James Clark, T. C. Memo. 2025-13, filed 2/4/25, has spent 30 (count ’em, 30) years supporting himself as a freelance writer of movie reviews and seller of movie memorabilia. For year at issue, he lumped all his earnings together, listed them as “other income” and went to an H&R Block shop to file his return.
What’s wrong with this picture? No Sched C, no Sched SE. IRS processes return, issues SND for SE and five-and-ten substantial understatement chop. James petitions timely as postmark on his mailed petition proves, but petition didn’t get to IRS for four (count ’em, four) months, too late to stop assessment. So IRS reverses assessment per Section 6213(a), and notifies Social Security Administration, which issues a letter saying no SE due. James says IRS estopped.
No, says Judge Tamara W. Ashford. If this sounds familiar to Judge Ashford, it’s because another (unrelated) Ashford (William T.) tried the same move. See my blogpost “You Might As Well Capitulate,” 9/22/22.*
SSA withdrew the SE because it hadn’t been properly assessed. But it will be back as soon as James loses this case. His writing-and-selling gigs are clearly self-employment, pass every test. Moreover, James reported the income as nonemployee compensation.
As for the chop, it’s a close call. Good faith belief and want of sophistication can offset, and James is only a high school graduate, but at day’s end he has been around the block too many times.
“At trial petitioner appeared sincere but seemed a little confused as to the tax treatment of the income he admitted receiving from freelance movie review writing and selling movie-related memorabilia in [year at issue]. To be sure, his sophistication regarding federal income tax matters is rather limited in the light of his educational background, but he has been in business for himself over 30 years and indeed he acknowledged at trial that he always just pays the penalty for failure to pay estimated tax when he files his return each year (as he did for [year at issue]). He also stated that H&R Block prepared his [year at issue] return, but that statement alone does not show that he actually relied on advice from a tax professional during the preparation process. Accordingly, we find that petitioner failed to present persuasive evidence of a cognizable effort to assess his proper tax liability or reasonable cause for the error. Because the understatement of income tax was by definition substantial, we will sustain the penalty.” T. C. Memo. 2025-13, at pp. 7-8.
Gotta wonder what training that H&R Block shop gave its line preparers.
* https://taishofflaw.com/2022/09/29/you-might-as-well-capitulate
Taishoff Law 
That’s terrible. There are so many people that I have met over the years, small business owners who literally have no idea, no clue whatsoever how their taxes work because no one at the level being described has been given training sufficient to teach their clients what to do and why to do it, and likely doesn’t have access to or cannot afford attorney sufficiently armed to fight the fight for real. The TC needs to see how real, ordinary people live their lives – get out of the ivory tower and touch grass – and then apply policy like reasonable human beings.
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Mr Briggs, I have long been an advocate for the creation of an Office for the Self-Represented at US Tax Court. So far, crickets. The Calendar Call Commandos and LITCs have been great, but apparently weren’t involved here, or petitioner chose to go it alone. What he told the paid preparer and what the paid preparer told him are not in the record, nor the qualifications of the paid preparer.
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What bothers me about this is that he is paying tax on the gross payments received from eBay, with no deduction for cost of goods sold or shipping costs. Should a judge ask a pro se petitioner whether he had any expenses, or is he stuck with the work of H&R Block?
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Mr Kamman, As we all know, petitioner has burden of proof. In a deficiency case, where a trial de novo is the rule, petitioner has the chance to raise these issues. Whether he raised them or knew to raise them is not stated, and I won’t speculate. But he seems to have stuck with whatever the paid preparer did (or didn’t do).
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