Court Dismisses Widow’s Action for Damages Against Trustees for Filing Fraudulent Information Return
April 3, 2013
Authored by: Tiffany McKenzie and Steve Dawson
Right now we are all in the peak of tax return filing season. As part of the tax return process, many tax practitioners file information returns for the entities they represent. Any person, including a corporation, partnership, individual, estate, and trust, who makes a payment (such for as rent, wages, salaries, and annuities) must file an information return with the IRS to report the payment. But what happens if a false information return is filed with the IRS?
In 1996, Congress enacted 26 U.S.C. § 7434(a), which gives victims of fraudulent filing activities a damage remedy against the perpetrators. The provision applies whenever “any person willfully files a fraudulent information return with respect to payments purported to be made to any other person.” It allows the subject of the false information return to recover from the person filing the return the greater of $5,000 or actual damages flowing “as a