- 10 - one-half of the taxable year; (2) the individual is between the ages of 25 and 65 before the close of the taxable year; and (3) the individual is not an allowable dependent claimed by another taxpayer in the same calendar year. Petitioner has met all of the above requirements. However, petitioner is subject to the limitations of the earned income credit under section 32(a)(2). Because petitioner’s income was greater than $9,230 in 1995, $9,500 in 1996, and $9,770 in 1997, petitioner is not allowed to claim the credits. See sec. 32(a)(2). Accuracy-Related Penalty The last issue for decision is whether petitioner is liable for accuracy-related penalties pursuant to section 6662(a). Section 6662(a) imposes a penalty of 20 percent of the portion of the underpayment that is attributable to negligence or disregard of rules or regulations. See sec. 6662(b)(1). Negligence is the “‘lack of due care or failure to do what a reasonable and ordinarily prudent person would do under the circumstances.’" Neely v. Commissioner, 85 T.C. 934, 947 (1985)(quoting Marcello v. Commissioner, 380 F.2d 499, 506 (5th Cir. 1967), affg. 43 T.C. 168 (1964) and T.C. Memo. 1964-299). Negligence also includes any failure by the taxpayer to keep adequate books and records or to substantiate items properly. See sec. 1.6662-3(b)(1), Income Tax Regs. The term “disregard” includes any careless, reckless, or intentional disregard. Sec. 6662(c). No penalty shall bePage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 Next
Last modified: May 25, 2011