THE EVERETT ADVOCATE – FRiDAy, MAy 16, 2025 Page 23 OBITUARIES Underreported Income T here are several Internal Revenue Service code sections that deal with taxpayers who underreport income. Code section 6001 puts the burden on taxpayers to maintain adequate records in order to verify that all of the taxpayer’s income has been reported and that the proper taxable income figure has been calculated for a particular calendar year. If a taxpayer’s accounting system or method utilized does not clearly reflect taxable income, under Section 446(b) of the Internal Revenue Code, the IRS has the authority to compute the taxable income using an alternative method. The IRS is given authority to use what it considers reasonable means to determine the taxpayer’s taxable income when the accounting records employed by the taxpayer do not support the income and deductions reported on a particular income tax return. If there is reason to believe that the taxpayer has not reported all of his or her income, the IRS can use an indirect method in order to reconstruct it. The several available methods employed by the IRS are listed in the Internal Revenue Manual and have been supported in several court cases. In a Third Circuit Court of Appeals case, the IRS was able to successfully reconstruct the taxpayer’s taxable income by analyzing bank deposits, cancelled checks, currency transactions, electronic debits, electronic transfers and account credits. Cash expenditures not from deposited funds or nontaxable sources were added to the taxpayer’s income. Deductible expenses that were not claimed on the taxpayer’s original return were, however, allowed as an offset to the unreported income. This theory of reconstructing income and expenses is supported in the Circuit Court of Appeals case of Calhoun v. United States, 591 F2d 1243, 1245 (9th Circuit, 1978). Based upon the reconstructed taxable income, the IRS assessed the taxpayer an additional income tax representing the deficiency as well as penalties for fraud. The Tax Court had originally sided with the IRS and the appeals court affirmed its decision. The taxpayer must maintain adequate records in order for the IRS to properly be able to determine if the correct taxable income figure has been reported. Also supporting this proposition is the case of Agnellino v. Commissioner, 302 F2d 797, 798-99 Allen Winecour O f Everett. En t ered E te r - nal Rest on Ma y 13, 2025. Bo r n i n B ost on, (3rd Circuit 1962). In this case and in many others, the court had determined that it is indeed the taxpayer’s responsibility to maintain adequate records in order to properly reflect income. If this is not the case, the IRS is authorized to employ various methods in order to arrive at the correct figure. In unreported income cases, it is presumed that the IRS’deficiency determination is correct so long as it is not “without rational foundation”. United States v. Janis, 428 US 433, 441(1976). A court may find that the IRS’ reconstruction of the taxpayer’s taxable income is reasonable and the burden of proof is then upon the taxpayer to prove otherwise. I always advise my clients to report all of their income. It’s very difficult to persuade a jury that you simply forgot to report the income. You are much better off being more aggressive with claiming deductions. It would be more likely than not for the deduction to simply be disallowed, unless the claimed deduction was so outrageous as to constitute income tax fraud. Taxpayers should also keep in mind that they may also be able to utilize these same methodologies in order to compute taxable income in the event records for some reason do not exist, such as in the case of being lost due to fire, storm or other casualty. If there is a material omission of income (25% or more of the taxpayer’s gross income not being reported on his or her tax return), the statute of limitations is increased from the general 3-year period to a 6-year period. For those taxpayers who choose to not file at all, the statute of limitation period for a particular year does not begin to run until the return is actually filed. It is always best to report all of your income and to file a return if required to. In cases where deductions cannot be substantiated, upon audit, you will lose the deduction. Joseph D. Cataldo is an estate planning/elder law attorney, Certified Public Accountant, Certified Financial Planner, AICPA Personal Financial Specialist and holds a masters degree in taxation. Allen was predeceased by his parents, Sylvia & Joseph Winecour and his stepmother, Dora Winecour. He worked as an educator and counselor and after retirement he became a tour guide. Allen was an amazing storyteller. His depth of knowledge about the history of Boston, Salem and surrounding communities was matched only by his incredible sense of humor. His claim to fame was being featured on Chronicle while guiding a tour in Salem on Halloween. Allen was the devoted husband of the late Eleanor (Solomon) Winecour. Together they traveled extensively and never missed a Broadway play. He was the dear brother of the late Eliot Winecour: and adored uncle of Susan Winecour. Allen had countless loving relatives and friends which was a testament to his kind, caring nature. Services at the Tifereth Israel Memorial Park 232 Fuller Street, Everett on Friday, May 16 at 11:00 AM. Condolence calls may be made at the Kirby residence following the interment on Friday. In lieu of flowers, expressions of sympathy may be made to the Salvation Army or to Kaplan Family Hospice House 78 Liberty St, Danvers, MA 01923. Joseph C. Ronan O f Ever - ett. Entered into e t e r n a l rest, May 9, unexpectedly, at home, at age 61. Joe was proud graduate of Malden Catholic High School, Class of 1981. He was a cemetery worker for the city of Everett. Beloved son of the late John J. Jr. and Celia M. (Nee) Ronan. Dear and devoted father of Joseph C Ronan, Jr. and his wife, Gia of Wakefield and Erin Marie Ronan of Wakefield. Devoted brother of John J. Ronan, III and his wife, Patricia of Malden, Mary Foresta and her husband, Victor of Swampscott, Maureen Pacheco and her husband, James of N. Andover and the late Celia Strunk. Loving grandfather of Joseph C. Ronan, III and Emma Lucia Ronan. Joe is also survived by several loving nieces, nephews, grandnieces, grandnephews and friends. Relatives and friends are respectfully invited to attend Joe’s visiting hours in the Cafasso & Sons Funeral Home, 65 Clark St. (Corner of Main St.) EVERETT, Sunday, May 18 from 1-4 p.m. His burial will be private. In lieu of flowers, contributions in Joseph’s memory to Alzheimer’s Association, 320 Nevada St., Ste.201, Newton, MA 02460 would be sincerely appreciated. Parking with attendants on duty.
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