- 22 -
In the case at bar, the parties calculated the underpayment
by subtracting the $5,688 overpayment (the $7,132 withholding tax
paid less the $1,444 tax liability reported on the return)
claimed on the joint return, which was not refunded to
petitioners, from the $8,225 deficiency; i.e., a $2,537 balance
of tax remaining unpaid.6
1. Respondent’s Computation
Respondent allocated $209 of the accuracy-related penalty to
petitioner. In so doing, respondent allocated $1,774 of the
refund claimed to petitioner. Respondent explained his
computation as follows:
In computing the underpayment for purposes of the
accuracy related penalty, respondent gave petitioner
Ingrid Capehart credit for a frozen refund in the
amount of $1,774.00. The frozen refund relates to
Ingrid Capehart’s Federal income tax withholdings
(prepayment credits) in the amount of $2,164.00 that
were taken from her wages, reported on the return, and
not refunded. In arriving at the $1,774.00 figure,
respondent subtracted from Ingrid Capehart’s
withholdings of $2,164.00 her allocable share of the
$1,444.00 of tax liability reported on the 1994 return.
Petitioner Ingrid Capehart’s allocable share of the
$1,444.00 tax liability reported on the 1994 return is
27 percent of $1,444.00 or $390.00 ($1,444.00 x .27 =
$4390.00). 27 percent is used because this is the
percentage of the total taxable income reported on the
return that would have been allocated to Ingrid
Capehart if the parties had filed separate returns. * *
* Accordingly, the $1,774.00 figure was arrived at as
follows:
6Essentially, the parties treat the claimed refund amount of
withholding tax as a tax collected without assessment.
Page: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NextLast modified: May 25, 2011