TAX COURT OPINION

Case: Christiane Marie Adela Plante
Docket Number: 22633-12S
Judge: Nega
Opinion Type: bench
Filed: 11/21/2013
Pages: 7

UNITED STATES TAX COURT WASHINGTON, DC 20217 CHRISTINE MARIE ADELA PLANTE, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, ) ) ) ) ) Docket No. 22633-12S. ) Respondent ) ) ORDER Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy of the pages of transcript of the trial in the above case before Judge Joseph W. Nega at Washington, DC, on November 6, 2013, containing his oral findings of fact and opinion rendered at the conclusion of the trial. In accordance with the oral findings of fact and opinion, decision will be entered for petitioner. (Signed) Joseph W. Nega Judge Dated: Washington, D.C. November 21, 2013 SERVED NOV 2 2 2013 Capital Reporting Company 3 1 2 Bench Opinion by Judge Joseph W. Nega November 6, 2013 3 Christiane Marie Adela Plante v. Commissioner 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Docket No. 22633-12S THE COURT: The Court has decided to render oral findings of fact and opinion in this case. And the following represents the Court's oral findings of fact and opinion. The oral findings of fact and opinion shall not be relied upon as precedent in any other case. In this bench opinion all citations ere- to sections, unless otherwise noted, are to the Internal Revenue Code for the year at issue, and citations to rules are to the Tax Court Rules of Practices and Procedure. Christiane Marie Adel Plante is self- represented. Han Huang represents Respondent. As a result of the Internal Revenue Service exam, the IRS assessed self-employment tax for 2008 and 2009 on petitioner with regard to employment with the British Embassy at the British Consulate General in Miami, Florida. petitioner agreed with this assessment prior to Respondent issuing a Notice of 23 Deficiency. On May 17th, 2012 respondent issued a 24 Notice of Deficiency to the petitioner. In it 25 respondent determined a Section 6662(a), accuracy- 866.488.DEPO twww.CapitalReportingCompany.com Capital Reporting Company 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 related penalty of $1,632.60, $448.40 for petitioner's 2008 and 2009 tax years respectively. The only issue for decision is whether petitioner is liable for the accuracy related penalty. Section 6662(a) imposes a penalty upon any underpayment of tax required to be shown on a taxpayer's return, if among other things the underpayment is a substantial understatement, or is due to the taxpayer's negligence or disregard of rules or regulations. According to Respondent the underpayment of tax required to be shown on the petitioner's tax return for 2008 is a substantial understatement within the meaning of 6662(d) (1), and for 2008 and 2009 in the alternative is due to negligence or disregard of rules and regulations 16 within the meaning of Section 6662(b). 17 18 19 20 21 22 23 24 A substantial understatement is a failure to report at least $5,000 or more of tax. The term "negligence", as used in Section 6662(a)includes "any failure to make a reasonable attempt to comply with the provisions" of the Internal Revenue Code, Section 6662(c). The imposition of the penalty depends upon the taxpayer's intent at the time that return is filed. Respondent bears the burden of production 25 with respect to the imposition of the negligence 866.488.DEPO twww.CapitalReportingCompany.com Capital Reporting Company 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 penalty here in dispute. See Section 7491(c). For petitioner's 2008 tax year, petitioners failed to report over $5,000 of tax. Therefore, respondent has satisfied his burden of production for 2008. See Section 6662(d) (1). For petitioner's 2009 tax year, respondent instead relies only on the negligence standard to apply an accuracy-related penalty of petitioner. See section 6662(b). Under this section a taxpayer is liable for a 20 percent penalty with respect to any portion of an underpayment attributable to negligence or disregard of the rules or regulations. The term "negligence" includes any failure to make a reasonable attempt to comply with the provisions of the Internal Revenue Code and the term "disregard" includes any careless, reckless, or intentional disregard. See Section 6662(c). Respondent alleges: (1), petitioner did not consult any books, publications or any other written 20 materials when she prepared her 2008 and 2009 income 21 22 23 24 25 tax returns; (2), petitioner did not use a tax professional to prepare her 2008 and 2009 returns; (3), that, upon hiring, petitioner was informed by the British Embassy that she was responsible for her own U.S. tax obligations, and that she would not 866.488.DEPO twww.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 complete a form W-4; (4), the petitioner's annual earnings summary show no social security or Medicaid taxes were being withheld and; (5), the Petitioner's earning statements received every two weeks included a line entitled "FICA Tax Allow", and dollar amount, which contributed positively to the amount of her "take-home pay". We find that respondent has satisfied his burden of production with respect to the Section 6662 accuracy-related penalty for 2009. Section 6664, however, provides that the section 6662 penalty will not be imposed with respect to any portion of an underpayment if a taxpayer had: (1) reasonable cause for such portion of the underpayment and; (2) acted in good faith with respect to that portion of the underpayment. 16 Petitioner alleges that:(1) she made reasonable 17 18 19 20 21 22 23 24 efforts to comply with the law and honestly relied on the tax preparation software; (2) she sought from the IRS telephonic helpline;(3 the tax treatment of foreign embassy employees is confusing, and the IRS failed to provide adequate guidance and support to the taxpayer; and (4) that an IRS prepared question and answer sheet for British embassy employees was at a minimum confusing, and at most misleading. 25 Petitioner cites in support thereof, "Question and 866.488.DEPO twww.CapitalReportingCompany.com Capital Reporting Company 7 Answer 1" from that document . It reads as follows : ********************************************** (1) Are US citizens employed by foreign embassies in the United States considered to be self- employed for U.S. tax purposes? No. U.S. citizens employed in the United States by a foreign government are employees of the foreign government, they are not self-employed. However, for purposes of paying self- employment tax and getting Social Security coverage, they are treated as if they were self-employed under Internal Revenue Code Section 1402(c) (2) (C). ****************************************** The record is not clear when Petitioner actually received this IRS question and answer sheet. But presumably she would've received it near the beginning of her employment with the embassy. We find persuasive petitioner's claim that the question and answer sheet was confusing. This guidance, prepared by the IRS, contains seemingly contradictory instructions and only serve to confuse the petitioner. Her difficulty understanding this document is entirely sympathetic and dispositive to the Court. Consequently, petitioner has established reasonable cause for her underpayment of self- employment tax for 2008 and 2009. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO twww.CapitalReportingCompany.com Capital Reporting Company 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 We note that petitioner makes other arguments with which we do not agree, and we would be remiss if we did not warn petitioner that she is responsible for understanding and complying with the tax laws, whatever her unique situation and circumstances in years after the years at issue in this proceeding. We also find that the petitioner acted in good faith with regard to her self- employment income for 2008 and 2009. Petitioner has satisfied the requirements of Section 6664. Accordingly, the Court holds petitioner not liable for the Section 6662 accuracy-related penalty for 2008 and 2009. Decision will be entered for petitioner. This concludes the Court's oral findings 1S of fact and opinion in this case. 16 17 18 19 20 21 22 23 24 25 (Whereupon, at 4:08 p.m., the above- entitled matter was concluded.) 866.488.DEPO twww.CapitalReportingCompany.com