Oops!! Preparer's Ommission Leaves Couple with $104,295 penalty!
Oh, the poor Woodsum's. They took their return to their preparer who left one measly 1099-Misc off their return and this poor couple gets stuck with a $104,295 penalty...not to mention the $521,473 tax bill that goes with it. But don't feel too bad for them. The missing 1099 was for a $3.4 million dollar transaction.
They tried to convince the Tax Court they shouldn't have to pay a penalty since they had a CPA (with 20 years experience specializing in private equity & hedge funds) prepare their return and it was his inadvertent mistake that caused the problem.
Apparently the Woodsum's didn't spend much time reviewing their return, which included 160 information returns & was 115 pages long. The court found the Woodsum's had reasonably fulfilled their duty to review their return. The Tax Court upheld the 20% penalty since the scrutiny of the return was "so casual that a half-million dollar understatement could slip between the cracks."
But I guess that can happen when you have a $4,240,927 tax bill and $34 million in taxable income. (That's 12.85% effective rate for those of you keeping score.).
Oh, the poor Woodsum's.....