Opinion
Docket No. 3139-20
04-28-2021
Jeffrey B. Stankiewicz & Leslie A. Stankiewicz Petitioners v. Commissioner of Internal Revenue 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 the transcript of the trial in the above case before Judge Kathleen Kerrigan at Boise, Idaho, containing her oral Findings of Fact and Opinion renderd at the trial session at which the case was heard.
In accordance with the oral Findings of Fact and Opinion, decision shall be entered for respondent.
(Signed) Kathleen Kerrigan
Judge Bench Opinion by Judge Kathleen Kerrigan March 31, 2021
THE COURT: The Court has decided to render in this case the following as its oral findings of fact and opinion, which shall not be relied upon as precedent in any other case. This Bench Opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code (Code) and Rule 152 of the Tax Court Rules of Practice and Procedure.
Unless otherwise indicated, all section references are to Code in effect for the year in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure. All monetary amounts are rounded to the nearest dollar.
By notice of deficiency dated November 20, 2019, the Internal Revenue Service (IRS or respondent) determined a deficiency in petitioner's Federal income tax for 2017 of $6,796, a penalty of $1,359 pursuant to section 6662, and an addition to tax of $667 pursuant to section 6651(a)(2). The issues for consideration are whether petitioners received unreported taxable wages and are liable for a penalty pursuant to section 6662 and an addition to tax pursuant to section 6651(a)(2).
A remote trial of this case was conducted on March 29, 2021. Petitioner husband represented petitioners and Erik W. Nelson represented respondent. Exhibits were admitted into evidence. Petitioner husband was the only witness. We find the following facts:
FINDINGS OF FACT
Petitioners resided in Idaho when they timely filed their petition. During 2017 petitioner husband received wages of $37,680 from Outotec USA, Inc. (Outotec) and $34,650 from Brooklyn Iron Works, Inc. (Brooklyn). During 2017 he was a quality assurance manager for both Outotec and Brooklyn.
Petitioners filed a 1040 EZ, Income Tax Return for Single and Joint Filers With No Dependents. Along with the return petitioners filed two Forms 4852, Substitute for Form W-2, Wage and Tax Statement. One Form 4852 reported Federal income tax withheld of $125. These forms were filed to notify the IRS that petitioner husband received incorrect Forms W-2.
In the notice of deficiency, respondent determined a deficiency of $6,796 as a result of the unreported income and a penalty of $1,359 pursuant to section 6662. Respondent determined an addition to tax of $667 for failure to pay.
OPINION
Generally, the Commissioner's determinations in a notice of deficiency are presumed correct, and the taxpayer bears the burden of proving those determinations erroneous. Rule 142(a)(1); Welch v. Helvering, 290 U.S. 111, 115 (1933). In unreported income cases such as this, the Commissioner must establish "some evidentiary foundation" connecting the taxpayer with the income-producing activity or demonstrating that the taxpayer actually received unreported income. See Weimerskirch v. Commissioner, 596 F.2d 358, 361-362 (9th Cir. 1979), rev'g 67 T.C. 672 (1977); see also Edwards v. Commissioner, 680 F.2d 1268, 1270-1271 (9th Cir. 1982) (holding that the Commissioner's assertion of a deficiency is presumptively correct once some substantive evidence is introduced demonstrating that the taxpayer received unreported income). Petitioners do not dispute receipt of the income. They have not shown that the burden of proof should shift to respondent as to any relevant factual issue.
Gross income generally includes all income from whatever source derived, including wages. See Sec. 61(a); Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 429-430 (1955); Wilcox v. Commissioner, 848 F.2d 1007, 1008 (9th Cir. 1988), aff'g T.C. Memo. 1987-225. The United States Supreme Court has held consistently that Congress defined gross income to exert the "the full measure of its taxing power." Commissioner v. Glenshaw Glass Co., 348 U.S. at 429 (quoting Helvering v. Clifford, 309 U.S. 331, 334 (1940)).
Petitioners did not make any valid arguments that petitioner husband's wages are excludable from gross income because of any specific provision of law. See Rodriguez v. Commissioner, T.C. Memo. 2009-92. Instead, they advanced frivolous arguments that his wages are not taxable. We do not need to discuss petitioner's frivolous and groundless arguments. See Heisey v. Commissioner, T.C. Memo. 2002-41, slip op. at 4, aff'd, 59 F. App'x 233 (9th Cir. 2003). We shall not painstakingly address petitioner's assertions "with somber reasoning and copious citation of precedent; to do so might suggest that these arguments have some colorable merit." Crain v. Commissioner, 737 F.2d 1417 (5th Cir. 1984).
Respondent bears the burden of production with respect to the penalty imposed by section 6662(a). Sec. 7491(c). This burden of production includes producing evidence that respondent has complied with the procedural requirements of section 6751(b). Frost v. Commissioner, 154 T.C. 23 (2020). Respondent's Automated Underreporter program detected the deficiency. Respondent automatically imposed the penalty without managerial approval. Managerial approval is not required for automated penalties. See Walquist v. Commissioner, 152 T.C. 61 (2019).
Under section 6662 an accuracy-related penalty of 20% is imposed for either negligence or a substantial understatement of income tax. A substantial understatement of tax is an understatement which exceeds the greater of 10% of the tax required to be shown on the return or $5,000. Sec. 6662(d). The deficiency meets these threshold requirements.
Section 6651(a)(2) imposes an addition to tax if the taxpayer fails to pay his or her income tax return by the required due date, including any extension of time for filing. A taxpayer has the burden of proving that failure to pay was due to reasonable cause and not willful neglect. See sec. 6651(a). Petitioners have not argued or presented any evidence that their failure to timely pay was due to reasonable cause.
A decision will be entered for respondent. This concludes the Court's oral Findings of Fact and Opinion in this case.
(Whereupon, at 11:09 a.m., the above-entitled matter was concluded.)