Tax Update Blog: Permalink

« Previous · Tax Update Blog Home · Next »

LESSONS IN RETURN FILING

June 15, 2005

Mr. Randon Scholet once took an H&R Block tax course. The Tax Court added to his tax knowledge today, but H&R Block was probably cheaper.

Mr. Scholet learned at least two valuable lessons:

LESSON #1: A LAME ASSERTION BY LETTER IS NOT A TAX RETURN.

Rather than filing a 1998 form 1040, Mr. Scholet and his wife notified the IRS by letter that:

We still sincerely believe that we are not a
person liable or required to file a 1040 U.S.
Individual Income Tax Return for 1998.

When the court determined that Mr. Scholet owed an additional $463,386 in tax for 1998, it also considered asserting a 25% failure to file penalty. Mr. Scholet said his "sincere" letter counts as a tax return, so he did file. The Tax Court explained otherwise. This lesson in the tax law comes to Mr. Scholet at a cost of $112,138.

LESSON #2: IF YOU DON'T FILE, YOU DON'T FILE JOINT

Mr. Scholet learned another unpleasant lesson: if you are married and don't file a joint return, the IRS gets to assess tax at the higher married filing separate rates. This lesson probably cost Mr. Scholet about $13,200. Expensive, yes, but a bargain compared to lesson #1.

Cite: Scholet v. Commissioner, T.C. Memo. 2005-140.

      Bookmark: del.icio.us • Digg • reddit