According to the Tax Court, a preparer’s omission of income from a return won’t excuse a penalty.
A couple had hired a preparer fill out their complex return, they gave him more than 160 information returns. The final completed return was 115 pages long and showed adjusted gross income of over $29 million.
Unfortunately, the preparer neglected to include $3.4 million of income reported on one of the 1099s. On audit, the couple disputed IRS’ assertion of the 20% penalty for large tax understatements, claiming they reasonably relied on the preparer’s advice and they acted in good faith.
The Court disagreed, saying the preparer’s clerical mistake wasn’t professional advice, and the couple should have spotted an error that large.
Ultimately individuals has responsibility for their returns and that cannot be transferred to the preparer.
(Woodsum, 136 TC No. 29)