Definition — Estimating the Penalty

Dart Board

When you think of getting a penalty abated, you probably immediately think of “reasonable cause.” That’s the term for requesting relief from tax code penalties when you exercise ordinary care in complying with tax law, and your actions were not due to willful negligence.

However, reasonable cause is not a pass for escaping all penalties in the tax code.

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Decisions — Hindsight

Image source: FDA photo illustration by Michael J. Ermarth, Public domain via Wikimedia Commons

If you make a mistake on your tax return, you should file an amended return within the required time period (Treasury regulation 1.451-1(a)). That seems clear enough.

But is it? How familiar are you with amended returns?

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Definition–Innocent or Injured?

Image source: Kevin Fillips (Own work) [CC-BY-3.0 (], via Wikimedia Commons

Perry Mason was able to solve the case of the Injured Innocent. Of course, Mr. Mason never had to deal with tax law, where spouses are either innocent or injured, but generally not both.

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Definition — Loving Your Preparer

Image source: Free Picture: Palm5ID: 60278 © Yanik Chauvin Dreamstime Stock Photos

Circular 230 is the Treasury department document that governs practice before the IRS.

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Decisions–Carrying On

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In order to deduct ordinary and necessary business expenses paid or incurred during a taxable year, you must be carrying on a trade or business. That’s internal revenue code section 61(a), and it sounds deceptively simple.

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Definition — But For

blood pressure cuff

Medical expenses are an exception to the general rule that personal, living or family expenses are not deductible.

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Case — A Facade of Relief

TL Case Summ

THE QUESTION: After an exception to a penalty has been eliminated from the tax code, will it apply if the penalty results from carryover deductions from years prior to the elimination?

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Decisions – Taxes and the Constitution

Image source: National Archives of the United States [Public domain], via Wikimedia Commons

Tax protesters generally seek to support their positions by citing the US constitution, such as stating the Sixteenth Amendment was never ratified. These claims are dismantled in tax court opinions on a regular basis.

But the US constitution does have a bearing on tax cases, particularly in criminal matters.

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Definition — Joint and Several

Image source: Rev. Thomas Davidson 1856-1923 (ed.) [Public domain], via Wikimedia Commons

Joint and several liability goes along with the election to file a joint federal income tax return, which has been an option in the tax code since 1918.

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Definition — Cost of Goods Sold

Image source: Wikimedia Commons, public domain

If your business manufactures or buys products for resale, you’re probably familiar with cost of goods sold. You might even know the formula for figuring these direct expenses–

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Useful Tax Law Links

US Tax Code- Cornell University Law School Legal Information Institute. Searchable. - Office of the Law Revision Counsel. Searchable. Downloadable.

US Tax Court - TC Opinions, Memorandum Opinions, Summary Opinions. Searchable. Downloadable.

Treasury Regulations - Government Printing Office provides the Federal Tax Regulations. Searchable. Downloadable.

Other Official US Tax Guidance - US Internal Revenue Service. Searchable. Downloadable.

Useful Downloads by Taxing Lessons

Foreign Earned Income Exclusion - free PDF - Graphic of Internal Revenue Code Section 911

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