## Facts

- G. Marshall Webster and his wife, Lisa Herlach, hired Terry Baer, whom Webster believed to be a certified public accountant (CPA), to file Webster’s federal income tax returns for 1983 and 1984.
- In about September 1990, the Internal Revenue Service (IRS) began examining Webster’s tax situation, and Webster discovered Baer had failed to file the 1983 and 1984 returns.
- Around September 1990, Webster and Herlach executed a power of attorney naming Baer as their representative before the IRS.
- On Baer’s advice, Webster and Herlach signed IRS Form 870, “Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment,” for tax years 1985, 1986, 1987, and 1988.
- Form 870 waived the restrictions imposed by I.R.C. § 6213 on assessment and collection and 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.”
- After reviewing the returns, the IRS assessed the tax liabilities shown on the returns.
- Relying on the signed waivers, the IRS levied on Webster and Herlach’s bank account based on the 1985 and 1986 assessments.
- Webster and Herlach later learned Baer’s accountant certification had been suspended in April 1989.
- They filed a petition in the United States Tax Court arguing the Form 870 waivers were invalid because (1) they did not knowingly and willfully sign due to a unilateral mistake about Baer’s CPA status and (2) they were poorly advised to sign.
- They also asserted their 1985 and 1986 returns overstated their tax liability.
- They did not claim they were unable to read or understand the waivers, and they did not allege fraud, duress, or misconduct by the IRS.

## Issues

1. Whether the Form 870 waivers executed for 1985–1988 were valid and binding, thereby waiving the I.R.C. § 6213 restrictions and barring the petitioners from contesting those years in the Tax Court absent additional deficiencies.
2. Whether a taxpayer’s unilateral mistake about a representative’s professional status, or reliance on poor advice from that representative, is enough to invalidate a Form 870 waiver when there is no allegation of fraud, duress, or IRS misconduct.
3. Whether, given the waivers, the petitioners could litigate in the Tax Court their claim that the 1985 and 1986 returns overstated the tax due.

## Decision

- The Tax Court enforced the Form 870 waivers for tax years 1985–1988 as valid and binding.
- The court rejected the petitioners’ attempt to set aside the waivers based on their unilateral mistake about Baer’s CPA status and their claim that Baer gave bad advice.
- Because the waivers expressly surrendered the right to contest the covered years in the Tax Court (unless additional deficiencies were determined), the petitioners could not use the Tax Court to challenge the assessed liabilities for 1985–1988 on the record presented.
- With the waivers in place and no showing of fraud, duress, or IRS misconduct, the IRS’s assessment and collection actions taken in reliance on the waivers were not blocked by I.R.C. § 6213.

## Legal Principles

- A signed Form 870 generally operates as a voluntary waiver of the I.R.C. § 6213 restrictions on assessment and collection for the years covered, and it also waives the taxpayer’s ability to contest those years in the Tax Court unless additional deficiencies are later determined.
- Clear, on-the-face language in Form 870 warning that Tax Court review is surrendered is given effect when the taxpayer can read and understand the document and signs it voluntarily.
- A taxpayer’s unilateral mistake about a chosen representative’s credentials, and dissatisfaction with the representative’s advice, does not by itself justify setting aside a Form 870 waiver as against the IRS in the absence of fraud, duress, or misconduct attributable to the IRS.
- Taxpayers generally bear the consequences of the actions of representatives they appoint, including decisions to sign waivers that carry stated legal consequences.

## Conclusion

In Webster v. Commissioner, the Tax Court held that Webster and Herlach were bound by their signed Form 870 waivers for 1985–1988, and their mistaken belief about Baer’s CPA status and their claim of poor advice did not invalidate those waivers without fraud, duress, or IRS misconduct; as a result, they could not contest the covered years in the Tax Court or use I.R.C. § 6213 to stop assessments and collection taken in reliance on the waivers.


Webster v. Commissioner, 64 T.C.M. 724 (1992)