This is from a recent Tax Court opinion involving a taxpayer who omitted $169,425 of 1099-MISC income from her 2015 return. She failed to respond to the CP-2000 but when IRS sent a notice of deficiency to assess the tax along with a $12,500 negligence penalty, she tried to claim reliance on her preparer, a CPA on Long Island.   It didn’t work.

“In early January 2016 Ms. Walton began to work on her 2015 tax return. To assist her in this effort Ms. Walton turned to Douglas Milo, a certified public accountant (C.P.A.) who had prepared her tax returns for approximately 20 years. Mr. Milo has over 30 years of experience as a C.P.A., and his firm prepares approximately 1,000 tax returns per year.

“The practice of Mr. Milo's firm was, after preparation of the return but before the due date, to mail the return and an efiling authorization form, together with a self-addressed envelope, to the client. Mr. Milo's firm would request oral authorization for efiling from certain longstanding clients, with the understanding that the client would send the written authorization later. Mr. Milo obtained such oral authorization from Ms. Walton for the filing of her return, and his firm thereafter efiled it.”

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