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penalties and interest. Also on September 7, 1998, notice and
demand for payment of the 1997 income tax liability was sent to
petitioners. However, petitioners failed to pay the amount due.
Petitioners’ 1999 Federal income tax return reported tax of
$951, withholding credits of $746, and a balance due of $205. On
May 22, 2000, respondent assessed the tax reported by petitioners
in their 1999 return, along with penalties and interest. Also on
May 22, 2000, notice and demand for payment of the 1999 income
tax liability was sent to petitioners. However, petitioners
failed to pay the amount due.
In 1999, petitioners filed Form 1040X, Amended U.S.
Individual Income Tax Return, for taxable year 1990 in which they
claimed their tax liability should be reduced. Respondent
accepted the Form 1040X as filed. In other words, respondent
agreed with petitioners that their tax liability for 1990 should
be reduced to the amount reported on the Form 1040X, $3,814. As
a result, no controversy exists as to the amount of petitioners’
1990 income tax liability.
Respondent’s acceptance of the Form 1040X changed the
application of payments petitioners had previously made on their
tax liabilities. Because assessment of petitioners’ excess 1990
tax liability, related penalties, and interest was abated,
petitioners’ prior payments on the original 1990 tax liability,
penalties, and interest were credited to petitioners’ other tax
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