IRS Plan to Flag Return Errors Could Impede Taxpayer Rights

Law360 included Kevin Otero's commentary in an article about The Internal Revenue Service's proposal to send notifications to taxpayers and tax professionals when returns are filed about errors and missed credits or deductions, a plan that could have the unintended consequence of hindering taxpayer rights.

Further details will be needed from the agency on its decision-making process for accepting or rejecting returns under the new initiative, Kevin said. The need for guidance from the agency on what returns will be accepted under the error-flagging initiative can be shown by a 2020 decision by the Tax Court in a case known as Fowler v. Commissioner, Kevin stated. In that case, the Tax Court barred the IRS from proceeding with a deficiency notice against a Florida man who filed a return that met the Beard test.

"Given a case like Fowler, where the Tax Court found the rejection of returns that met the Beard requirements as improper," Kevin said, "it would be helpful for taxpayers and tax professionals to have guidance with examples of what constitutes substantial compliance to clarify the standard the IRS will employ in the acceptance vs. rejection decision."