At K. Tyson Law, we are here to help you resolve IRS tax issues and provide answers about tax requirements for charitable contributions.
The IRS frequently asserts an accuracy-related penalty under I.R.C. § 6662, either for negligence or for a substantial understatement of income tax. Generally, the penalty is 20% of the tax underpayment.
The penalty might not apply if a taxpayer can show that he or she acted with reasonable cause and in good faith. “Reasonable cause and good faith” is:
I.R.C. § 6664(c)(1). Treas. Reg. § 1.6664-4(b); United States v. Boyle, 469 U.S. 241 (1985).
Relying on the advice of a professional tax adviser can provide reasonable cause as a defense to a penalty if you can show that you satisfy each of the following three elements:
Treas. Reg. § 1.6664-4(c); Neonatology Assocs., P.A. v. Commissioner, 115 T.C. 43 (2000).
Relying on Turbo Tax (or other tax preparation software) generally does not provide a penalty defense.
“The Turbo Tax defense” is routinely rejected as a defense to a penalty because tax preparation software is only as good as the information input into the software. When a taxpayer is entering his or her own return information into Turbo Tax (or other tax preparation software), he or she has not obtained professional tax advice. The main case cited for this point is Bunney v. Commissioner, 114 T.C. 259, 267 (2000), but the Tax Court reiterated the point recently in Beacom v. Commissioner, T.C. Memo. 2026-65.
For “cash” donations to charity (for example, cash, check, Venmo, Zelle, or PayPal), the law requires that a taxpayer claiming a tax deduction must prove (“substantiate”) that the donation was paid. This proof can be a written confirmation from the charity that received the donation with the name of the charity, the date of the contribution, and the amount of the contribution. I.R.C. § 170(f)(17). (And, for people still using checks, the negotiated (cashed) check also counts.) In the absence of a written confirmation (i.e., a receipt), the deduction can be substantiated with “other reliable records” that show the name of the charity, the date of the donation, and the amount.
In a non-precedential case, the Tax Court disallowed a deduction for a cash donation because the only evidence offered was the taxpayer’s own statements about the donation. The judge stated that the taxpayer failed to show that they satisfied the cash donation substantiation rule and disallowed the deduction. The case is Aimiuwu v. Commissioner, T.C. Summ. Op. 2026-7. Taxpayers making contributions of $250 or more, regardless of whether cash or other monetary gift or property, are reminded of the additional requirement of a contemporaneous written acknowledgment under I.R.C. § 170(f)(8).
If you need help resolving a tax dispute with an IRS issue or have questions about the taxation of donations of charitable contributions, please reach out to our team at K. Tyson Law.