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Borrelli the tax organizer he requested every year and
additionally sent all supporting documentation requested. We
find that petitioners provided Mr. Borrelli with the necessary
and accurate information to prepare their income tax returns.
Finally, we address whether petitioners relied in good faith
on Mr. Borrelli’s advice. Petitioner stated he wanted a return
preparer who would be more readily available and more responsive
to his questions. Yet he chose Mr. Borrelli, who lives in St.
Louis, Missouri, without evaluating any local northern California
alternatives.
We find that petitioners failed to perform the due diligence
that a reasonably prudent person would perform before hiring an
income tax return preparer. Petitioner did little to investigate
Mr. Borrelli’s qualifications before hiring him. Petitioner did
not determine whether Mr. Borrelli was a CPA or had relevant
education and experience.
Although petitioner may have graduated only from high
school, he has been managing a construction business generating
millions of dollars in revenues for several years, and he
personally engaged in hundreds of thousands of dollars of day
trading during the years at issue. Petitioners’ income tax
liability went from more than $40,000 a year when Ms. Irussi
prepared returns for them to essentially zero when Mr. Borrelli
prepared the returns. Yet the gross revenues from the
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Last modified: May 25, 2011