John M. and Carolyn Merritt - Page 10

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               Petitioners claim that they provided complete and timely               
          information to their C.P.A. and that it was the C.P.A. who did              
          not timely file the income tax returns.                                     
               Petitioner, a practicing lawyer, was fully capable of making           
          sure that the income tax returns for himself, his wife, and his             
          firm were completed and filed on time.  Petitioner’s alleged                
          reliance on the C.P.A. is not credible.                                     
               Petitioners are liable for the additions to tax under                  
          section 6651(a)(1) for the failure to timely file their income              
          tax returns for the years in issue.                                         

          Section 6662 Accuracy-Related Penalties                                     
               Section 6662 imposes an accuracy-related penalty of 20                 
          percent on underpayments of tax attributable to:  (1) Negligence            
          or to disregard of the rules or the regulations; and                        
          (2) substantial understatements of income tax.                              
               Section 6662(d)(1) defines “substantial understatements” as            
          the greater of:  (1) More than 10 percent of the tax required to            
          be shown on the tax return; or (2) $5,000 in the case of an                 
          individual, and $10,000 in the case of a corporation.                       
               The section 6662 accuracy-related penalty is not imposed               
          with respect to portions of underpayments of tax for which                  
          taxpayers acted with reasonable cause and in good faith.  See               
          sec. 6664(c)(1).  The decision as to whether taxpayers acted with           
          reasonable cause and in good faith depends upon all the pertinent           





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