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Monday, April 26, 2010

Adding “Without Prejudice” To Income Tax Return Jurats Does Not Unmake Returns for Aiding and Abetting Charges

    Fifth Circuit Judge Jennifer Walker Elrod wrote an opinion for a panel including Catharina Haynes, and senior circuit judge Harold R. DeMoss, Jr. holding that when a person signs a federal income tax return adding the words "without prejudice," the tax preparer can't beat a charge of aiding and assisting in the preparation of false tax returns because the additional language rendered the signed documents not tax returns.

    Richard Duane Davis prepared tax returns for Madison Lee Oden, telling him to sign the returns with the added words "without prejudice." Was that the same as Oden's not signing at all?

  • Where a taxpayer filed a complete Form 1040 and added the phrase "signed involuntarily under penalty of statutory punishment" under the jurat, this return was "complete and accurate."
  • A taxpayer's attachment to his signature of a specific disclaimer of liability invalidated his Form 1040.
  • A document which on its face plausibly purports to be in compliance, and which is signed by the taxpayer, is a return despite its inaccuracies.

Here it's not clear what "without prejudice" means. The IRS should be entitled to construe alterations of the jurat against the taxpayer, at least when there is any doubt. Even if the added language rendered the Forms 1040 invalid as "tax returns," Davis still would have aided in the preparation or presentation of a false return, affidavit, claim or other document, which is a crime. The Court won't require the I.R.S. to engage in guessing games to determine what disclaimers like this one mean. To require such would drastically hinder the I.R.S.'s ability to process returns efficiently.

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