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Penalties
Part 3 Penalties
| Question | Answer |
|---|---|
| IRC § 6700 – Promoting abusive tax shelters | The penalty is for a promoter of an abusive tax shelter and is generally equal to $1,000 for each organization or sale of an abusive plan or arrangement (or, if lesser, 100 percent of the income derived from the activity). |
| IRC § 6701 – Penalties for aiding and abetting understatement of tax liability. | The penalty is $1000 ($10,000 if the conduct relates to a corporation's tax return) for aiding and abetting in an understatement of a tax liability. Any person subject to the penalty shall be penalized only once for documents relating to the same taxpayer |
| IRC § 6713 – Disclosure or use of information by preparers of returns. | The penalty is $250 for each unauthorized disclosure or use of information furnished for, or in connection with, the preparation of a return. The maximum penalty on any person shall not exceed $10,000 in a calendar year. |
| IRC § 7206 – Fraud and false statements. | Guilty of a felony and, upon conviction, a fine of not more than $100,000 ($500,000 in the case of a corporation), imprisonment of not more than three years, or both (together with the costs of prosecution). |
| IRC § 7207 – Fraudulent returns, statements, or other documents. | Guilty of a misdemeanor and, upon conviction, a fine of not more than $10,000 ($50,000 in the case of a corporation), imprisonment of not more than one year, or both. |
| IRC § 7216 – Disclosure or use of information by preparers of returns. | Guilty of a misdemeanor for knowingly or recklessly disclosing information furnished in connection with a tax return or using such information for any purpose other than preparing or assisting in the preparation of such return. Upon conviction, a fine of |
| IRC § 7407 – Misrepresentation of elibility to practice or guantee of tax refund/credit | A federal district court may enjoin a tax return preparer from engaging in certain proscribed conduct, or in extreme cases, from continuing to act as a tax return preparer altogether. |
| IRC § 7408 – Action to enjoin specified conduct related to tax shelters and reportable transactions | A federal district court may enjoin a person from engaging in certain proscribed conduct (including any action, or failure to take action, which is in violation of Circular 230). |
| IRC § 6695(b) - Failure of preparer to sign return or claim for refund | $50 per return, up to $25,000 per year against preparer and employer. |
| IRC § 6695(e) - Failure to maintain information on all employed preparers | $50 per preparer or per item missing from required information, up to $25,000 per year against preparer and employer |
| IRC §6694(a) - Understatement due to unreasonable positions. | The penalty is the greater of $1,000 or 50% of the income derived by the tax return preparer with respect to the return or claim for refund. |
| IRC §6694 (b) Understatement due to willful or reckless conduct. | The penalty is the greater of $5,000 or 50% of the income derived by the tax return preparer with respect to the return or claim for refund. |
| IRC § 6695(b) - Failure of preparer to sign return or claim for refund | The penalty is $50 for each failure to sign a return or claim for refund as required by regulations. The maximum penalty imposed on any tax return preparer shall not exceed $25,000 in a calendar year. |
| IRC §6695(c) - Failure to furnish identifying number. | The penalty is $50 for each failure to comply with IRC § 6109(a)(4) regarding furnishing an identifying number on a return or claim. The maximum penalty imposed on any tax return preparer shall not exceed $25,000 in a calendar year. |
| IRC §6695(d) - Failure to retain copy or list. | The penalty is $50 for each failure to comply with IRC § 6107(b) regarding retaining a copy or list of a return or claim. The maximum penalty imposed on any tax return preparer shall not exceed $25,000 in a return period. |
| IRC § 6695(e) -Failure to file correct information returns. | The penalty is $50 for each failure to comply with IRC § 6060. The maximum penalty imposed on any tax return preparer shall not exceed $25,000 in a return period. |
| IRC § 6695(f) - Negotiation of check. | The penalty is $510 for a tax return preparer who endorses or negotiates any check made in respect of taxes imposed by Title 26 which is issued to a taxpayer. |
| IRC § 6695(g) - Failure to be diligent in determining eligibility for earned income credit. | The penalty is $510 for each failure to comply with the EIC due diligence requirements imposed in regulations. |
| IRC § 6651(a)(1) - Failure to file a tax return | If a return is not timely filed, penalty of 5% of the net amount due, if the failure is for not more than one month, with an additional 5% for each month or fraction thereof during which the failure continues, but not in excess of 25%. ONLY if REQURED to |
| IRC § 6651(a)(2) & (3) - Failure to pay tax | FTP penalty should be assessed at one-half of 1% of the unpaid tax for the first month the penalty applies and an additional one-half of 1% for each additional or fraction of the month the tax is unpaid, not to exceed 25% of the tax. |
| IRC § 6651(f) - Fraudulent failure to file a tax return | 15% of tax balance per month, maximum 75% |
| IRC § 6654 & § 6655 Individuals - underpayment of estimated tax | The penalty is figured at the federal quarterly interest rate |
| IRC § 6657 - Write a bad check to IRS | 2% of the bad check amount, unless the check is under $1,250, in which case the penalty is the amount of the check or $25, whichever is less. |
| IRC § IRC 6652 – Failure to report tips | Penalty of 50% of the additional social security and Medicare taxes, and a negligence penalty of 20% of the additional income tax, plus interest |
| IRC § 6662 - Accuracy related penalty | The Penatly is 20% of underpayment. 40% for gross underpayment |
| IRC § 6652 -Exempt orgs not filing annual returns | Most organizations $20 each day up to lesser of $10,000 or 5% of gross receipts. If organization is over $1,000,000 increases to $100 up to $50,000. |
| IRC § 6672 – Trust Fund Penalty Recovery Penalty | Also known as the 100% Penalty. Can be against any and all responsible parties. |
| IRC § 6663 - The Fraudulent Return Penalty | 75% of the portion of the underpayment [of tax] which is attributable to fraud |
| IRC § 6673 – Frivolous Tax Court action | Maximum $25,000 if position is groundless, intentional delay, frivolous or failed to follow administrative remedies |
| IRC § 6702 The frivolous return penalty | $5,000 fine for filing a frivolous income tax return |
| IRC § 7201 – Willful attempt to evade or defeat any tax | Felony - up to $100,000 fine or 5 years in prison or both. $500,000 for corporations |
| IRC § 7202 – Willful failure to collect or pay over tax | Felony - up to $10,000 and/or 5 years in prison or both |
| IRC § 7203 – Willful failure to pay tax or file a tax return or supply information | Misdemeanor - up to $25,000 fine or one year in prison or both. ($100,000 for corp.) |
| IRC § 7212 – Attempts to Interfere with administration of IRS laws | "Felony – up to 3 years in prison or fine up to $5,000 or both. |
| " |
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