An insurance consultant’s clients are currently primarily accountants. Nonetheless, he prepared his own return for tax years before he had these clients. He admitted to the Tax Court that he made a lot of mistakes when he prepared the return. He claimed payments to his former spouse were deductible. He claimed various business expenses, including interest payments, were deductible. Unfortunately, these deductions were disallowed:
Because of these errors, the IRS imposed an accuracy-related penalty for a substantial underpayment of tax. This penalty applies if the understatement of tax exceeds the greater of $5,000 or 10% of the tax required to be shown on the return. To avoid the penalty, the burden is on the taxpayer to prove that there was reasonable cause and that he acted in good faith. In this case, he said that his software—TurboTax—lured him into claiming some of the deductions (the “TurboTax defense”). The Tax Court dismissed this argument as meritless (Barry Leonard Bulakites, TC Memo 2017-79). He took deductions he shouldn’t have and overstated certain losses. He can’t blame the software, because it is only as good as the information inputted into it.
A type of medical plan combining high deductible medical insurance protection with an IRA-type savings account fund to pay unreimbursed medical expenses.