IRS Interest and Penalties

[whkrueg]

Hello All,

In discussion with some new tax preparers the question came up, if a clients has to pay interest and penalties to the IRS are these deductible on a future tax return. Possibly as a business expense, if they were self employed. I'm inclined to say no. But, wanted to be 100% sure just in case.

Thanks

[veritas]

Penalties=NO

Interest for form 1040=NO (even if taxpayer is self employed)

Interest on employment or business returns=Yes

[taxea]

IRS Interest and Penalties

Just out of curiosity, what is your tax backround?

[whkrueg]

Interst & Penalties

Just out of curiosity, what is your tax backround?

I worked a couple of years for Jackson Hewitt and now I working at a small agency.

Just out of curiosity, what does it matter?

[BOB W]

I worked a couple of years for Jackson Hewitt and now I working at a small agency.

Just out of curiosity, what does it matter?

Actually it doesn't matter, but we always like to know newcomers when they come on board. Some new poster give us a little background so that we answer at a level of the new poster.

We all started at the lowest level of knowledge at some point so we understand where some basic questions come from. Not that your question was basic. We all appreciate every question posted because WE ALL learn something new everyday, regardless of who asks.

Some of our posters are way up there in tax knowledge and some of us are just average, like me. So I appreciate every question posted.

Anyway, welcome to this message board and jump in anytime to post or answer a question.

[New York Enrolled Agent]

I worked a couple of years for Jackson Hewitt and now I working at a small agency.

Just out of curiosity, what does it matter?

I concur with Bob W - it doesn't matter! Ask your questions.

Actually, Veritas gave you the correct answer but it always wasn't that way so your question was appropriate. ( I do not know all the facts of your case so for purposes of my post I'm assuming the interest and penalties resulted from a prior Schedule C issue on the taxpayers 1040). In Redlark 106 TC 31, the Tax Court found that such interest would be deductible on a Schedule C. (I believe that was in 1996). However, in 2002 , the Tax Court reversed itself in Robinson 119 TC No.4 and said that such interest was personal and could not be deducted on a Schedule C.

If you have interest in reading the case, go to the Tax Court website www.ustaxcourt.gov and do a search under the opinions tab. Put in the case name, in type of case click on regular and you should be good to go.

[taxea]

My curiosity is so I can better answer in a way that the poster will understand. His level of expertise helps me determine the detail of my response and or the resourse location that I might suggest. It also helps me to decide what questions I could ask to clarify certain information before I voice an opinion.taxea