There was an interesting Tax Court case, Barrion v. Commissioner that was recently released. Barrion did not file his 2012 tax return. The IRS received a W-2 for $204,805 and a 1099-INT for $73.
The IRS properly filed an SFR for the taxpayer, which allowed the standard deduction and one personal exemption. The taxpayer filed in Tax Court challenging the SFR on the grounds of,
"I had a hard drive failure and lost data. I would like to file my own return for 2012."
The IRS requested the taxpayer respond to admissions of 1) having received the income, 2) having failed to file a return, 3) provide documents for any deductions, credits, and exemptions he would be entitled, and 4) show anything that he is not liable for any penalties. The taxpayer did not respond. Under Rule 90(c), that means all matters were deemed admitted.
Since the taxpayer failed to assign error in his petition that the income was not his, the income was proven to be the taxpayers. The failure to respond and support any deductions was also upheld.
This is a good case to point out to potential clients. Under competent representation, the taxpayer could have 1) avoided Tax Court all together and 2) reduced the amount of tax due through proper submissions of deductions, credits and exemptions.
Relevant Citations: TC Memo 2016-153
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