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Preparation of Petitioner’s Income Tax Returns
Petitioner engaged Thanh Nguyen (Mr. Nguyen), an enrolled
agent, to prepare her 1999, 2000, and 2001 Federal income tax
returns. Petitioner filed Forms 1040, U.S. Individual Income Tax
Return, for 1999, 2000, and 2001. Petitioner attached to each of
those returns Schedules C, Profit or Loss From Business,
reporting the following gross receipts, cost of goods sold, and
expenditures for La Belle Vie:
Gross Cost of Business
Year Receipts Goods Sold Deductions Net Profit
1999 $428,595 $63,845 $331,957 $31,933
2000 412,763 85,618 272,495 54,650
2001 466,770 38,897 338,417 88,760
Petitioner’s business records consisted of her bank
statements and canceled checks, and the parties agree that Mr.
Nguyen prepared the returns based solely on canceled checks and
statements from petitioner’s U.S. Bank accounts. Petitioner did
not inform Mr. Nguyen of her tip income at the time.
Petitioner did not report any of her tip income on her
Federal income tax returns for the years at issue. Petitioner
did not mention the tip income to Mr. Nguyen because she did not
believe that tips were taxable. Indeed, petitioner became aware
that tip income was taxable only when she was informed as such by
her attorney during preparation for the trial of this case.
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