An interesting new tax court decision published last week echoes a common theme I’ve been covering on my Daily Tax Savings show. The court writes “While it is not necessary to show that (taxpayer) made every data entry correctly, the record offers the Court no insight as to (taxpayer’s) installation, training, or use of the software. Similarly, (taxpayer) did not establish that it took reasonable steps to foster compliance.”

The point is that small business taxpayers are not expected to be accounting, bookkeeping and software experts. We are expected to show reasonable efforts toward compliance. When a tax problem becomes known, we are expected to take reasonable steps address it. Failure to do so will trigger enforcement of nasty penalties.

When negotiating a settlement of a tax dispute, I often find that showing an attitude of reasonableness by the taxpayer is more important than any of the other facts of the case. The most significant thing I can say to help reach a favorable result in a tax problem is “This is what we are doing now this year since I came on board and am working with the company to make sure that it doesn’t happen again”.

Almost always, we fix the current year first before delving into fixing past errors. That helps get the whole problem resolved with the least amount of pain.