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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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