…But the Tax Court does.
In a case released today, a man thinks he has some additional 1099s. He has not received copies of his statements on these accounts (they are education accounts for his children). He calls and writes his bank, and asks for copies. He calls and write his ex-spouse, asking for copies. His bank acknowledges the request, but never sends any 1099s (or statements). His ex won’t give him the time of day. He assumes there aren’t any additional 1099s and files his return.
However, the IRS examines his return and finds the “missing” 1099s. He immediately pays the additional tax, but he’s also assessed an accuracy-related penalty because the amounts were large. He goes to Tax Court and challenges the penalty.
I don’t think it’s a close case. As the Court notes,
We note at the outset that we found petitioner to be a very conscientious taxpayer. In preparing to file his 2000 return, petitioner made concerted efforts to obtain any statements and Forms 1099 pertaining to the education accounts….Moreover, petitioner specifically requested that First Albany mail him copies of the Forms 1099 pertaining to the education accounts….Petitioner never received any Forms 1099 for 2000 from First Albany pertaining to the education accounts. It was not unreasonable for petitioner to assume that there were no Forms 1099 issued….
Upon a review of the record, we find that petitioner had reasonable cause to believe that there were no Forms 1099 pertaining to him, and that he acted in good faith with respect to the understatement attributable to the income reported on those forms.
One should note, though, that the Court notes, “Although this is a close case….” The taxpayer does all that he can do and it’s close? Just a reminder of where the bar is in Tax Court.