The Tax Court has rejected a taxpayer’s use of the so-called Geithner Defense holding that a reliance on TurboTax software does not warrant relief from IRS penalties:
We do not accept petitioners’ misuse of TurboTax, even if unintentional or accidental, as a defense to the penalties on the basis of the facts presented. … At trial Ms. Lam did not attempt to show a reasonable cause for petitioners’ underpayment of taxes. Instead, she analogized her situation to that of the Secretary of the Treasury, Timothy Geithner. Citing a Wikipedia article, Ms. Lam essentially argues that, like Secretary Geithner, she used TurboTax, resulting in mistakes on her taxes.
In short, it was not a flaw in the TurboTax software which caused petitioners’ tax deficiencies. “Tax preparation software is only as good as the information one inputs into it.” [Bunney v. Commissioner, 114 T.C. 259, 267 (2000).] Because petitioners have not “shown that any of the conceded issues were anything but the result of [their] own negligence or disregard of regulations”, they are liable for the § 6662(a) penalties.
Would I be naive to expect that the IRS will now send out a penalty notice to Treasury Secretary Geithner?
(Hat Tip: Paul Caron)
Related Posts:
- “Turbo Tax Did it:” Obama Top Financial Man Blames the Software
- Geithner Penalty Waiver Act of 2009
- Tim Geithner Lectures Americans on Tax Compliance: Right Message, Wrong Messenger
4 responses so far ↓
1 HappyTaxDude // Apr 21, 2010 at 8:32 am
Geithner’s penalty escape should have been litigated, then stare decisis might have helped.
2 Geithner Tax Defense Doesn’t Work for the Small People // Jun 23, 2010 at 7:44 am
[...] [...]
3 Joe Mastriano CPA // Oct 15, 2010 at 3:04 pm
There are a lot of false promises being made to consumers by representatives concerning the removal of interest and penalties. Many people use that as a way to justify paying representation fees.” If you can save me $20,000. of interest and penalties, I will gladly pay you $2,000.” is an example. Unfortunately, interest is hardly ever waved, and penalties are not waved nearly as often as people are led to believe.
4 Peter // Oct 18, 2010 at 10:25 am
Joe,
I agree, interest is almost never waived, but penalties often are, especially if the taxpayer has a decent record of compliance and relied on a seemingly qualified tax advisor.
You are also right that many so-called tax experts make promises they cannot deliver just to get the frightened taxpayer to hire them. it’s classic bait and switch.
Leave a Comment