To me it reads like a nightmare.
Brendan Bettis wanted to file his 2022 tax return. He
had worked in 2021 for several employers, including Federal Express, DoorDash
and Instacart. In April 2023 he saw a social media post recommending a tax
preparer. Bettis called the phone number.
He spoke with someone. She instructed him to provide
further information, including his W-2s, Forms 1099, social security number and
bank account information through an online portal.
He - of course - heard nothing back for months.
COMMENT: I may be betraying my age, but hiring a professional sight unseen and through a website is unacceptable. Sending confidential information is less so. Even working among CPAs, I have known practitioners which I would not personally use and which I could not refer. To be fair, though, I suspect this one was a professional as much as I am a deep-sea diver.
In April 2023 she filed a 2022 Form 1040 reflecting
Bettis’ name and social security number.
He did not know about it, much less authorize it. The
return was signed by a Ms. Victoria Jackson of Cypress, Texas. Bettis never met
her in person.
The return did show the W-2s, but then it became a
work of fiction. It showed Bettis’ occupation as “landscaping,” as well as
household wages of $21,108. The return also claimed a fuel tax credit of
$23,790 for the off-highway use of 130,000 gallons of gasoline. I presume that
is how and why “landscaping” entered the story.
At 130,000 gallons Bettis might as well have been
installing a pipeline.
I suppose he was getting a surprise tax refund.
Nope.
Ms. Jackson, or someone in her employ, wanted to
receive a “refund product.” This means that Jackson and/or her firm would
receive some/all of the refund. The refund was to be sent to a bank Bettis did
not know.
The IRS processed the return in June 2023.
It made three adjustments:
- The IRS applied $5,561 of the refund to offset Bettis’ 2015 tax liability.
- It next used $1,077 to offset his remaining 2018 tax liability.
- It then used the remainder of the refund to satisfy Bettis’ past-due child support.
Ms. Jackson – or someone in her employ – was furious. She/they
demanded that Bettis pay his tax preparation fee.
Righhttt.
Eventually the IRS figured it out. In May 2025 the IRS
sent Bettis a Notice of Deficiency for $24,780.
Which is how we got into Tax Court.
The IRS and Bettis agreed that the correct tax was
$1,263. The court case was about the difference - $23,517.
And the key was the tax definition of the word “deficiency.”
26 U.S. Code § 6211 - Definition of a deficiency
(a) In general For purposes of this title in the case of income, estate, and gift taxes imposed by subtitles A and B and excise taxes imposed by chapters 41, 42, 43, and 44 the term “deficiency” means the amount by which the tax imposed by subtitle A or B, or chapter 41, 42, 43, or 44 exceeds the excess of—
(A) the amount shown as the tax by the taxpayer upon his return, if a return was made by the taxpayer and an amount was shown as the tax by the taxpayer thereon, plus
(B) the amounts previously assessed (or collected without assessment) as a deficiency, over—
(2) the amount of rebates, as defined in subsection (b)(2), made.
(b) Rules for application of subsection (a) For purposes of this section—
(1) The tax imposed by subtitle A and the tax shown on the return shall both be determined without regard to payments on account of estimated tax, without regard to the credit under section 31, without regard to the credit under section 33, and without regard to any credits resulting from the collection of amounts assessed under section 6851 or 6852 (relating to termination assessments).
(2) The term “rebate” means so much of an abatement, credit, refund, or other repayment, as was made on the ground that the tax imposed by subtitle A or B or chapter 41, 42, 43, or 44 was less than the excess of the amount specified in subsection (a)(1) over the rebates previously made.
The IRS came in hot. The fuel tax credit was the “rebate”
referred to in Section 6211(b)(2). A rebate increases a deficiency (via the arithmetic
of 6211(a)(2). Give me my money, said the IRS.
The Tax Court was not persuaded.
The Court reasoned that – before a 6211(b)(2) argument
could be made – a Section 6211(a)(1)(A) argument must be made: the amount shown
as tax by the taxpayer on his return.
Issue: Bettis was scammed. He never filed an
authorized return. No real tax return was filed meaning no real tax was shown
by the taxpayer on his return.
The IRS could not get past Section 6211(a)(1)(A) to
get to the Section 6211(b)(2) it wanted.
The Court explained its reasoning:
- A fraudster obtains confidential information and files a false return seeking a refund to the fraudster’s bank account.
- The taxpayer has no idea. In fact, taxpayer does not even have to file a return.
- The IRS issues the refund.
- The IRS catches its mistake. It wants its money back from the defrauded taxpayer.
Nope. Can’t. What we have just described does not rise
to the level of a “deficiency” that the IRS can pursue against the taxpayer.
The Court decided that the correct deficiency was
$1,263, to which both sides had previously agreed.
Our case this time was Bettis v Commissioner, US
Tax Court, Docket No. 6560-25S, dtd 9.25.26
