Tuesday, January 21, 2003
"The cobbler's children go without shoes." The existence of this proverb is no excuse. James Joseph, Jr. was a tax preparer who made some money from tax return preparation fees, and even more money in kickbacks from the banks through which he arranged Refund Anticipation Loans for his "clients". (The case does not mention this, by the way, but the vast majority of his "clients" were poor. Rich people owe taxes. Only poor people pay usury rates for loans based on refunds of money that they loaned to the government interest-free.) He failed to keep records of his earnings in 1992, 1993, and 1994, and failed to timely file his 1992 and 1993 tax returns. When contacted by the IRS, he claimed to have prepared fewer than 395 returns for each of the years in question. IRS computers, however, showed that his preparer number was on over 700 returns each year. Tax Court determined Mr. Joseph's liability based on the IRS's data and research, although they did not accept the IRS's calculations and made their own.
Mr. Joseph claimed his Social Security payments for the years in question were not taxable because they were disability benefits. No, disability benefits are as taxable as any other Social Security benefits.
As to a failure to file penalty: "... petitioner contends that he filed his returns late because he was ill. We disagree. Petitioner was well enough to prepare and file hundreds of tax returns for each of the years in issue." Ouch.
Finally, Mr. Joseph failed to address the accuracy-related penalty in his brief, and Tax Court therefore considered it conceded.