Jerry V. Rice - Page 6

                                        - 6 -                                         

          properly assess a penalty under section 6663.  An underpayment is           
          defined in section 6664(a) as the amount by which the tax imposed           
          exceeds the excess of the sum of the tax shown on the return,               
          plus amounts not so shown that were previously assessed (or                 
          collected without assessment), over the amount of rebates made.             
          In making this computation, the tax shown on the return is                  
          reduced by:                                                                 
                    (i) The amounts shown by the taxpayer on his                      
               return as credits for tax withheld under section 31                    
               (relating to tax withheld on wages) * * * over                         
                    (ii) The amounts actually withheld, * * * with                    
               respect to a taxable year before the return is filed                   
               for such taxable year.  [Sec. 1.6664-2(c)(1)(i) and                    
               (ii), Income Tax Regs.]                                                
          This regulation takes into consideration the situation in which a           
          taxpayer overstates the credit for withholding.  See also sec.              
          1.6664-2(g) Example (3), Income Tax Regs.  Accordingly, if a                
          taxpayer overstates prepayment credits, such as the credit for              
          wages withheld, the overstatement decreases the amount shown on             
          the return and increases the underpayment of tax.                           
               In this case, petitioner claimed that he had withholding               
          credits of $18,102 in 1989 and attached false Forms W-2 to                  
          substantiate this claim.  Jerry Rice, P.C., and Rice and                    
          Associates, however, made no withholding payments during 1989.              
          Applying section 1.6664-2(c)(1), Income Tax Regs., petitioner's             
          overstatement of withholding results in an underpayment of                  
          $18,102 for 1989.                                                           

Page:  Previous  1  2  3  4  5  6  7  8  Next

Last modified: May 25, 2011