Paul L. Caron

Wednesday, August 26, 2009

Tax Court Rejects Taxpayer's Attempt to Use Geithner's TurboTax Defense

The Tax Court yesterday rejected a taxpayer's attempt to use the TurboTax defense successfully employed by Treasury Secretary Timothy Geithner.  Hopson v. Commissioner, T.C. Summ. Op. 2009-130 (Aug. 25, 2009) (citations omitted):

Petitioners have not met their burden of persuasion with respect to reasonable cause and good faith. Mr. Hopson admitted that he received both Forms 1099-R for the distributions and that he knew they constituted income. After using tax return preparation software for nearly 20 years, he simply filed the return that was generated by the software without reviewing it. The omission of the distributions resulted in the failure to report over 40 percent of petitioners’ total income for the year. Granted this was a one-time event, but petitioners nevertheless had a duty to review their return to ensure that all income items were included. Petitioners were not permitted to bury their heads in the sand and ignore their obligation to ensure that their tax return accurately reflected their income for 2006. In the end, reliance on tax return preparation software does not excuse petitioners’ failure to review their 2006 tax return.

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Taxpayer doesn't enter his taxable retirement plan distribution as he does his return using TurboTax. TurboTax doesn't catch the error.... [Read More]

Tracked on Aug 26, 2009 7:54:02 AM


You get rid of get rid of Geithner,end of story!

Posted by: cricket23 | Aug 28, 2009 12:31:22 AM

Geithner's not the only Obama Dem who ignores the tax code governing the rest of us. Daschle got knocked out of a staff job because he "forgot" large chunks of income. Charley Rangel "forgot" he had rental properties in the Dominican Republic. Chris Dodd did not consider a below market rate mortgage a "gift" from Countrywide Mortgage. Half of Obama's land in Chicago that his house sits on was sold to him at something like 50% of its true value by a convicted felon doing business with the State of Illinois. Yet that's not a bribe and not a gift.

It goes on and on. These guys demand equality of outcomes--except when it comes to their taxes.

People are just starting to realize that the Cook County Democrat Machine is running the country and there are different rules for them and the rest of us.

Posted by: Daniel Westerbeck | Aug 27, 2009 1:55:44 PM

Geithner clearly stated at the end of the video that he used Turbo tax, and answered that Turbo Tax didn't, to his recollection prompt him to report and pay self-employment tax on his IMF income.

I think that it's pretty clear that he used Turbo Tax as a defense against his under reporting, despite "taking full responsibility" for the problem.

Kinda reminds me of Janet Reno taking personal responsibility for the deaths at Waco, and nothing happened as a result of that "responsibility."

Posted by: Ned | Aug 27, 2009 11:20:05 AM

Hey folks, I'm as sickened as the rest of you...But, don't forget we do have some powers-vote those crooks out of office as soon as they run for re-election. Run yourself, encourage someone you know and trust. We need a whole new breed of people in our state, local and government offices. It begins with each and every one of us. I have short term memory loss issues, wonder if that would work on my taxes next year?

Posted by: SusanBennett | Aug 27, 2009 10:07:21 AM

Here's the one thing, if Geithner should not have been appointed and the excuse should have been mocked by those to whom he gave his answer.

This administration set a precedent, but that doesn't mean anything unless you want to work for Obama.

Posted by: Pam | Aug 27, 2009 9:18:23 AM

Good catch Lily! Oh my... so you mean to tell me that as head of the Department of Treasury he also oversees the IRS, the same people that are responsible for going after tax cheats. Hmmm...well I guess its an honest mistake and I am sure that the IRS is going to be more understanding and kinder if it finds similar omissions or mistakes with the general public. I mean all they have to do is point to the man at the top as an exmaple. AM I right?

Posted by: Clinton | Aug 27, 2009 8:17:17 AM

This particular guy in this case did what Geithner did.
He had income - he knew it (according to the court) and he didn't report it.
Bad idea.
Geithner did indeed initially blame it on Turbo-Tax...ergo the "Turbo-Tax Defense".
Penalties were waived in Geithner's case and God knows why!
Geithner paid what he knew was due ONLY after an audit. And then he only paid what
was due for the audited years. Not what he KNEW he owed for previous years.
He took full responsiblility for his "mistake". Obama termed it a "simple error"
Sorry - there was no mistake here. That is cheating - that is fraud.

Posted by: Chris | Aug 27, 2009 7:51:09 AM

So, he is so "careless" with his own money? Since when did the IRS accept that excuse? He could - SHOULD - be liable for the same fines, penalties and prison time the rest of us would get (and do get) if we did the same thing. Why on earth would anyone put this incompetent ignoramus in charge of trillions in taxpayer funds? In fact, in his actions since his appointment, he's proven that he is a reckless, corrupt political hack who is bankrupting (what was) the richest country in the world for the sole benefit of his rotten, bankster handlers. You put crooks like this into powerful government positions and they'll commit huge crimes. Duh. Remove him. Prosecute him. Lock him up.

Posted by: Jim | Aug 27, 2009 5:03:38 AM

Listen to you plebes, bickering amongst yourselves, while your 'withholding' is taken before you even get it. You don't get it, do you? Let me spell it out: DIVIDE AND CONQUER. And you all are playing the game as good little sheep should. And you call yourselves American, you are not. You have no concept of why our nation was founded. You are content to bicker over which slave is not 'doing their fair share'. Shameful plebiscites you are.

Posted by: Taste Reality | Aug 26, 2009 2:32:40 PM BS detector has picked you up. Geithner signed a statement saying he UNDERSTOOD that he had to pay social security taxes on his earning, not too mention his salary was "grossed up" for the tax effect. He is a tax cheat, PERIOD. You are intellectually challenged.

Posted by: mike | Aug 26, 2009 2:07:49 PM


I use TaxCut as well, and you can always print off the form before filing. There's a button that says "Forms". Select the 1040 form and print it out.

Posted by: hah | Aug 26, 2009 1:32:58 PM

"It's not as if he would be working for the IRS. he made a careless mistake for whatever reason. "

The IRS is under the Treasury Department. This puts him IN CHARGE of the IRS. Were you unaware of this or just being sarcastic?

Posted by: Lily | Aug 26, 2009 12:26:27 PM

The TurboTax defense didn't work for a somewhat more sympathetic taxpayer. In Ghazitehrani v. Commissioner, T.C. Summary Opinion 2006-170, the taxpayer neglected to include the Section 72(t) early withdrawal penalty. Curiously, Ghazitehrani's ex was administratively granted innocent spouse relief in the matter.

Posted by: Kenneth H. Ryesky | Aug 26, 2009 11:50:29 AM

So he did not pay all his taxes why should that prevent him from a job in the Obama administration. It's not as if he would be working for the IRS. he made a careless mistake for whatever reason.

Posted by: Clinton | Aug 26, 2009 11:50:25 AM

Also, I'd like everyone to remember that he was fully notified by his employer that the additional SS taxes would need to be paid by him, signed a paper stating he was aware of his obligation and even filed for and received reimbursement of the taxes due from this employer (The IMF) - but didn't pay them.

I guess this is the difference between being just smart and having Geithner-level genius.

Posted by: Lily | Aug 26, 2009 11:14:38 AM

"Geithner never blamed Turbo Tax for his careless mistakes. In fact, it was just the opposite as he took full responsibility."

He does both, actually (blamed the software, but took ultimate responsibility). But he was excused from the penalty by the IRS, if I recall correctly.

Also, he did not pay the full tax due - He did not pay the part that was past the statute of limitations.

I thought this was tone-deaf for the head of the the Dept of Treasury. He should have paid the full taxes due to set the right example.

Posted by: Lily | Aug 26, 2009 11:08:31 AM

Don't be lazy. Watch the video. Geithner doesn't blame TurboTax for making the errors on his returns. When his mis-reporting of income was discovered by an audit he paid the amount the auditor said he owed which, in my experience, would include the original tax plus penalties and interest. It doesn't sound like he received any favorable treatment from the IRS in this instance. To mis-label his statements in this video clip as the "Turbo Tax Defense" is misleading, at best.

Posted by: brian | Aug 26, 2009 10:30:50 AM

Poor sap should have made clear to the judge that he was a Democrat

Posted by: tmac | Aug 26, 2009 10:21:39 AM

"Geithner's TurboTax Defense?"

Geithner never blamed Turbo Tax for his careless mistakes.
In fact, it was just the opposite as he took full responsibility.

Nice spin, though.

Posted by: Bret | Aug 26, 2009 9:49:35 AM

I do hope that an appeal is planned. If there is a legal defense fund, I plan to contribute.

Posted by: John Galt | Aug 26, 2009 9:09:51 AM

Can’t have that. Next thing you know folks will want the same terms and conditions paying their taxes as the state receives when it owes a tax refund (Finally received my AL state tax refund, which paid 4% interest starting July 16th…).

Posted by: JoeInTheSouth | Aug 26, 2009 9:06:07 AM

Gee, since the One hasn't filled a large percentage of the executive positions in the Adminstration (including some in Treasury) this gentleman must immediately be assigned a position in the Obama gaggle in DC.

Posted by: Patriot | Aug 26, 2009 8:49:47 AM

But they'll waive any applicable fines, right?

Posted by: Brian | Aug 26, 2009 7:59:47 AM

One law for me, another one for thee.

Ah, I love the smell of corruption in the morning.

Posted by: John Steele | Aug 26, 2009 7:57:53 AM

I don't know about Turbo Tax, but when I use Tax Cut and file electronically, there is no opportunity to review the return form until after you file to print one for your records (of course you could if you wanted to), and given the interview process you wouldn't even know how to know if it was filled out properly, because the process completely insulates you from what goes where on the form.

The common sense thing here is that if he filled out his income in the program then he tried to report his income. If the program screwed that up, that is a good faith mistake. However, that isn't what happened here. What happened here is that he didn't report the 1099-R distribution to Turbo Tax, probably answering no to the question of if had any such forms to report (it is also possible that the interview didn't ask about them, but I doubt it - Tax Cut always does). It isn't Turbo Tax's fault that it didn't know about the income. If he used H&R Block or the most reputable CPA in the state, but didn't tell them about his 1099-Rs, they would have filed an inaccurate return as well.

Posted by: Nobody | Aug 26, 2009 7:57:30 AM

Silly taxpayer.

Posted by: Rulez4daLittlePeeps | Aug 26, 2009 7:56:25 AM

John Edwards was right. There are two "Americas". One for the politically connected. Another for everyone else.

Taxes are for the little people.

Posted by: Think38 | Aug 26, 2009 7:20:23 AM