Ferreira v. Commissioner; T.C. Memo. summary opinion 2001-167

Lisa Ferreira was told she had made a mistake.  When reporting wages and unemployment compensation income on her Federal income tax return, she had included her unemployment income on the Social Security line.  The IRS then adjusted her refund because the amount she had reported as "Social Security" benefits was not taxable.  End of story? Not by a long shot.

Lisa Questioned the adjustment, explaining that the amount was really unemployment compensation, but the IRS employee she spoke with assured her that the adjusted return was correct.  She was told that the refund was a final determination and that she should enjoy it.  Lisa was not convinced, though, and she called a second, then a third time.  Same answer.  Still concerned, she held on to the refund for several months thinking that the IRS would eventually ask her to return it.

All was quite for two years and then Lisa received an IRS notice of deficiency for the tax on her "unreported" unemployment compensation.  She took the issue to Tax Court arguing that the IRS claim should be invalidated since she had made a good faith effort to correctly report her income and had relied on the advice of IRS employees.  Lisa did not deny that she had received the income.  Her contention was that she had not been treated fairly by the IRS since it had facilitated the original reporting error and given her the wrong information.  The Tax Court was sympathetic to Lisa's position but ruled in favor of the IRS, indicating that advice received from the IRS employees does not have the force of law, and the Tax Court must follow the law.

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Last modified: January 30, 2017