Tax Newsletter

• Entertainment and Meals: The 50% Rule and Exceptions
  In most cases, you can deduct no more than 50% of certain unreimbursed business-related meals and entertainment expenses on your income tax return. This limit applies to employees or their employers, and to the... Read more.
• Landlords, Tax and Rental Income
  Rental income is considered any payment you receive in exchange for the use or occupation of property. For the purposes of federal income tax filings, you must include all rental income as part of your total gross... Read more.
• "Alimony" May Actually Be Considered Child Support
  Three major issues commonly resolved in a divorce decree or agreement are: alimony, or spousal support; division of property; and child support. Each has its own tax treatment and implications. In general, for federal income tax... Read more.
• U.S. Supreme Court Abandons the "Relation-Back" Rule for the Taxation of Back Wages
  The U.S. Supreme Court has ruled that awards of back wages to employees are subject to federal taxation according to the year in which the wages are actually paid, not the year in which the wages should have been paid or were actually... Read more.

• Here’s the best way to use a health savings account, which offers a triple-tax advantage
• How to sidestep a tax bomb when selling your home
• New Treasury proposal would hammer wealthy investors using clever tax strategies
• TurboTax maker will pay $141M in settlement over misleading ads for free tax-filing
• What We Know About the DeSantis-Disney Rift

Payment Failure Due to Faulty Advice

When a taxpayer fails to file a tax return or to pay a tax that is due, the IRS will impose a penalty. However, a taxpayer will be excused from paying the penalty for failure to file or pay if he or she shows that there was reasonable cause for such failure in a written statement made under penalty of perjury. Reliance on an attorney, accountant or other expert constitutes reasonable cause, and can excuse a taxpayer from having to pay the penalty.

Penalties for Failure to File a Tax Return and Failure to Pay a Tax

The penalty for failing to file a tax return is a 5% addition to the tax if the failure does not exceed one month. There will be an additional 5% penalty for each month thereafter for as long as the failure continues, up to 25% of the unpaid tax. If filing more than 60 days late, there is a minimum penalty of the lesser of $135 or the total amount of the unpaid tax.

The penalty for failing to pay a tax on or before the required date is 0.5% of the amount of the tax due if the failure does not exceed one month. There will be an additional 0.5% penalty for each month thereafter for as long as the failure continues, up to 25% of the unpaid tax.

Reliance on an Attorney or Other Expert as Reasonable Cause

An inexperienced taxpayer’s reliance on an attorney, accountant or other expert constitutes reasonable cause and can excuse the taxpayer’s failure to file or pay. For example, a husband and wife who employ a reputable accountant to prepare their joint income tax returns, giving the accountant all he needs to prepare correct returns, will not be liable for fraud penalties from incorrect deductions made by the accountant.

In order to show reasonable cause, a taxpayer must prove that he or she exercised ordinary business care and prudence and was nevertheless unable to file the tax return or pay the tax in a timely manner. Some factors used to determine whether the taxpayer exercised ordinary business care and prudence are:

• The taxpayer’s financial situation, including the amount of the taxpayer’s expenditures in relation to his or her income
• Whether the taxpayer made reasonable efforts to conserve assets to satisfy tax liability, but was nevertheless unable to pay
• The nature of the tax the taxpayer failed to pay

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