Yesterday the Tax Court issued a bench opinion under IRC § 7459(b) in an underreported income case. The IRS determined the extent to which taxpayers underreported their income by reconstructing the income by analyzing the taxpayers’ bank account. The case is Momotaz v. Commissioner, Dkt. No. 8286-23 (Oct. 13, 2026) (bench op.).
Of note, the court did not uphold the penalty against the taxpayers. The court removed the penalty because the IRS has the burden to prove penalties against individuals. IRC § 7491(c). This means the IRS is required to show that there was personal, written approval by the immediate supervisor of the initial determination of the penalty. IRC § 6751(b). In Momotaz, the IRS offered no evidence of the penalty approval, meaning the IRS made a mistake.
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If you have a penalty issue, procedural and substantive defenses may be available to you. The team at K. Tyson Law has decades of experience with penalty issues.
Written by Kim Tyson, J.D., LL.M.