World Class Mergers & Acquisitions  |  For Companies $5 Million to $250 Million in Revenue

Tax Court Rules Commercial Tax Preparers Not Held To the Same Standard of Care in Protecting Individual Tax Returns

A United States District Court found a commercial tax return preparer not liable for a violation of improper disclosure.  In the case, a taxpayer alleged that her commercial tax return preparer threw her 2005 federal and state tax returns in a public dumpster where they were later found by someone else.  The returns had not been shredded.  While the taxpayer was concerned about identity theft, there was no evidence that such theft had actually taken place.  The taxpayer sued the preparer, claiming that the disclosure of information by improperly disposing of the returns was a violation of the Internal Revenue Code.  However, the Court found that a commercial return preparer is not held to the same standard under the Code regarding information disclosure as IRS employees, state employees and private persons receiving authorized disclosures from the IRS.  As a result, the preparer was not held liable.

Points of Interest

  • Without a buy-sell agreement, businesses face peril upon a triggering event such as an owner’s death, incapacitation, divorce, filing bankruptcy, desire to sell, or retire.
  • . . . if a business does not have a valid buy-sell agreement, a buy-sell agreement can be created and agreed to at any time once the business is in operation.
  • A buy-sell agreement provides for smooth transition of a business interest by identifying triggering events

By: Basi & Basi at the Center for Financial, Legal and Tax Planning for Transworld M&A Advisors