Risks of Preparing Return Yourself
Think twice about preparing a complex return yourself, even if using consumer tax software to assist you. The Tax Court recently held against an oral surgeon and his wife, indicating that they were not entitled to deduct expenses for commuting between their home and the dental office. Because of a long commuting distance, the dentist occasionally stayed overnight at a hotel near the office. The surgeon's daughter, who was not experienced in preparing tax returns, helped prepare her parent's tax return using Turbo Tax software. They deducted commuting expenses on Form 1040, Schedule C of $31,662 in 2008 & $24,288 in 2009, along with travel expenses for those overnight stays. The Tax Court agreed with the IRS and approved tax deficiencies of $14,220 for 2008 and $11,688 for 2009. In addition to the tax deficiencies, penalties for substantial underpayments and negligence in the amount of $2,844 for 2008 and $2,238 for 2010 were upheld.
Bottom line is that it cost this taxpayer $5,082 in substantial underpayment & negligence penalties, plus the possibility that they will be audited in future years. This is far more than having a tax return prepared by a CPA experienced in tax matters.
Read the decision for yourself at http://tinyurl.com/mp64yly
Clare L Garner Jr CPA LLMT | 07/12/2013