Odd Reason To Be In Tax Court

 

Not all accountants practice tax.

To the contrary, I suspect most accountants do not. The confusion, I suspect, has to do with the CPA license. One associates the license with practicing at a CPA firm, but that is not necessarily true. Most accountants do not practice at a firm, and just practicing at a firm does not mean that one works tax. I have worked with a firm my entire career, and there have been many CPAs – auditors, forensics, valuation experts and so on – who have little crossover with tax. Step outside a firm – say internal audit or accounting at a corporate employer – and those numbers only increase.

I am looking at a pro se case in the Tax Court.

We have discussed pro se many times. It is commonly described as a taxpayer representing himself/herself before the Court. That technically is not true. A taxpayer can have professional representation and still be considered pro se. What it means is that the representative does not have a license to independently practice before the Court. The representative can act as an agent, advocating for and advising a taxpayer, but without that license the taxpayer is still considered pro se.

That license requires one to pass an exam, and the Tax Court exam is commonly considered one of the more challenging exams in tax practice. The exam BTW is not about tax law; rather it is about rules and procedures at the Tax Court. I have been involved in this area for decades, and I admit that those rules and procedures can be a bit … arcane.

Eva Zaczek finds herself in Tax Court. There is only one issue: how much does she owe? The answer in turn depends on how much of her Affordable Care (that is, Obamacare) subsidy was overpaid and now has to be returned. The concept is straightforward: make little money and the subsidy might fully pay for the premiums; make too much money and there is no subsidy at all. The rub is that someone is applying for the subsidy early in the tax year, before knowing what income for the year will be. Take a promotion or job change or marriage – or just ignore the too-much-income issue altogether - and the numbers can swing hard.

The IRS sent Eva a Notice of Deficiency for $2,418.

COMMENT: Eva sent a handwritten tax return, and the IRS made mistakes reading her writing.  

To its credit, the IRS admitted its mistake and revised the balance due to $900.

Eva challenged the calculation.

The rub was line 11 of Form 8962 Premium Tax Credit.

Both Eva and the IRS agreed that the number in box 11(b) should be $7,294.

This box represents the maximum premium that can be subsidized.

Both agreed that box 11(c) should be $9,057.

This amount represents the amount of premium the taxpayer is expected to pay himself/herself, without subsidy.

Eva calculated box 11(d) as $1,763 ($9,057 - $7,294).

Eva got the numbers reversed. Box 11(d) should be minus $1,763 ($7,294 - $9,057).

So?

If you read the instructions, box 11(d) cannot go below zero ($-0-).

Eva was convinced she owed the IRS $1,763.

The IRS said no, no: you only owe us $900.

And Eva was in Court arguing that she owed the $1,763 and not the $900 the IRS was seeking.

Here is the Court:

      

I will spare both of us the difference in tax law between a “deficiency” and a “balance due,” other than to point out the IRS notice that got Eva into Tax Court is called a Notice of Deficiency.

Pro se cases have a reputation for being entertaining, and we have looked at a number of them over the years.

But to go to Tax Court to argue that one owes more than the IRS wants? And this action from an accountant?

I consider this to be shade: 

I truly, truly hope that Eva doesn’t practice anywhere near a tax return.

This time we talked about Eva Zaczek v Commissioner, docket 4667-25S, filed 7/15/26.

What If The IRS Changes Mailing Addresses?

 

I am looking at case filings in the Tax Court electronic filing system.

Not mine, thankfully.

It reminds me of something.

Tax CPAs (likely) use professional preparation software. Over the years I have used several myself. Recent years have introduced the “suites,” whereby preparation software is bundled with other software (research, time and billing, practice management, yada yada). It makes it almost impossible to change, as one then has to change almost all practice software and also learn a new suite It is a monumental pain.

The preparation software has updates, of course. Sometimes I would see a prior year updating, beggaring the question: why? Why is the 2021 preparation software updating in 2025, for example?

Let talk about Boparai. As I write this, there have been 40 back-and-forth filings with the IRS, with the first one starting last spring (May 27, 2025). Rosie Boparai recently lost a motion, and this case will not go to trial.

Rosie extended her 2019 tax return from April 15, 2020 to October 15, 2020.

Rosie did not file a return, however.

Three years later (on July 17, 2023) she appeared in person at the Sacramento Taxpayer Assistance Center and attempted to hand-deliver her 2019 tax return. The TAC employees refused to accept her return, however, because she had not made an appointment.

COMMENT: I have a serious problem here. I can see if someone has a tax issue that needs research and investigation, but Rosie was just dropping off a paper return. Someone could have stamped it received and put it into the processing pipe. Is it unconventional? Yes, but so what? A taxpayer tried to comply.

Facing failure at the TAC, Rosie put the return in the mail. The return showed a refund, but she included a check for $10,000. Rosie was figuring that – sending money and simultaneously requesting a refund – someone would pay attention to her return.

NOTE: Consider the calendar here. The return was due April 15, 2020. It was extended until October 15, 2020. She put it in the mail July 17, 2023. As long as that extension was valid, Rosie is within the three-year statute of limitations for her 2019 refund.

Rosie mailed that return to San Francisco.

An average person would say she filed. A bit late, yes, but still within the rules.

Problem: the IRS closed its Fresno and San Francisco mailing addresses by the end of 2021. 

This would not have been a problem had she filed her 2019 return on time. 

The post office marked the envelope as undeliverable. Rosie asserted she never received the returned mail.

The IRS issued a NOD in February 2025.

Rosie filed a petition in Tax Court.

She also filed (or refiled, possibly) her 2019 return in May 2025.

The IRS agreed that Rosie did not owe money. The IRS however had no intention of refunding her 2019 overpayment. You know why: the return was filed outside the three-year statute of limitations.

Rosie was in Tax Court fighting to have her July 17, 2023 TAC visit/mailing to San Francisco count as filing her return.

Here is Reg 301.7502-1(c)(1):

That “properly addressed to the agency, officer, or office” language was brutal to Rosie.

A return filed in 2023 (yes, that would include a 2019 return filed in 2023) should have gone to Ogden, Utah or Cincinnati, Ohio.

Not San Francisco.

The return was not “properly addressed.”

July 17, 2023 did not count.

Which meant that Rosie had not filed her return within the three-year window. There would be no refund.

My thoughts?

The Court was right.

A lot of tax is procedural: correct form, correct date, address and so on. Rosie missed a step.

I also see Rosie being denied at the TAC as IRS negligence, impeding her attempt to comply and causing her irreparable harm.

My argument is one of equity. The Tax Court is not a court of equity, however; it is a court of law. A court of equity can … bend … the law a smidge to get to fairness. The Tax Court does not have this wiggle room. It has to follow the rules.

I expect cases like this to go away with electronic filing. Oh, I suppose there might be the oddball case here or there where the software glitches, but that should be rare.

And there is a reason why I see my preparation software updating several years after the fact.

Today we looked at the DAWSON filings for Boparai v Commissioner, Docket No. 7789-25.

A CPA Takes Tax Advice

 

The facts are not difficult. In fact, they are rather straightforward.

What puzzles me is the player:

Mr. Igboke has been a certified public accountant for more than 30 years and regularly prepares tax returns for his clients. He knows how the federal income tax rules work ….”

I get it: not all CPAs do taxes. Some do taxes, but so few and infrequent as to not count. I used to work with a CPA - since retired - who was a career auditor. He could run circles around me when it came to reports and disclosures and such. He however prepared two returns a year, and his personal return was one of them. He had me review the other.

Mr. Igboke prepared taxes, we are told.

Let’s go through it.

Mr. and Mrs. Igboke (Igboke) lived in Long Beach, California. In 2003 they borrowed from Bank of America. They ran into financial issues not long after, and in 2006 their loan somehow wound up with Select Portfolio Servicing (SPS).

In 2020 Igboke refinanced with a credit union; the mortgage servicing was done by Cenlar.

Let’s go forward one year.

Igboke claimed a mortgage interest deduction of $47,119 on his joint 2021 individual tax return.

Problem: Cenlar issued a Form 1098 for $18,411.

Not the hardest thing for IRS computers to match.

The IRS sent notices. Back and forth they went, to no avail. In 2024 the IRS issued a Notice of Deficiency (called a NOD or sometimes SNOD).

Igboke filed with the Tax Court.

A 30-year CPA with some tax experience. I have no idea if this was his first time in Tax Court, but I am nonetheless expecting a ball with some movement over the plate.

Igboke provided the Court with:

(1)  A “substitute” 2021 Form 1098 from SPS

(2)  An explanatory letter from SPS

Wait, I thought SPS was paid-off in 2020?

Here is the Court on the 1098:

It states in box 1 that Mr. and Mrs. Igboke paid $71,618 of mortgage interest in 2021 …”

Here is the Court on the letter:

Dear Henry Igboke: SPS is in receipt of your recent request for information about the account. Our records show that for calendar year 2021, you paid a total mortgage interest of $31,635.”

I admit: I am not following the numbers:

(1)  The unexplained mortgage interest on the 2021 return was $28,708 ($47,119 – 18,411).

(2)  Then we have a $71,618.

(3)  And next we have a $31,635.

These numbers are parachuting from the sky.

The Court looked closely at the 2021 Form 1098.

All the numbers on the purported 2021 form are identical to those from 2020, including the interest paid and loan balance. But, on the purported 2021 form, the year 2020 has been replaced with 2021, and there appear to be irregular photocopier markings around the year.”

Oh oh.

The Court looked at the SPS letter:

… SPS’s recordkeeper could not find copies of either document in SPS’s records.”

As Ricky would say: someone has some explainin’ to do.

Igboke admitted he had no outstanding loan with SPS and paid no interest in 2021.

Nahhhh, really?

Igboke asserted that SPS sent the Form 1099 because they were unable to deduct the full $71,618 of interest paid in 2020.

QUESTION: How would SPS know this?

SPS told him that he could carry over some portion of that undeducted interest from 2020 to 2021.

COMMENT: And who does he get his medical advice from: Tik Tok?    

Folks, the rules for deducting interest expense can get complicated.

It helps to categorize the interest: investment interest is deducted this way; mortgage interest that way, and vehicle loan interest yet another way. It gives some order to the rules.

Some interest can carry over from year to year. Most interest cannot. You know which interest cannot?

Mortgage interest cannot.

It has been that way since before I heard of accounting.

Here is the 2013 Smoker tax case:

It is well settled that a cash basis taxpayer … is allowed a deduction for interest paid during the year in cash or its equivalent.”

In other words: show me the money.

Back to the Court:

We do not credit Mr. Igboke’s explanation.”

… the discrepancies noted above strongly suggest that these documents are not authentic and were created for the purposes of supporting the Igboke’s claimed deduction.”

This could have gone much worse.

I would have expected heightened penalties for a 30-year CPA.

Maybe a visit from the IRS Office of Professional Responsibility.

Or contact from the California State Board of Responsibility.

Worst case: all of the above.

Igboke lost the deduction, of course, but he may have been lucky to even survive this.

Our case this time was Igboke v Commissioner, T.C. Docket 12275-24, dtd 6.3.26.