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The Freijes timely filed a joint Federal income tax return
for the 1999 taxable year (1999 return) reporting a tax due of
$12,507.05, listing withholding credits of $4,318.96, and
claiming estimated tax payments of $15,616.6 On or about May 29,
2000, respondent issued a notice to the Freijes, at the address
they entered on the 1999 return, concerning the 1999 return and
entitled “We Changed Your Estimated Tax Total--You Have An Amount
Due". The notice indicated that the 1999 return had been changed
as follows: (i) Taxable income had been increased from the
$43,531 reported to $53,399, resulting in an increase in the tax
shown as due on the return from $12,507.05 to $15,265; and (ii)
estimated tax payments had been reduced from the $15,616 reported
to $6,000. On the same date as the notice, respondent assessed
the increased tax of $15,265, without issuing a statutory notice
of deficiency to the Freijes.
On December 27, 2000, respondent sent a letter to the
Freijes with attached workpapers that explained in greater detail
the foregoing changes made to the 1999 return. With respect to
the reduction in the claimed estimated tax payments, the letter
advised that the Freijes' 1999 account showed 1999 estimated tax
payments of only $6,000, consisting of two payments of $3,000 on
6 According to the Forms 4340 in the record, the total
remittances made by the Freijes during 1999, exclusive of the
$3,000 payment submitted with the 1998 return, were $15,087.
Insofar as the record discloses, these remittances were not
designated by the Freijes for any taxable year.
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