The Section 6707A reportable transaction penalty can be difficult to work with given the more limited avenues for contesting the penalty. The court addressed this in Bitter v. Commissioner, T.C. Memo. 2017-46, in the context of a Section 412(i) plan. Tax advisors have been waiting for an answer to the very question of how to…
Category: IRS Penalties
IRS Penalties
Monetary sanctions imposed by the IRS for various tax-related violations. Give us a call to see how we can help, (713) 909-4906.
Check Signing Activity Not Sufficient for Trust Fund Penalty
The IRS will often assert trust fund recovery penalties against anyone who signs checks written on the business checking account. The court addressed this in Shaffran v. Commissioner, T.C. Memo. 2017-35, concluding that some check signing activity alone is not sufficient to impose a trust fund recovery penalty. The case provides some insight as to…
Relying on Tax Attorney for Filing Deadline is Reasonable Cause
It is clear that one cannot rely on a tax attorney to file a tax return for purposes of removing penalties if the return is not filed. But can you rely on an attorney if the attorney provides advice as to the wrong date for filing? The court addresses this in Estate of Hake v.…
No Reasonable Cause Defense for Some Trust Fund Penalties
The IRS is serious about unpaid employment taxes. The trust fund recovery penalty can be used to collect these taxes. This penalty makes a business tax liability a personal liability. With most penalties, the penalty can be abated for reasonable cause. But what about the trust fund penalty? Can it be abated for reasonable cause?…
Proof of Cash on Hand to Abate Failure to Pay Penalty
The failure to pay penalty is one of the most commonly assessed penalties. The penalty does not apply and can be abated or removed if the taxpayer can establish that the failure to pay is due to reasonable cause and not to willful neglect. But how do you establish reasonable cause? In C1 Design Group, LLC…
Judicial Review for Trust Fund Recovery Penalties
Taxpayers who are assessed trust fund recovery penalties need to take note of the U.S. Tax Court’s recent decision in Anderson v. Commissioner, T.C. Memo. 2016-219. The decision highlights a potential foot fault they may make when trying to resolve their trust fund recovery penalties at the IRS administrative level. Facts and Procedural History The…
Written Manager Approval for Penalties
An IRS agent is generally required to get written approval from their manager for a tax penalty can be assessed. This is requirement is set out in the Code. This begs the question as to what happens if the agent does not get written approval before he closes the audit? The court addressed this in…
Reportable Transaction Penalty, Full Payment Required
Tax matters can be litigated in a number of different courts. One of the advantages of bringing suit in U.S. Tax Court is that the tax does not have to be paid prior to bringing suit. For tax matters litigated in the U.S. District Courts or the Court of Federal Claims, the tax has to…
Stay-at-Home Mom Not Liable for Trust Fund Recovery Penalty
The IRS has the ability to assess a trust fund recovery penalty against those who are responsible for withholding payroll taxes for employees if they fail to withhold and pay over the taxes to the IRS. Then penalty is equal to the amount of the withheld but unpaid tax. Liability for the penalty falls on…
Accuracy Related Penalties Do Not Apply to Full Understatement of Tax
In Hatcher v. Commissioner, T.C. Memo. 2016-188, the court considered a very common error IRS agents make in computing the Section 6662 accuracy related penalty. The IRS applied the penalty to the entire understatement of tax, rather than the portion of the understatement that was not subject to the reasonable cause defense. This is one…