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