Rethinking Free File

Today’s post is written by Frank DiPietro, LITC Director at Indiana Legal Services, Inc., and Sarah Taylor, a third-year law student at Indiana University Mauer School of Law. Frank and Sarah review the development of the Free File program and examine possible reasons for its extremely low take-up rate. As Frank and Sarah mention, the National Taxpayer Advocate’s 2018 Annual Report to Congress identifies deficits in the Free File program as the fourth most serious problem facing taxpayers.

One issue of concern to the NTA (and today’s guest bloggers) is the upselling of paid products. While the Memorandum of Understanding governing the Free File program has provisions designed to protect taxpayers from upselling, these protections are limited and they don’t apply to non-Free File preparers. To address this, the 2019 Purple Book includes a recommendation that Congress amend section 6713 so the Treasury Department could write regulations designating the “use of tax return information for certain questionable business practices or the sale of certain products with high abuse potential as civil violations without also making them criminal violations.” Christine

On January 28th, tax filing season officially began. It is estimated by the Internal Revenue Service (IRS) that over 150 million individual tax returns will be filed for tax year 2018. The majority of these tax returns could be prepared and filed electronically for free. According to the Free File, Inc., formally Free File Alliance (Alliance), an organization composed of the largest tax preparation software companies, 70% of taxpayers are eligible to prepare their tax returns and file electronically for free. However, it is estimated that only 3% of those eligible will utilize this service. This post evaluates some of the reasons the Free File program has failed to provide free online preparation and filing for the majority of taxpayers and suggests alternative approaches to addressing the tax preparation needs of the most vulnerable taxpayers.


The IRS and the Free File Alliance (members include H&R Block, Intuit, Liberty Tax) entered into a memorandum of understanding (MOU) in 2002 to allow financially eligible taxpayers to prepare and electronically file tax returns using Free File Alliance members’ tax preparation software for free. Section 2004 of the IRS Restructuring and Reform Act of 1998 (RRA ’98) mandated that the IRS develop a return-free tax system under which eligible individuals could comply with their filing obligations without preparing a tax return for all returns filed after December 31, 2007. However, in a 2003 report to Congress, the Secretary of the Treasury stressed that such a system would not be feasible without a significant increase in electronic filing and may not actually reduce administrative costs or compliance burdens for low- to middle-income taxpayers. Instead of developing the return-free system Congress envisioned, under the direction and guidance of the Department of the Treasury and the Office of Management and Budget, the IRS entered into the Free File MOU with an intention to increase access to online tax preparation software and free electronic filing options. Yet, over 15 years later, almost all eligible taxpayers still pay tax preparation and electronic filing fees, use of the Free File program is actually declining, and the Secretary of the Treasury has not implemented the return-free mandate for eligible taxpayers or continued to annually update Congress on its development as required by RRA ’98.

The reasons behind the failure of the Free File program are numerous. The National Taxpayer Advocate, Nina Olson, once described it as “a bit like living in the Wild, Wild West.” Each member of the Alliance (currently there are 12) has its own specific eligibility requirements, and eligibility may not be determinable until the return is started or nearly completed. Examples of these varying requirements include active duty military status, differing income and age eligibility requirements, foreign address filing, or required associated tax forms or schedules. Although the IRS website attempts to address this concern with its Free File Software Lookup Tool, the tool is overinclusive in that it only screens for adjusted gross income, age, state of residency, military service, and a self-assessment of whether the taxpayer is eligible for the earned income tax credit. The result is that many Schedule C filers or filers with complicated dependency issues, for instance, may inadvertently think they are eligible for a free version of a specific software when in fact they are not.

Unfortunately, the only way for many filers to discover their ineligibility is to first create an online account with the software company, begin entering their data, and then see if their situation is covered. For instance, H&R Block currently does not support free Schedule C preparation online. However, a taxpayer would not discover this ineligibility until attempting to enter 1099-MISC or other self-employment income data, which could happen well into the process of completing the return. In these situations, the current MOU with the Alliance requires the software company, at this point, to re-direct the taxpayer back to the IRS’s Free File website. Additionally, the company may offer to let the taxpayer continue if he or she agrees to pay to the proposed fee (H&R Block starts at $49.99 for a federal return). Thus, a taxpayer in this situation must determine whether he or she wants to restart the entire process or pay the fee to continue.

Another reason most taxpayers do not use the Free File program is taxpayers may simply not know it exists. Although an Alliance spokesperson stated a lack of an Alliance advertising budget is partly to blame for this awareness issue, a recently filed tax return (available through for the nonprofit organization suggests its revenue is steadily increasing. Regardless, according to terms of the MOU, it is ultimately the responsibility of the IRS to advertise and promote the program, and this advertising budget has reportedly been eliminated.

Additionally, unless taxpayers begin their search for the appropriate Free File software from the IRS’s Free File website, which is accessible through the IRS’s homepage, they may never learn of the different software options. A simple “Google” search for “free file” only reveals some advertisements by some of the providers, and the IRS’s website only appears below those advertisements. This can result in taxpayers directly choosing to visit a provider’s page without ever visiting the IRS’s Free File website. If the taxpayer has chosen a provider that he is not eligible for, he may not know there are other options with different eligibility requirements.

Moreover, if the taxpayer has not accessed the provider’s website through the IRS Free File website, he may never land on the “Member Free File Landing Page.” This is a critical step in the functioning of the program because only these “landing pages” are regulated by the MOU. Thus, a software provider may advertise its free filing option in any way it chooses, or not at all, anywhere else on its website, and it is not required to notify taxpayers that they are eligible for a free return if those taxpayers have selected a purchased version of the software.

Finally, the providers are not required to screen Free File eligible taxpayers who enter their websites via any method other than the Member Free File Landing Page. For instance, the TurboTax website offers new users the option of letting the website choose which software is best for them based on taxpayers selecting certain criteria that are applicable to them. But, by choosing the first option “I want to maximize deductions and credits,” the taxpayer is already disqualified for a “Free Edition” version of the software. Even though TurboTax is the leading software provider of taxpayers who use the Free File program, it is not obligated to offer its Free File software anywhere except the Member Free File Landing Page. As another example, Liberty Tax does not advertise its associated Free File software – esmart tax – on its online filing homepage or associated links, nor does it appear on its comparison of its online tax filing products.

It should be apparent by now that the opportunities available and utilized by Free File members to steer otherwise eligible taxpayers into paid versions of their software or other products are numerous. Past practices by these software providers have been well documented and reported, and they include the use of “value add” links promoting products such as audit protection services, refund advance loans, and refund transfer services, charging to file corresponding state returns even if a free filing option is available for that state, and failing to advertise or link to the company’s free file edition from its homepage.

The Internal Revenue Service Advisory Council’s (IRSAC) most recent report addressed some of these concerns, including “the IRS’s deficient oversight and performance standards” for the program which “put vulnerable taxpayers at risk.” The Free File MOU was revised to address some of these concerns, including how members may communicate with previous free file users and how products are advertised on the Member Free File Landing Page and within the Free File version of the member’s software. Additionally, in the most recent Annual Report to Congress, the National Taxpayer Advocate addresses the underutilization and lack of oversight of the Free File program as a “most serious problem” facing taxpayers. The report notes, “With no effective goals, measures, or budget, the IRS’s Free File program in its current format has become an ineffective relic of early efforts to increase e-filing.” It urges the IRS to develop actionable goals and increase its oversight of the program or otherwise discontinue its use.

Given calls for increased federal oversight, why do the for-profit Alliance members continue to offer versions of their tax preparation and filing software for free? In short, it keeps the IRS out of the tax preparation business. The current non-compete agreement, which extends the terms of the MOU until October 31, 2021, ensures Alliance members that if individuals wish to self-prepare and electronically file their tax returns for free, they must use Alliance software. During fiscal year 2017, this amounted to approximately 53 million self-prepared and electronically filed tax returns, of which only 2.5 million were filed for free using the Free File program. Given the fact that a significant majority of eligible free file taxpayers still pay, how can the IRS expect these for-profit companies to direct most of their paying customers towards a free version of their software? Also, the current partnership with the IRS and Alliance does nothing to address the return-free mandate of 1998.

The privatization of tax return preparation has created an industry fundamentally at odds with the objectives of the IRS. While the IRS wants citizens to file and pay the correct amount of tax, the software industry wants to generate its own revenue, which does not necessarily entail ensuring legally correct tax returns. For instance, in an evaluation of the various Free File software options, the Taxpayer Advocate Service noted a lack of consistency in the amount of assistance the software versions provide to taxpayers, which can result in filing incorrect returns. Additionally, scholars such as Jay A. Soled and Kathleen DeLaney Thomas have raised concerns with other features of the software, such as displaying the running refund total or balance due throughout the return preparation. Although the Free File program requires members to guarantee their calculations, it does not require any level of assistance to assure taxpayers are claiming legally correct tax positions. This feature of continuously displaying the refund may make taxpayers more susceptible to filing incorrectly in an attempt to game the system.

Realizing the regressive costs of tax return preparation on low- and middle-income individuals, Congress directed the IRS to develop a system that would allow eligible individuals to comply with their filing obligations without the need for preparing a return. One such system implemented in Mexico provides pre-populated tax returns to its citizens – also known as a type of tax agency reconciliation filing system – using cloud-based technology provided by Microsoft’s Azure. The results were that taxpayers were able to complete their returns often in a matter of minutes, and the revenue agency experienced an increase in overall revenue collections by as much as fifteen percent in a single year. This example calls into question whether a complete reliance on industry software and services as the “financial gatekeepers of the income tax system” is the most efficient method for the IRS to administer electronic tax return preparation and filing.

However, in its final annual report to Congress on the matter, the Secretary of the Treasury stressed the need for tax simplification as a pre-requisite to implementation of an American return-free system. The Tax Cuts and Jobs Act of 2017 is expected to significantly reduce the number of individuals who itemize their deductions. Treasury Secretary Mnuchin touted the simplification of the “postcard” sized new IRS Form 1040 for tax year 2018. Could this be the necessary simplification the IRS requires to finally implement the return-free mandate?

Meanwhile, the future of the Free File program is currently undecided. Both houses of Congress have offered vastly different options going forward. The House of Representatives passed the Taxpayer First Act on December 20, 2018 and referred it to the Senate. This bill would have codified the Free File program to guarantee its perpetuity. Alternatively, Senator Elizabeth Warren, along with 11 co-sponsors, presented a drastically different direction for tax return preparation in the Tax Filing Simplification Act of 2017. This act would have prohibited future agreements from barring the IRS from developing its own preparation software and would have provided for optional government preparation of individual tax returns for eligible taxpayers. Neither bill has been voted on in the Senate.

For now, however, the Free File program remains the only option for taxpayers to self-prepare and electronically file a free tax return. Without an advertising budget, it also remains one of the IRS’s best kept secrets. In its current form, an overwhelming majority of taxpayers who are eligible for Free File will never use it.

Counsel for Ibrahim Explain Last Week’s Important Circuit Court Opinion on Filing Status

Today’s post is written by Professor Kathryn Sedo of the University of Minnesota Law School and Frank DiPietro. Frank is a Teaching Fellow Center for New Americans / University of Minnesota Tax Clinic and recipient of the ABA Tax Section Christine A. Brunswick Public Service Fellowship for 2015-17. In Tax Court, as a student attorney, Frank tried Ibrahim v Commissioner under Professor Sedo’s supervision, and he argued the case on appeal before the 8th Circuit. Frank and Kathryn wrote about the Tax Court case here, and Carl Smith weighed in on the oral argument here. Last week, the 8th Circuit Court of Appeals issued its decision. The post explains the decision and discusses how the issue is not yet resolved, with the ball now in the IRS and DOJ’s court. Frank and Kathryn’s efforts demonstrate the importance of legal representation and show how clinics can ensure that taxpayers without resources to afford legal representation can get a fair day in court. Kudos to Kathryn and Frank for an exceptional job. Les

The question before the 8th Circuit in Isaak Ibrahim v. Commissioner was whether the term “separate return” as used in section 6013(b) is defined as return with the filing status “married, filing separately” or a tax return with any other filing status other than “married, filing jointly.” The Tax Court, following its precedent, ruled that “separate return” is defined as any filing status other than “married, filing jointly.” Ibrahim v. Comm’r, 107 T.C.M. (2014). However, the 8th Circuit held that the term “separate return” in section 6013(b) meant “married, filing separately”. This ruling is in accord with the decision in Glaze v. United States, 641 F.2d 339, 344 (5th Cir. 1981). The 8th Circuit reversed and remanded the case back to Tax Court in a 2-1 decision.

The reason why this mattered was that section 6013(b)(2)(B) prevents a taxpayer from changing the election to file a “separate return” to a joint return once the taxpayer has received notice of deficiency and filed a petition in Tax Court. Mr. Ibrahim, who was unrepresented at the time, filed as head of household (an erroneous filing status), was audited, received a notice of deficiency and filed in Tax Court. Mr. Ibrahim found himself in Appeals as a docketed case and it was then he came to the University of Minnesota Tax Clinic for assistance. If Mr. Ibrahim filed as “married, filing separately” as the IRS and (ultimately) the Tax Court insisted, he would lose the ability to claim the earned income credit for his children. Thus, after losing in Tax Court, the U of MN clinic appealed the case to the 8th Circuit.


The Ibrahim opinion states that because the term “separate return” when viewed alone is ambiguous, the Court must consider the Code as a whole and the legislative history of section 6013 to determine its meaning. In reviewing where “separate return” appears throughout the code, the Court focused on section 7703 and how it interplays with other sections of the Code including sections 1, 2, 36 and 6654. This was not surprising as during oral argument, Judge Benton (who wrote the opinion for the court) asked numerous questions to both parties concerning section 7703’s use of the term and how it related to section 6013.   Section 7703 provides for a determination of a person’s marital status and the Court stated that section 7703(b) “creates a special rule: an abandoned spouse ‘who is married,’ ‘files a separate return,’ and supports a child is considered not married.” Following this logic, the Court reasoned that “separate return” in section 7703(b) “refers to a married-filing separately return made by a taxpayer who is considered married. Conversely, head-of-household taxpayers, considered “not married,” may not make joint or separate returns.” Furthermore, the court reviewed and found in the Internal Revenue Manual as well as 28 other Code sections that the term “separate return” is defined as a taxpayer who has filed a tax return with the filing status of “married, filing separately” return.

The Court also looked at the legislative history of section 6013 as found in the Congressional Reports concerning its enactment in 1951, the Glaze court’s view of why the statute was created, and the usage of the term “separate return” by the IRS in its publications prior to its enactment as well as immediately after. The Tax Clinic strongly argued in its briefs this line of review and felt it comprised some of its strongest arguments. The 8th Circuit determined that section 6013 was created to help taxpayers avoid adverse financial consequences due to the complexity of the Code by preserving the “election” of a married taxpayer to choose the filing “married, filing jointly” after the filing of their original return with the status of “married, filing separate”. Prior to the enactment of section 6013, a taxpayer could not change their election. Consequently, the Court found that the legislative history supported the claim that “separate return” could only apply to those taxpayers who had originally filed “married, filing separately.” Furthermore, the Court referenced IRS instructions on preparing individual tax returns “in 1952 showing that ’separate return’ did not apply to those filing as “head of household.”

In one of the best parts of the opinion, the Court found that the Commissioner was incorrect when he claimed that the “head of household” status did not exist when section 6013(b)(2)(B) was enacted. In fact, the “head of household” status was first enacted at the same time that section 6013(b) was enacted.

Based on its review of the legislative history and the term’s usage in the Code as a whole, the Court held that the “separate return” as used in section 6013(b) only applies to taxpayers who have filed a tax return with the filing status of “married, filing separately.” Because Mr. Ibrahim filed his 2012 income tax return with the filing status of Head of Household, the limitations of section 6013(b)(2)(B) do not apply and he may amend his return with his correct filing status and receive the Earned Income Tax Credit.

Surprisingly, there was a strong dissenting opinion by Judge Bye in this case. Judge Bye argued that Congress created with sections 6013 and 6511 a two-step process to request a refund; “-step one is to amend to a joint return under § 6013(b)(1) and step two is then to use that joint return as the operative return to seek a credit or refund under section 6511.” Based on this logic, if section 6013(b)(1) does not apply to Head of Household taxpayers, then Ibrahim does not have the right to amend his return in compliance with section 6511. The dissenting opinion goes further in arguing that if “separate return” only applies to those with the filing status of “married, filing separately,” then the purpose of section 6013 as explained by the Glaze court is frustrated because it prevents taxpayers with the filings status “single” and “head of household” amending their returns to the filing status of “married, filing jointly.” The majority references this logic in its opinion and discounts it.

Granted, section 6013 expressly provides the married taxpayer a right to go from “married, filing separately” to “married, filing jointly.” However, the majority states that section 6013 is not required for a taxpayer to amend his returns because “section 6511(and IRS regulations) satisfy this ‘first step’ by allowing taxpayers to correct their filing status through Form 1040X.” The tax clinic agrees, but also contends that while the dissenting opinion states the reasoning for the creation of section 6013, it does not illustrate its purpose. Section 6013 was created because prior to 1951 a taxpayer with the filing status of “married, filing separately” could not amend his/her return to the filing status of “married, filing jointly.” The enactment of section 6013 allowed them to do so. As a taxpayer with the “single” or “head of household” filing status is considered non-married by the IRS, they were never prevented from amending their tax returns. Thus, there is no problem for Section 6013 to solve and it benefits and/or limitations should not apply.

The Department of Justice and the Internal Revenue Service currently have five options after this opinion. First, the IRS Office of Chief Counsel could concede the issue in the 8th circuit as it is has done in 5th and 11th circuits while maintaining its position elsewhere. Second, the IRS could concede the issue nationally so that the application of section 6013 is consistent throughout the country. Third, the Department of Justice could request an en banc review before the entire 8th Circuit which we feel is unlikely to be granted due to the persuasiveness of Judge Benton’s opinion. Fourth, the Department of Justice could request certiorari before the US Supreme Court. However, this request will most likely also not be granted as the only Federal Circuit Courts of Appeals that have ruled on this issue are in agreement despite the contrary opinions of the Tax Court. Lastly, the IRS could follow the recommendations of National Taxpayer Advocate, Nina Olson, who in her most recent annual report to Congress recommended that section 6013(b)(2)(B) be amended, and propose legislation to that effect.

We think it is unlikely that this issue has been put to rest and urge clinics in other circuits to raise the issue in appropriate cases. The Office of Chief Counsel stated in 2006 (25 years after Glaze was decided) that “We continue to disagree with the rationale and holding of Glaze, which holding is inconsistent with Tax Court cases” and “Chief Counsel attorneys with cases appealable to other circuits should look for appropriate cases to litigate that challenge Glaze.see I.R.S. Chief Counsel Notice CC-2006-010. Regardless, we are extremely happy with the result in this case and look forward to an impoverished immigrant receiving thousands of dollars in income tax refunds.


Ibrahim v Comm’r: A Procedural Trap for Unrepresented Taxpayers

[Today’s post is written by Professor Kathryn Sedo of the University of Minnesota Law School and Frank DiPietro, a third-year student attorney at the University Of Minnesota Tax Clinic. Frank litigated the case of Ibrahim v Commissioner under Professor Sedo’s supervision. The case highlights the pitfalls of unrepresented taxpayers facing IRS compliance action and in particular raises another aspect of the complexities facing taxpayers claiming the EITC. The procedural issue in the case is whether a taxpayer can change filing status to MFJ from HOH after filing a petition to Tax Court. That alone caught our attention.  The way the IRS and Tax Court are interpreting Section 6013(b)(2)(B) puts lots of pressure on taxpayers to know the procedural traps of filing a petition before fixing marital status on tax returns.  The case also raises issues about when IRS should or can refer people to tax clinics. Keith will have more to say on that in tomorrow’s post.]

On January 13, the Tax Court decided the case of Ibrahim v. Comm’r, T.C. Memo 2014-8.  The primary issue in this case was whether a taxpayer may amend his personal income tax return to change his filing status from “Head of Household” to “Married Filing Jointly” after he has received a notice of deficiency from the IRS and filed a petition in Tax Court.  The issue is complicated because the language of the applicable statute is ambiguous and there is a split between the only appellate court (the 5th circuit) that has ruled on directly on this issue and Tax Court decisions.  The result of the Tax Court’s decision in this case is to deny Mr. Ibrahim married filing jointly filing status and bar him from claiming the Earned Income Tax Credit (EITC).  He was required to file as married filing separate and allowed the claimed dependents and child tax credits.  However, instead of receiving a large refund, this decision creates a tax liability for Mr. Ibrahim.


The petitioner in this matter was Isaak Abdi Ibrahim, an immigrant from Somalia with almost no proficiency of the English language.  Mr. Ibrahim retained a tax preparer to prepare and file his 2011 tax return.  The tax preparer (who not surprisingly cannot now be found) filed returns with incorrect filing status for both Mr. Ibrahim and his wife, despite being advised by them of their marital status and living situation.   Mr. Ibrahim and his wife completely relied on the expertise and knowledge of their tax preparer when preparing their income tax returns as they cannot read English.

Mr. Ibrahim’s filing status, claimed exemptions and credits were contested by the IRS, and his Earned Income Credit frozen.  Ultimately a Notice of Deficiency was issued on October 1st, 2012 challenging his filing status, disallowing his two dependents and the child tax and earned income credits for those dependents.  Mr. Ibrahim filed a tax court petition pro se on November 16th, 2012.  Subsequently, Mr. Ibrahim was contacted by the St. Paul Appeals office of the IRS and was notified, based on the evidence provided by Mr. Ibrahim, that his filing status was incorrect but he could claim his two dependents.  The St. Paul Appeals office also referred Mr. Ibrahim to the University of Minnesota Tax Clinic for representation.

Upon review of the circumstances and consultation with our client, we determined the primary issue in that matter was whether section 6013(b)(2)(B) applies and would it prevent our client from amending his personal income tax return.  Section 6013(b)(2)(B) prevents a taxpayer from electing to file a joint return after filing a separate return once  “there has been mailed to either spouse, with respect to such taxable year, a notice of deficiency under section 6212, if the spouse, as to such notice, files a petition with the Tax Court within the time prescribed in section 6213.”  The question becomes whether filing a return with the status of “Head of Household” is considered filing a “separate return” under section 6013(b)(2)(B).

The IRS and Tax Court properly conceded that if this case was in the 5th or 11th circuits, the decision would be in our clients favor allowing him to amend his return.  The 5th Circuit ruled in Glaze v. United States, 641 F.2d 339 (5th Cir. 1981) that a “separate return” refers to only the filing status of “Married, filing separately” and not to any other election such as “Head of Household”.  Therefore, following the logic in Glaze, our client should be allowed to amend his return as he did not file a “separate return” under section 6013(b)(2)(B).  The 11th Circuit adopted all prior decisions of the Court of Appeals for the 5th Circuit in Bonner v. City of Prichard, 661 F.2d 1206 (11th Cir. 1981).

However, only the 5th Circuit has ruled directly on this issue.  The Tax Court in numerous T.C. Memo decisions has ruled against petitioners with similar filing status situations.  (See e.g., Currie v. Comm’r, T.C. Memo. 1986-71; Blumenthal v. Comm’r, T.C. Memo. 1983-737; Saniewski v. Comm’r, T.C. Memo. 1979-337; Phillips v. Comm’r, 86 T.C. 433, 439 (1986))  In addition, the IRS stated in its Action on Decision in relation to Glaze that it would decline to follow it circuits beyond the 5th (AOD 1981-140 (IRS AOD), 1981 WL 176193).

The Tax Court found for the respondent in this matter holding prior Tax Court precedent that “section 6013(b)(2)(B) bars a taxpayer who has filed a return with single or head of household filing status for a tax year and in response to a notice of deficiency for that year filed a petition with this Court from changing his filing status to married filing jointly.”  (Ibrahim at 7) In addition, the court supported its position with the rationale that “Congress enacted the predecessor statute to section 6013(b) in 1951 but did not establish a separate rate structure for married taxpayers filing separately until 1969.” The Tax Reform Act of 1969 created the separate rate structure between “single” and “married, filing separately”.  However, this separate rate structure was created to help avoid the marriage penalty.  We do not feel the addition of the “married, filing separately” tax rate relates in any way to section 6013(b).

We find this decision troubling for numerous reasons.  The IRS concedes a proper filing status if section 6013(b)(2)(B) did not apply for our client is “Married Filing Jointly”.   This filing status would allow him to claim the Earned Income Tax Credit.  Taxpayers who filed with the status of Married filing Separate cannot claim the Earned Income Credit.  However, because our client did not amend his tax return, even after a notice of deficiency was issued but prior to him filing in tax court, he is barred from this credit.  Thus unrepresented and limited English proficient taxpayers who are not aware of section 6013(b)(2)(B) fall into the trap of filing a Tax Court petition instead of amending their returns.  The Tax Court and IRS reading of section 6013(b)(2)(B) works a substantial hardship on this group of taxpayers.

We believe there has been a significant increase in the appearance of this issue after discussion with several of our colleagues.  Low-income taxpayers, especially those that cannot understand English, cannot hope to understand a complex statutory scheme such as the one at issue in this case.  These taxpayers rely on paid preparers who may not understand or choose to properly file their clients’ tax returns.  In this particular case, an unrepresented taxpayer relied on his tax preparer and upon receipt of the notice of deficiency filed a tax petition believing he was following proper procedure.  In trying to follow proper IRS and Tax Court procedures, he prevented himself from obtaining those very refunds he was trying to protect.

We will be speaking with our client in the near future to determine our next course of action.  This may include an appeal to the 8th circuit.  As the 8th circuit has not directly ruled on this issue, we hope to obtain a more favorable result if we appeal.