Tax Court Upholds Dependency Exemption Deduction

Posted on August 07, 2014

A taxpayer filed a tax return with the IRS claiming a dependency exemption deduction for a friend who lived at his home along with losses stemming from his book writing activity. Unfortunately, the taxpayer did not review his tax return when he filed it.

The IRS then disallowed the dependency exemption and the book writing losses and also assessed an accuracy-related penalty. The United States Tax Court allowed the dependency exemption for the friend who lived at the taxpayers’ home but disallowed the deductions for the losses stemming from his book writing activity.

The Tax Court also upheld the accuracy-related penalty, finding that the taxpayer had not acted in good faith because he did not review his tax return before it was filed.

We always recommend that taxpayers carefully review their tax returns before they are filed. Although a friend or an accountant may have prepared your tax return, the ultimate responsibility for the accuracy of that tax return falls upon you.

Do you have tax problems due to not reviewing you tax return resulting in unpaid liability due to the IRS?

Call us, we can help.