- 3 -
On their 2001 Federal income tax return, the following
disallowances and adjustments were agreed to as a result of an
audit of petitioners’ return by respondent.
Claimed Agreed to
on return by parties
Schedule A deductions
Medical expenses $ 7,894 $ -0-
State and local taxes 11,633 1,759
Personal property taxes 1,499 246
Charitable contributions 9,946 3,625
Unreimbursed employee expenses 2,584 518
Subscriptions 854 -0-
Maintenance repairs 1,987 -0-
Gambling losses 2,307 2,307
Education credit 2,200 -0-
Petitioners testified that they, and their family and
friends, were audited only after an employee of their return
preparer reported him to the IRS. This employee purportedly knew
that Mr. Chavez was preparing returns fraudulently and allowing
taxpayers to claim deductions that were either inflated or
imaginary. The employee demanded $50,000 to keep quiet, and,
when Mr. Chavez refused to pay, the employee reported his actions
to the IRS. Petitioners believe that, because of the tip to the
IRS, anyone who made more than $40,000 and had a return prepared
at Tax Care For Less was audited by the IRS. Because the IRS
“used blackmail as a source of their information”, petitioners
contend that the audit of their 2001 Federal income tax return
was improper.
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Last modified: May 25, 2011