Business Consultant Challenges Deficiency, Penalties in Tax Court

a. The Commissioner erred in determining the amount of Petitioner's business income.

b. The Commissioner erred in determining the amount of Petitioner's adjusted gross income by not taking into consideration one or more exclusion provisions and or allowing a deduction for ordinary and necessary business expenses associated with the income attributed to Petitioner.

c. The Commissioner erred in overstating Petitioner's taxable income.

d. The Commissioner erred in overstating Petitioner's income tax liability.

e. The Commissioner erred in assessing the failure to file penalty and should be required to abate the failure to file penalty based on reasonable cause.

f. The Commissioner erred in assessing the failure to pay penalty and should be required to abate the failure to file penalty based on reasonable cause.

g. The Commissioner erred in assessing the estimated tax penalty and should be required to abate the failure to file penalty based on reasonable cause.

h. The Commissioner may have erred in erroneously asserting any other changes for the Relevant Period otherwise included in the Notice of Deficiency but not enumerated within the paragraphs above.

a. Petitioner was born in Germany to a German mother and moved to the U.S. at age 4 with her mother.

b. Petitioner is a dual citizen of Germany and the U.S. and travels abroad on passports from both countries.

c. Petitioner at age 22, moved to Indonesia on a visitor visa and has recently relocated to the United Kingdom.

d. In 2016, Petitioner moved to Indonesia and resided there full-time until 2020.

e. Prior to moving to Indonesia, Petitioner was a college student and had never filed a Form 1040 or any other tax return.

f. In 2016, while living in Indonesia, Petitioner started her consulting business in 2016, which focuses on coaching women on how to set up their own online business with a focus on marketing and sales.

g. After moving to Indonesia, Petitioner was unaware that she was required to file a Form 1040 on her non-U.S. source income.

h. Petitioner incurred ordinary and necessary business expenses in carrying out her consulting business, which are deductible against her business income.

i. After learning that she was required to file a Form 1040 for income earned outside of the United States, Petitioner retained the undersigned counsel and an accounting firm roughly one year ago to prepare any and all delinquent returns as well as her 2019 and 2020 Form 1040.

j. As Petitioner did not have an accounting system and had a pending filing deadline for her 2019 Form 1040, the undersigned suggested that the accounting firm should focus on preparing the 2019 tax return and assist her in calculating 2020 estimated tax payments.

k. At all relevant times. Petitioner exercised ordinary business care and prudence; instead, Petitioner failed to recognize non-U.S. source income was taxable in the United States for the sole reason that she was a United States citizen.

L. Petitioner did not willfully neglect to timely file her 2017 Form 1040 or timely pay her U.S. tax 

m. Petitioner is entitled to an abatement of all delinquency penalties, including failure to file, failure to pay and failure to timely pay her taxes.