Corporations’ Return Signer Was Not Person Other than the Taxpayer; Accuracy-Related Penalty Imposed on Related Corporate Groups for Several Years (Seven W. Enterprises, Inc. & Subsidiaries, TC)

Two closely held corporate groups were subject to the accuracy-related penalty for several years. The individual who prepared and signed the returns was an employee for the two groups for all but one year. He incorrectly characterized some corporate income and concluded that the corporations were not subject to the personal holding company tax resulting in a substantial underpayment of tax.

The corporate groups contended that they relied on their employee who was a competent tax advisor. The employee acted as both the vice president and the taxpayer; therefore, he did not qualify as a person other than the taxpayer with respect to the returns he signed on behalf of the corporate groups. One group was not liable for the accuracy-related penalty during the time the individual was not an employee. He had resigned from the company and, pursuant to an agreement, he provided the corporate groups with consulting services concerning tax matters and he was not subject to the corporation’s direction or supervision. The group, thus, could claim that it had reasonable cause for the underpayments.

Seven W. Enterprises, Inc. & Subsidiaries, 136 TC –, No. 26, Dec. 58,650

Other References:

Code Sec. 6662

CCH Reference – 2011FED ¶39,651D.55

Tax Research Consultant

CCH Reference – TRC PENALTY: 3,100

CCH Reference – TRC PENALTY: 3,116

AUTHOR

Wolters Kluwer Tax and Accounting

Wolters Kluwer Tax and Accounting is a leading provider of software solutions and local expertise that helps tax, accounting, and audit professionals research and navigate complex regulations, comply with legislation, manage their businesses and advise clients with speed, accuracy and efficiency. Wolters Kluwer Tax and Accounting is part of Wolters Kluwer N.V. (AEX: WKL), a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services. Wolters Kluwer reported 2016 annual revenues of €4.3 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,000 people worldwide. Wolters Kluwer shares are listed on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Wolters Kluwer has a sponsored Level 1 American Depositary Receipt program. The ADRs are traded on the over-the-counter market in the U.S. (WTKWY).

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