A keying error while entering data in a tax software program can excuse a penalty, according to the Tax Court says.
A filer got a Form K-1 from his mother-in-law’s estate showing a large amount of interest income. When he used a tax software program, he entered the K-1 data incorrectly and the interest did not appear on his return.
The IRS hit him with a 20% penalty for big tax understatements, but the Tax Court disagreed, saying his mistake was isolated and that he acted reasonably and in good faith. His ignorance was with the K-1 form, and the rest of his return was accurate. Also, the Court found his testimony credible
SO, we can also assume that there was a lot of tax planning on this case as well.
(Olsen, TC Summ. Op. 2011-131).