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IRS ENFORCEMENT

A man was being investigated by the IRS in the Department of Justice for income tax evasion. The Grand Jury issued him a subpoena to produce his account records and he refused saying that turning over the documents would violate his Fifth Amendment rights (remember Fifth Amendment, protects you from having to incriminate yourself). None the less, the Appeals Court decided that the taxpayer did in fact, have to comply with the subpoena, and turn over those records.

On a separate matter, the Tax Court determined that reliant upon tax preparation software is not a valid defense against an IRS penalty. In this particular case a taxpayer used Turbo tax to do her tax return. She made several mistakes and the IRS assessed a 20% penalty because the deficiency was more than $5,000. Her lawyers argued that she should not be liable for the penalty because she used tax software. The Tax Court was not persuaded and said no. Specifically, the Court said the errors were caused by her mistakes in putting the data in (remember the old adage with computers, garbage in and garbage out) not by a mistake in the computer software.