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June 24, 2004

A classic Steve Martin skit has the comedian explaining how to avoid paying taxes on a million dollars: say "I forgot." The Tax Court today didn't buy a version of that defense with respect to $105,000 of salary income omitted from a return.

Michael Sullivan apparently neglected to provide his tax preparer for 2000 a W-2 for $105,000 from a new employer. The IRS caught it and assessed Mr. Sullivan $39,519 in tax and an "accuracy-related penalty" of $2,314. Mr. Sullivan tried to get the Tax Court to lift the penalty. The judge declined:

   Taxpayers have a duty to read a return and
   to make sure all items are included. (citations 
   omitted) At trial, Mr. Sullivan agreed with 
   this point. The omission of the CEMAX 
   Form W-2 resulted in petitioners' failure to 
   include almost one-third of their income on 
   their original return. Petitioners' failure to 
   carefully review their return was not 

Link: Sullivan v. Comm., T.C. Summary Opinion 2004-83

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