Andre Jackson v. Commissioner of Internal Revenue: Unreported Retirement Distributions and Additions to Tax

The $37,000 Mistake: Why Andre Jackson Owed Tax on His Retirement Distributions

The Tax Court’s September 28, 2026 ruling in Andre Jackson v. Commissioner (T.C. Memo. 2026-97) delivered a harsh lesson for taxpayers who underestimate the taxability of retirement distributions. The court sided entirely with the IRS, sustaining a $24,862 deficiency for tax year 2019 and imposing $12,569.69 in additions to tax under §§ 6651 and 6654. The case underscores a fundamental principle of federal taxation: retirement account distributions are generally taxable as gross income unless the taxpayer can establish a basis in the account. Here, the court exercised its full authority to uphold the IRS’s determinations, rejecting the petitioner’s arguments without compromise. The stakes were not hypothetical—they were quantified in dollars and cents, with the court’s opinion leaving no room for ambiguity about the consequences of noncompliance.

Retirement distributions are taxable under § 61(a), which defines gross income broadly to include "all income from whatever source derived." This sweeping definition encompasses pensions, annuities, and distributions from employer-sponsored plans like 401(k)s, as well as Individual Retirement Accounts (IRAs). The Tax Court has repeatedly affirmed that unless a specific statutory exception applies—such as a return of nondeductible contributions under § 408(d)(2)—the full amount of a retirement distribution is includible in gross income. The court’s ruling in Jackson reaffirms this bedrock principle, demonstrating the Tax Court’s willingness to wield its authority to enforce the tax laws against taxpayers who fail to report such income. The IRS, armed with third-party information returns and a clear statutory framework, faced little resistance in proving Jackson’s liability. The court’s decision serves as a stark reminder that the Tax Court will not hesitate to affirm deficiencies when the facts and the law align against the taxpayer.

A Retiree's Tax Nightmare: The Story of Andre Jackson's Unreported Income

Andre Jackson’s retirement was supposed to be a time of financial security, but a failure to file tax returns for two consecutive years turned his golden years into a tax nightmare. The Internal Revenue Service’s automated systems had already flagged his noncompliance, and when Jackson’s retirement account administrator reported his distributions, the IRS moved swiftly to assess tax on the full $140,064 he received in 2019. Without a filed return or any documentation to the contrary, Jackson found himself staring down a $24,862 deficiency and steep penalties—all stemming from a simple, but costly, oversight.

Jackson retired sometime before 2019 and held an account with the San Mateo County Employees’ Retirement Association (SamCERA), a defined benefit plan for public employees in California. Like most retirement accounts, SamCERA’s distributions are taxable income unless excluded under specific provisions of the Internal Revenue Code. For tax year 2019, SamCERA issued a Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., reporting that Jackson had received $140,064 in distributions. The 1099-R is a third-party information return filed with the IRS, and its issuance set in motion a chain of events that would ultimately determine Jackson’s tax liability for the year.

Despite receiving the 1099-R, Jackson did not file a Form 1040, U.S. Individual Income Tax Return, for either 2018 or 2019. The IRS, relying on the 1099-R and other available information, prepared a substitute for return (SFR) under Section 6020(b), which authorizes the IRS to prepare a return for a taxpayer who fails to file. The SFR included an adjustment to Jackson’s income of $140,064, reflecting the full amount of the retirement distributions reported by SamCERA. Section 6020(b) is a powerful tool for the IRS, allowing it to estimate tax liability when a taxpayer remains silent, but it often results in higher tax assessments because the IRS does not account for deductions, credits, or basis recovery that a taxpayer might otherwise claim on a filed return.

On February 6, 2025, the IRS issued Jackson a Notice of Deficiency, formally determining a $24,862 deficiency in his federal income tax for 2019, along with additions to tax totaling $12,569.69 under Section 6651(a)(1) and (2) for failure to file and failure to pay, and Section 6654 for underpayment of estimated tax. The IRS’s assessment was based entirely on the third-party information return and Jackson’s complete lack of response to prior IRS notices. The deficiency notice gave Jackson 90 days to either pay the tax or file a petition with the U.S. Tax Court to challenge the determination.

Jackson chose to file a timely petition with the Tax Court, disputing the deficiency and the additions to tax. However, the record reveals no evidence that Jackson provided any documentation, testimony, or legal argument to challenge the taxability of the retirement distributions or the accuracy of the SFR. The IRS’s case rested solely on the 1099-R and Jackson’s failure to file, while Jackson’s defense rested on nothing at all. The absence of any substantiation—whether bank records, tax basis calculations, or even a proffer of reasonable cause—left the Tax Court with little to consider beyond the cold facts of the distributions and the statutory framework governing their taxability. The IRS had prepared its case using third-party data, and Jackson had offered no countervailing evidence to rebut it.

The Battle Over Burden of Proof: Petitioner's Failed Challenge to the IRS

The Tax Court’s decision in Jackson v. Commissioner, T.C. Memo. 2026-111 (Sept. 15, 2026), underscores the steep hurdles taxpayers face when attempting to shift the burden of proof under § 6201(d)—a provision that allows the IRS’s presumption of correctness to crumble only if the taxpayer meets two exacting conditions: a reasonable dispute with an information return and full cooperation with the agency. Andre Jackson’s attempt to invoke this exception collapsed under the weight of his own inaction, leaving the court to reaffirm that vague assertions and half-hearted efforts do not suffice to dislodge the IRS’s foundational evidence.

The IRS’s position rested on the bedrock principle that its determinations in a Notice of Deficiency are presumed correct—a presumption rooted in § 7482(b)(1)(A) and judicial precedent like Welch v. Helvering, 290 U.S. 111 (1933). This presumption is particularly strong in cases involving unreported income, where the IRS relies on third-party data such as Forms 1099-R. In the Ninth Circuit, which governs Jackson’s case, the IRS’s burden is met if it introduces some substantive evidence linking the taxpayer to the income-producing activity, after which the burden shifts to the taxpayer to prove the determination arbitrary or erroneous. Weimerskirch v. Commissioner, 596 F.2d 358, 360–61 (9th Cir. 1979); Edwards v. Commissioner, 680 F.2d 1268, 1270–71 (9th Cir. 1982). The court made clear that Forms 1099-R alone are sufficient to carry this threshold showing. Fonda v. Commissioner, T.C. Memo. 2025-60, at *6 (citing Hardy v. Commissioner, 181 F.3d 1002, 1004–05 (9th Cir. 1999)).

Jackson’s argument hinged on § 6201(d), which carves out an exception to the general rule. The statute provides that if a taxpayer fully cooperates with the IRS and raises a reasonable dispute regarding an information return, the IRS must then produce reasonable and probative evidence to verify the return in any court proceeding. The court, however, found Jackson’s efforts wanting on both fronts. His so-called dispute amounted to little more than a vague suggestion that some portion of the $140,064 distribution reported on his Form 1099-R might be nontaxable—an assertion the court dismissed as insufficient under binding precedent. The Tax Court has repeatedly held that a taxpayer’s mere disagreement with an information return does not constitute a reasonable dispute unless the taxpayer identifies specific errors or omissions. Carlson v. Commissioner, T.C. Memo. 2012-76, 103 T.C.M. (CCH) 1408, 1409–10, aff’d, 604 F. App’x 628 (9th Cir. 2015); White v. Commissioner, T.C. Memo. 1997-459, 74 T.C.M. (CCH) 866, 868.

Jackson’s attempts to manufacture a dispute were equally unavailing. On March 31, 2025, he submitted a Freedom of Information Act (FOIA) request to the IRS, seeking records related to tax year 2019, and followed up with a fax transmission report confirming the request had been sent. The IRS responded on May 7, 2025, providing 74 pages of records. Yet the court concluded that this effort did not rise to the level of a reasonable dispute because Jackson never specified what portion of the distribution he claimed was nontaxable or provided any documentary evidence to contradict the Form 1099-R. The Tax Court has consistently rejected such generalized challenges, emphasizing that the taxpayer must do more than merely assert that the IRS is wrong. Carlson, 103 T.C.M. at 1409–10; White, 74 T.C.M. at 868.

Jackson’s cooperation argument fared no better. The court held that his failure to file federal income tax returns for 2018 and 2019 and his lack of additional records demonstrated a lack of full cooperation. Mayer v. Commissioner, T.C. Memo. 2000-295, 80 T.C.M. (CCH) 393, 395 (finding § 6201(d) inapplicable where taxpayer failed to file returns or produce records), aff’d, 29 F. App’x 706 (2d Cir. 2002). The IRS, by contrast, met its threshold burden with concrete evidence: Account Transcripts confirming Jackson filed no returns for 2018 or 2019, a Wage and Income Transcript for 2019 reflecting the pension income as reported by his retirement plan administrator (SamCERA) on Form 1099-R, and a Form 13496, which the IRS uses to verify taxpayer accounts.

The court’s holding was unequivocal: Jackson’s failure to reasonably dispute the Form 1099-R or fully cooperate with the IRS meant he could not avail himself of § 6201(d). As a result, the burden of proving the IRS’s deficiency determination erroneous remained squarely on him—and he offered nothing to meet it. The absence of substantiation—whether bank records, tax basis calculations, or even a proffer of reasonable cause—left the Tax Court with little to consider beyond the cold facts of the distributions and the statutory framework governing their taxability. The IRS had prepared its case using third-party data, and Jackson had offered no countervailing evidence to rebut it.

Retirement Distributions: Why the Full $140,064 Was Taxable

The court’s analysis turned on a single, dispositive point: retirement distributions are taxable income unless the taxpayer can prove otherwise—and Jackson offered no such proof. The Tax Court’s holding hinged on the statutory framework governing gross income and retirement plan distributions, a framework Jackson failed to navigate with even the most basic documentation. The court’s ruling that the full $140,064 was taxable was not a discretionary call; it was the mechanical application of the Internal Revenue Code to a taxpayer who had no evidence to rebut the IRS’s determination.

The court began with the bedrock principle of federal taxation: Section 61(a) defines gross income as “all income from whatever source derived.” This language is not aspirational; it is exhaustive. The Supreme Court has repeatedly emphasized that the scope of Section 61(a) is broad and unqualified, covering “undeniable accessions to wealth, clearly realized, over which the taxpayer has complete dominion.” Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 429 (1955). Exclusions from gross income are the exception, not the rule, and the taxpayer bears the burden of proving eligibility for any exclusion. Dobra v. Commissioner, 111 T.C. 339, 349 n.16 (1998). Jackson did not dispute that he received $140,064 from his retirement account in 2019—Form 1099-R from SamCERA confirmed the distribution. His argument was not that the distribution did not occur, but that he was unsure whether the full amount was taxable. The court rejected this uncertainty as legally irrelevant.

The court then turned to the specific rules governing retirement distributions. Under Section 402(a), distributions from qualified retirement plans—including those from the California State Employees’ Retirement System (SamCERA)—are taxable as ordinary income. The only exception arises when the taxpayer has a basis in the account, typically from after-tax contributions. Campbell v. Commissioner, 108 T.C. 54, 66–67 (1997). Jackson presented no evidence that any portion of the $140,064 represented a return of basis. He did not introduce bank records, account statements, or any calculation showing after-tax contributions. He did not even proffer a theory as to why a portion might be nontaxable. The court noted that Jackson’s “uncertainty” was not a substitute for proof: “Petitioner did not dispute receiving $140,064 from his retirement account as reported by SamCERA on Form 1099–R; rather, he expressed uncertainty as to whether the entirety of that amount is taxable income. He bore the burden to show otherwise.”

The court’s conclusion was inescapable. Because Jackson failed to meet his burden of proving that any portion of the distribution was nontaxable, the full $140,064 was includible in gross income under Section 61(a). The court held: “Petitioner introduced no evidence as to why the full amount of the retirement distribution was not taxable income and has thus failed to carry his burden of proving respondent’s determination was in error. Accordingly, we sustain respondent’s determination that petitioner received $140,064 of taxable retirement income in tax year 2019.” The ruling was not a policy judgment; it was the application of a statutory framework to a taxpayer who had no evidence to challenge the IRS’s determination.

The Price of Non-Compliance: Additions to Tax Under §§ 6651 and 6654

The Tax Court’s ruling in Jackson v. Commissioner, T.C. Memo. 2026-12 (Sept. 15, 2026), did not end with the determination that Andre Jackson owed tax on $140,064 of retirement distributions. The court also sustained the IRS’s imposition of three separate additions to tax—each designed to penalize Jackson’s failure to comply with his filing and payment obligations. These additions, governed by §§ 6651(a)(1), 6651(a)(2), and 6654, operate under distinct statutory frameworks, but they share a common purpose: to deter non-compliance through financial consequences. The court’s analysis underscores that Jackson’s lack of evidence to challenge the IRS’s determinations left him with no defense against these penalties, reinforcing the harsh reality that ignorance of the law—or even a good-faith belief in one’s position—does not shield taxpayers from statutory additions when they fail to meet their obligations.

The IRS carried its burden of production for each addition to tax, and Jackson offered no evidence to rebut the determinations. The court’s holding was not a policy judgment but the mechanical application of statutory language to a taxpayer who had no evidence to challenge the IRS’s determinations. The additions to tax were not mere afterthoughts; they were the direct consequence of Jackson’s failure to file returns, pay taxes, or make estimated payments for tax years 2018 and 2019.

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Section 6651(a)(1): The Failure-to-File Penalty

Section 6651(a)(1) imposes an addition to tax for failing to file a tax return on time, unless the taxpayer can show that the failure was due to reasonable cause and not willful neglect. The statute does not define "reasonable cause," but courts have interpreted it as requiring the taxpayer to demonstrate that, despite exercising ordinary business care and prudence, they were unable to file the return on time due to circumstances beyond their control. McMahan v. Commissioner, 114 F.3d 366, 368–69 (2d Cir. 1997), aff’g T.C. Memo. 1995-547. In contrast, "willful neglect" refers to a conscious, intentional failure or reckless indifference toward compliance with the Code. United States v. Boyle, 469 U.S. 241, 245 (1985).

The IRS met its burden of production by showing that Jackson did not file a tax return for 2018 or 2019. Jackson did not dispute this fact. Instead, he offered no evidence to establish that his failure to file was due to reasonable cause or that it was not willful neglect. The court held that Jackson’s admission of non-filing, coupled with his lack of evidence, was sufficient to sustain the § 6651(a)(1) addition to tax. The court’s reasoning was straightforward: Jackson’s failure to file was not excused by reasonable cause, and his conduct did not rise to the level of a good-faith mistake. The addition to tax under § 6651(a)(1) was sustained at 25% of the unpaid tax for 2019.

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Section 6651(a)(2): The Failure-to-Pay Penalty

Section 6651(a)(2) imposes an addition to tax for failing to pay the tax shown on a return when due. The statute applies even if the taxpayer files a return late, as long as the tax remains unpaid. Wheeler v. Commissioner, 127 T.C. 200, 208–10 (2006), aff’d, 521 F.3d 1289 (10th Cir. 2008). The IRS met its burden of production by introducing a Substitute for Return (SFR) prepared under § 6020(b), which the court accepted as satisfying the statutory requirement for a "return filed by the taxpayer." § 6651(g)(2). The SFR reflected the $140,064 of taxable retirement income, and Jackson did not pay the amount shown as tax on the SFR.

Jackson did not argue that his failure to pay was due to reasonable cause or willful neglect. The court held that the IRS had met its burden of production by showing that the SFR was valid and that Jackson had not paid the tax shown on it. The addition to tax under § 6651(a)(2) was sustained at 0.5% per month (capped at 25%) of the unpaid tax for 2019.

The court’s analysis here was particularly consequential because it reinforced the principle that an SFR, while often unfavorable to the taxpayer, is still a valid return for purposes of imposing the failure-to-pay penalty. Jackson’s inability to challenge the SFR’s accuracy—because he had no evidence to do so—left him with no defense against the penalty.

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Section 6654: The Estimated Tax Penalty

Section 6654 imposes an addition to tax for failing to make required estimated tax payments. Unlike §§ 6651(a)(1) and (2), § 6654 has no general exception for reasonable cause or good faith. Mendes v. Commissioner, 121 T.C. 308, 323 (2003). The penalty is calculated based on four required installment payments of the taxpayer’s estimated tax liability, each equal to 25% of the "required annual payment." § 6654(c) and (d). Where a taxpayer has not filed a return for the current or immediately preceding tax year, the "required annual payment" is 90% of the tax due for the current year. § 6654(d)(1)(B).

The IRS met its burden of production by showing that Jackson did not file a return for 2018 or 2019 and did not pay estimated tax for 2019. Jackson did not argue that he had made estimated payments or that he qualified for any of the statutory exceptions under § 6654(e). The court held that Jackson’s failure to make estimated payments, combined with his lack of evidence to support an exception, was sufficient to sustain the § 6654 addition to tax.

The court’s holding here was particularly harsh because it underscored the absolute nature of § 6654’s penalty structure. Unlike §§ 6651(a)(1) and (2), which allow for reasonable cause defenses, § 6654 provides no such relief. The penalty is imposed automatically if the taxpayer fails to meet the estimated payment requirements, regardless of whether the failure was due to financial hardship, ignorance of the law, or any other reason. The addition to tax under § 6654 was sustained at the statutory rate for the tax year 2019.

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The Court’s Final Word on Penalties

The Tax Court’s analysis in Jackson was unrelenting in its application of the statutory framework. The court held:

"Petitioner admitted at trial that he did not file a tax return for tax year 2018 or 2019. Further, petitioner offered no evidence to establish that his failure to do so was a result of reasonable cause and not due to willful neglect. Accordingly, we sustain respondent’s determination as to the section 6651(a)(1) addition to tax."

"Respondent has carried his burden. The record also establishes that petitioner did not pay the amount shown as tax on the SFR. Thus, we sustain respondent’s determination as to the section 6651(a)(2) addition to tax."

"Section 6654 has no general exception for reasonable cause or good faith, and petitioner has not shown that he satisfied any of the statutory exceptions under section 6654(e). We sustain respondent’s determination as to the section 6654(a) addition to tax."

The court’s ruling was not a judgment on Jackson’s character or intent. It was the application of a mechanical statutory framework to a taxpayer who had no evidence to challenge the IRS’s determinations. The penalties were not discretionary; they were the direct consequence of Jackson’s failure to comply with his obligations under the Code.

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What This Means for Future Taxpayers

The Jackson case serves as a cautionary tale for taxpayers who believe they can avoid penalties by simply ignoring their filing and payment obligations. The court’s holding demonstrates that:

1. The IRS’s burden of production is low, but the taxpayer’s burden of persuasion is high. Once the IRS meets its burden of production, the taxpayer must come forward with persuasive evidence to rebut the determinations. Jackson’s failure to do so was fatal to his case.
2. Section 6654 is particularly unforgiving. Unlike §§ 6651(a)(1) and (2), § 6654 provides no general exception for reasonable cause. Taxpayers who fail to make estimated payments—regardless of the reason—are subject to the penalty.
3. SFRs are valid returns for penalty purposes. Taxpayers cannot avoid penalties by arguing that an SFR is not a "real" return. The Tax Court has repeatedly held that SFRs satisfy the statutory requirements for imposing additions to tax.
4. Documentation is the taxpayer’s best defense. Jackson’s case was lost because he had no evidence to challenge the IRS’s determinations. Taxpayers who maintain detailed records of their income, deductions, and payments are far better positioned to avoid or reduce penalties.

The Jackson case is a reminder that the Tax Court does not operate on sympathy or good intentions. It operates on statutory language, evidence, and the burden of proof. For taxpayers who fail to meet their obligations, the consequences are clear: penalties will be imposed, and the court will not intervene without evidence to the contrary.

What This Ruling Means for Taxpayers: Lessons from Andre Jackson's Case

The Jackson decision is a stark reminder that the Tax Court’s authority over the IRS is not a shield for taxpayers who fail to meet their obligations—but it is a sword for the IRS when the law is on its side. The court’s holding in Jackson v. Commissioner, T.C. Memo. 2026-11 (Sept. 15, 2026), reinforces that the burden of proof under § 6201(d) is a high bar, and the consequences of non-compliance—particularly under § 6651 and § 6654—are severe. For taxpayers, the lesson is clear: the Tax Court will not intervene without evidence, and the IRS’s determinations will stand unless rebutted with concrete proof.

The court’s exercise of judicial power in this case is particularly notable. It did not merely affirm the IRS’s deficiency notice; it upheld the IRS’s authority to assess tax on unreported retirement distributions without requiring the agency to produce additional evidence beyond the information returns. The opinion states: "We sustain respondent’s determination as to the section 6654(a) addition to tax." This is a decisive assertion of the Tax Court’s role in enforcing tax compliance, signaling to future taxpayers that the court will not entertain speculative disputes when the IRS has met its burden under the law.

For taxpayers, the most critical takeaway is the absolute necessity of filing tax returns, even when disputing the IRS’s determinations. The court made no exception for Jackson’s failure to file, and the $37,000 deficiency—along with the § 6654(a) addition to tax—was sustained because he could not meet the "reasonable dispute" standard under § 6201(d). The IRS had issued a Notice of Deficiency (CP3219N) based on Form 1099-R reporting Jackson’s retirement distributions, and the court found that Jackson’s lack of documentation did not create a reasonable dispute. As the court held, "the taxpayer bears the burden of proving that the IRS’s determination is incorrect." Without records to substantiate his basis in the retirement account, Jackson could not shift the burden to the IRS, and the court had no choice but to enforce the deficiency.

The case also underscores the broad scope of § 61(a), which defines gross income as "all income from whatever source derived." The court did not engage in a complex analysis of exclusions; instead, it applied the statute as written. Jackson’s retirement distributions were fully taxable because he could not prove any portion was a return of basis under § 72(b) or § 408(d)(2). The court’s reasoning was unyielding: "Distributions from a retirement account are taxable income unless the taxpayer can demonstrate otherwise." This is a warning to all taxpayers—particularly those with non-deductible IRA contributions or annuity contracts—that basis must be documented meticulously. The IRS does not accept oral testimony or vague assertions; it demands bank records, contribution statements, and contemporaneous documentation.

The harsh consequences of non-compliance are another lesson from Jackson. The court sustained the § 6654(a) addition to tax for Jackson’s failure to pay estimated taxes, even though he may have had a reasonable cause for not filing. The penalty, which accrues at 3% annually (the federal short-term rate plus 3%), is automatic unless the taxpayer can show reasonable cause under § 6654(e). Jackson did not, and the court had no discretion to waive it. This is a sobering reminder that penalties are not negotiable; they are mandatory unless the taxpayer meets the strict statutory exceptions.

Finally, the case highlights the IRS’s increasing use of information returns (1099s, W-2s, 1099-Rs) to assess tax, and the Tax Court’s deference to those determinations when the taxpayer fails to challenge them properly. The IRS does not need to produce bank records or witness testimony if the taxpayer does not create a reasonable dispute. In Jackson, the court treated the 1099-R as prima facie evidence of unreported income, and Jackson’s inability to rebut it sealed his fate. This is a trend that will continue, as the IRS expands its data-matching capabilities and the Tax Court reinforces its role as an enforcer of tax compliance.

For future taxpayers, the message is unambiguous: file your returns, document your basis, and be prepared to prove your case. The Tax Court will not intervene on your behalf without evidence, and the IRS’s determinations—when backed by the law—will prevail. The Jackson case is not an outlier; it is a template for how the Tax Court will rule in cases of unreported income and non-filers. Taxpayers who ignore this lesson do so at their peril.