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White Paper

IRS Tax Audits and Collections: Accuracy Related Penalty, FBAR Civil Penalties, Collection After Assessment

 
IRS Tax Audits and Collections: Accuracy Related Penalty, FBAR Civil Penalties, Collection After Assessment

“The two penalties primarily applicable to underpayments of tax are the accuracy-related penalty (Code Sec. 6662) and the fraud penalty (Code Sec. 6663).

The accuracy-related penalty consolidates all of the penalties relating to the accuracy of tax returns. It is equal to 20% of the portion of the underpayment of tax (i.e. greater of $5,000 or 10% 0f the tax) that is attributable to one or more of the following: (1) negligence or disregard of rules or regulations, (2) substantial understatement of income tax, (3) substantial valuation misstatement, and (4) substantial overstatements of pension liabilities (Code Sec. 6662(a) and (b))., or 40% of the tax underpayment from an undisclosed foreign financial account understatement.

The accuracy-related penalty is entirely separate from the failure to file penalty and will be imposed if no return, other than a return prepared by the IRS when a person fails to make a required return, is filed (Code Sec. 6664 (b)). In addition, the accuracy-related penalty will not apply to any portion of a tax underpayment on which the fraud penalty is imposed.”

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Our author, Gary S. Wolfe, has more than 34 years of experience, specializing in IRS Tax Audits and International Tax Planning/Tax Compliance, and International Asset Protection.

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