Source: https://irstaxtrouble.com/irs-civil-tax-penalties/abatement-of-irs-tax-penalties-interest/?_page=2
Timestamp: 2020-06-04 17:23:15
Document Index: 315426836

Matched Legal Cases: ['§ 6662', '§ 6662', '§ 6662', '§ 6662', '§ 6662', '§ 6662', '§ 6662', '§ 6662']

“Penalties exist to encourage voluntary compliance by supporting the standards of
behavior required by the [Code].” I.R.M., pt. 20.1.1.2 (Nov. 21, 2017).
There are more than 150 different types of civil penalties, additions to tax, and additional taxes.
The most common penalties are “additions to tax.” This includes penalties when taxpayers fail to submit timely tax returns, fail to pay their taxes timely, or fail to make timely estimated payments.
Accuracy-related penalties,
Fraud penalties,
Certain information returns and payee statement penalties,
Tax return preparer penalties,
Promoter and protestor penalties, and
Compensation statements, pension plans, exempt organization, education programs and other reporting penalties.
Accuracy-related penalties warrant special mention. They are usually assessed at the close of an IRS audit. They can include:
Negligence or disregard of rules or regulations (I.R.C. § 6662(b)(1))
Substantial understatement of income tax (I.R.C. § 6662(b)(2))
Substantial valuation misstatement (I.R.C. § 6662(b)(3))
Substantial overstatement of pension liabilities (I.R.C. § 6662(b)(4))
Substantial estate or gift tax valuation understatement (I.R.C. § 6662(b)(5))
Disallowance of claimed tax benefits by reason of a transaction lacking economic substance or failing to meet the requirements of any similar rule of law (I.R.C. § 6662(b)(6))
Undisclosed foreign financial asset understatement (I.R.C. § 6662(b)(7))
Inconsistent estate basis (I.R.C. § 6662(b)(8))
The IRS generally has the ability to not impose these penalties and to abate them once assessed. In most cases, one has to be able to show “reasonable cause” to have the penalties not imposed or abated after they are imposed.
Reasonable cause is based on all the facts and circumstances in the situation. The IRS will abate penalties based on reasonable cause if the taxpayer exercised ordinary business care and prudence in determining his or her tax obligations but nevertheless is unable to comply.
Reasonable cause may be based on:
Fire, casualty, natural disaster, or some other disturbance
Ignorance of law in conjunction with other facts & circumstances
Misfeasance by employee or agent leaving taxpayer “incapacitated” or “disabled”
These are just a few of the more common justifications.