Tax Credit for Businesses Providing Health Insurance?

Oh, that's what it is all about!

Owen S. Arnoff, Enrolled Agent
Admitted to Practice Before the Internal Revenue Service
http://www.betterbusinessventures.com
Sacramento Tax Consulting
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