Shawn Steven Salter v. Comm., TCM 2022-29
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Itemized Deductions Not Allowed After IRS Prepared Substitute Return (Shawn Steven Salter v. Comm., TCM 2022-29)
Shawn Salter failed to file a return for the tax year. Having received no return from Mr. Salter, the IRS prepared a substitute for return based on third-party reporting, allowing the taxpayer the standard deduction. Mr. Salter then prepared a late (by seven years) Form 1040 reporting all items of income as shown on the IRS notice of deficiency, but claiming itemized deductions for medical, state, and local taxes, mortgage interest, charitable deductions, and unreimbursed employee business expenses. Section 63(e)(1) provides that, “[u]nless an individual makes an election under this subsection for the taxable year, no itemized deduction shall be allowed for the taxable year.” Section §63(e)(2), captioned “Time and Manner of Election,” provides that “[a]ny election under this subsection shall be made on the taxpayer’s return.” In certain circumstances a taxpayer may make “a change of election with respect to itemized deductions,” but only when a return was previously filed (§63(e)(3)). The court found the taxpayer remained only entitled to the standard deduction as calculated on the IRS notice of deficiency.