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disallowance of the employee business expense deductions. All
other expenses petitioners incurred that would be deductible as
itemized deductions, such as, for example, the tax preparation
fee for 1999, while allowable, would not exceed 2 percent of
petitioners' adjusted gross income under section 67(a). Thus,
none of the itemized deductions on Schedule A of petitioners'
returns for job expenses and other miscellaneous deductions are
deductible. Respondent, therefore, is sustained on this issue.
Petitioners contend they should be absolved of liability for
the section 6662(a) penalties because they relied on the
representations of their return preparer.
The Court is satisfied that petitioners knew that the
amounts deducted on their tax returns for charitable
contributions and employee business expenses were false. They
even asked their return preparer whether they needed
documentation to substantiate the amounts deducted, which
indicates to the Court that petitioners had reason to doubt
whether they could deduct such amounts.
Section 6662(a) provides for an accuracy-related penalty
equal to 20 percent of any portion of an underpayment of tax
required to be shown on the return that is attributable to the
taxpayer's negligence or disregard of rules or regulations. Sec.
6662(a) and (b)(1). Negligence consists of any failure to make a
reasonable attempt to comply with the provisions of the Internal
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Last modified: May 25, 2011