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Shortly after the new payroll system began, petitioners’
return preparer, Shannon Perez (Perez), assumed bookkeeping for
the concrete business. Perez also prepared petitioners’ 2001
Form 1040. That Form 1040 was prepared in haste in order for
petitioners to satisfy a requirement to close on a new home.
Neither petitioners nor Perez thought the 2001 return was
accurate when prepared and filed, and they anticipated its
amendment. On the Form 1040, petitioners reported approximately
$15 million in receipts and slightly more in expenses, resulting
in a net Schedule C loss of approximately $157,000.
Perez kept track of the expenses of the concrete business by
categorizing and entering those expenses into a computer
Quickbooks data file using bank statements, check stubs, and
canceled checks that petitioner provided. To prepare
petitioners’ return, Perez ran reports from the Quickbooks
database.
D. Disallowed Deductions
Petitioners’ 2001 Form 1040 was selected for audit, and
respondent, in the notice of deficiency mailed to petitioners on
August 29, 2005, determined that petitioner failed to
substantiate five categories of expenses on Schedule C:
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Last modified: November 10, 2007