James Joseph, Jr. - Page 3




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               Petitioner received Social Security payments of $6,491 in              
          1992 and $6,664 in 1993.1  He did not report those payments as              
          income on his returns for 1992 and 1993.                                    
          B.   Petitioner’s Return Preparation Business                               
               Petitioner has been a self-employed tax return preparer from           
          1980 through the years in issue.  He charged fees ranging from $0           
          to at least $70 per return in 1992-94.                                      
               In the years in issue, petitioner generally filed his                  
          clients’ returns by transmitting them electronically through                
          banks to respondent.  Petitioner filed paper returns for clients            
          whose electronic returns were rejected by respondent.  Petitioner           
          included his name and return preparer number on the returns he              
          prepared.                                                                   
               Taxpayers claimed refunds on 99 percent of the returns                 
          prepared by petitioner.  Petitioner arranged loans in                       
          anticipation of refunds (refund anticipation loans or RALs) for             
          taxpayers for whom he electronically filed returns.  Banks                  
          approved refund anticipation loans in the amount of a client’s              
          anticipated refund and advanced that amount to the client, less             
          fees for the bank and petitioner.  The banks paid petitioner a              
          $30 fee for each RAL.  The bank issuing the RAL also sometimes              




               1  Respondent determined that $3,246 of those payments is              
          taxable income to petitioner in 1992 and $3,342 is taxable income           
          in 1993.                                                                    




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