Webster v. Commissioner

G. Marshall Webster (plaintiff) and his wife, Lisa Herlach (plaintiff), hired Terry Baer, whom Webster believed to be a certified public accountant (CPA), to file Webster’s federal tax returns for 1983 and 1984. Webster discovered that Baer had failed to file the returns when the Internal Revenue Service (IRS) began an examination of Webster’s returns in September 1990. Also in approximately September 1990, Webster and Herlach executed a power of attorney appointing Baer as their representative to the IRS. On Baer’s advice, Webster and Herlach executed IRS form 870, Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment, for each of the tax years 1985, 1986, 1987, and 1988 (waivers). Form 870 waived restrictions that Internal Revenue Code (code) § 6213 imposed on the IRS’s assessment and collection of tax. The IRS form 870 stated on its face, “I understand that by signing this waiver, I will not be able to contest these years to the United States Tax Court, unless additional deficiencies are determined for these years.” Upon reviewing Webster’s returns, the IRS issued assessments for the tax liabilities that were indicated by the returns. Additionally, pursuant to the waivers, the IRS levied on Webster and Herlach’s bank account based on the 1985 and 1986 assessments. Webster and Herlach later learned that Baer’s accountant certification had been suspended in April 1989. Webster and Herlach filed a petition with the United States Tax Court against the IRS commissioner (defendant), arguing that the waivers were invalid because Webster and Herlach (1) did not knowingly and willfully sign the waivers due to their unilateral mistake regarding Baer’s status as a CPA and (2) were poorly advised to sign the waivers. Webster and Herlach further argued that their 1985 and 1986 returns overstated how much tax they owed. However, Webster and Herlach did not claim that they could not read or understand the waivers or that they were induced to sign the waivers by fraud, duress, or IRS misconduct.