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Part 20. Penalty and Interest

Chapter 1. Penalty Handbook

Section 10. Excise Tax Penalties and Miscellaneous Penalties (Cont. 2)

20.1.10  Excise Tax Penalties and Miscellaneous Penalties (Cont. 2)

20.1.10.17 
Fuel Tax Enforcement

20.1.10.17.2 
IRC Section 6717, Penalty for Refusal of Entry

20.1.10.17.2.4  (01-01-2006)
Joint and Several Liability

  1. If the penalty is imposed on any business entity, each officer, employee, or agent of such entity, who willfully participated in any act giving rise to such penalty is jointly and severally liable with such entity for such penalty, IRC section 6717(b)(1) .

  2. If a business entity described in paragraph (1) above, is part of an affiliated group (as defined in IRC IRC section 1504(a) ), the parent corporation of such entity shall be jointly and severally liable with such entity for the penalty imposed under this section, IRC section 6717(b)(2) .

20.1.10.17.3  (01-01-2006)
IRC Section 7272 Penalty for Failure to Register

  1. IRC section 7272 (civil) provides for a penalty for failing to register under IRC section 4101.

20.1.10.17.3.1  (01-01-2006)
Who Asserts / Assesses

  1. Reserved

20.1.10.17.3.2  (01-01-2006)
Penalty Computation

  1. The penalty increased from $50 to $10,000 by section 862 of the American Jobs Creation Act .

  2. The increase is effective for penalties imposed after December 31, 2004.

20.1.10.17.3.3  (01-01-2006)
Assertion / Assessment

  1. This penalty is assessed using PRN 667.

20.1.10.17.3.4  (01-01-2006)
Penalty Relief

  1. Reasonable cause does apply. See IRM 20.1.1.3 .

20.1.10.17.4  (01-01-2006)
IRC Section 6718, Failure to Display Tax Registration on Vessels

  1. Beginning on January 1, 2005, an operator who is required to register under IRC section 4101 must display proof of registration using an identification device prescribed by the IRS on vessels transporting taxable fuel, IRC section 4101(a)(2) enacted by the American Jobs Creation Act.

  2. IRC section 6718 provides for a penalty for the failure to display the registration on a vessel.

20.1.10.17.4.1  (01-01-2006)
Who Asserts / Assesses

  1. Reserved

20.1.10.17.4.2  (01-01-2006)
Penalty Computation

  1. Five hundred ($500) per vessel for the initial one month failure to display

  2. In the case of multiple monthly violations, $500, plus the amount derived by multiplying $500 times the number of monthly penalties previously imposed.

20.1.10.17.4.3  (01-01-2006)
Assertion / Assessment

  1. Reserved

  2. Notice 2005–4, 2005–2 Internal Revenue Bulletin 289, provides at section 6 that no penalty will be imposed until after the IRS provides guidance on the identification device and the manner of its display.

20.1.10.17.4.4  (01-01-2006)
Penalty Relief

  1. Reserved

20.1.10.17.5  (01-01-2006)
IRC Section 6719 Penalty for Failure to Register

  1. IRC section 6719 enacted by the American Jobs Creation Act, adds an assessable penalty for each initial failure to register under IRC section 4101 .

20.1.10.17.5.1  (01-01-2006)
Who Asserts / Assesses

  1. This penalty is asserted by Compliance.

20.1.10.17.5.2  (01-01-2006)
Penalty Computation

  1. Ten thousand dollars ($10,000) for each failure to register, and

  2. One thousand ($1,000) a day for each day the failure continues.

20.1.10.17.5.3  (01-01-2006)
Assertion / Assessment

  1. This penalty is assessed using PRN 670.

20.1.10.17.5.4  (01-01-2006)
Penalty Relief

  1. Reasonable cause does apply. See IRM 20.1.1.3 .

20.1.10.17.6  (01-01-2006)
IRC Section 6725, Failure to File Information Return

  1. The Excise Summary Terminal Activity Reporting System (ExSTARS) is the IRS's fuel information reporting system requiring terminal operators and bulk transport carriers to report monthly on the movement of any liquid product into or out of a terminal under IRC section 4101(d) . IRC section 6721 provides a penalty for failing to report (failure includes providing inaccurate or incomplete information.) The penalty is $50 for each return.

  2. IRC section 6725, enacted by the American Jobs Creation Act, creates and assessable penalty for the failure of any person to make a report required by the ExSTAR system (failure includes providing inaccurate or incomplete information) on a vessel or facility (e.g., a terminal.)

20.1.10.17.6.1  (01-01-2006)
Who Asserts / Assesses

  1. Reserved

20.1.10.17.6.2  (01-01-2006)
Penalty Computation

  1. Ten thousand dollars ($10,000) per failure with respect to each vessel or facility to make a report.

20.1.10.17.6.3  (01-01-2006)
Assertion / Assessment

  1. Reserved

20.1.10.17.6.4  (01-01-2006)
Penalty Relief

  1. Reasonable Cause does apply.

20.1.10.18  (01-01-2006)
IRC Section 7268, Possession With Intent To Sell In Fraud Of Law Or To Evade Tax

  1. IRC section 7268, is administered by the Bureau of Alcohol, Tobacco and Firearms. See LEM 20.1.10 .

20.1.10.19  (01-01-2006)
IRC section 7270, Insurance policies

  1. IRC 7270 provides for penalties for the issuance of insurance policies by foreign insurers with the intent to evade tax.

20.1.10.20  (01-01-2006)
IRC section 7271, Penalties for offenses relating to stamps

  1. IRC section 7271 is administered by the Bureau of Alcohol, Tobacco and Firearms. See LEM 20.1.10 .

20.1.10.21  (01-01-2006)
IRC section 7272, Penalty for failure to register

  1. IRC section 7272 relates to penalties for failure to register as required (other than by subtitle E, Alcohol, Tobacco and certain other special taxes.)

    Note:

    For the application of the penalty to a failure to register under IRC section 4101 (fuel tax), see IRM 20.1.10.17.3 .

20.1.10.21.1  (01-01-2006)
Who Assert / Assesses

  1. Reserved.

20.1.10.21.2  (01-01-2006)
Penalty Computation

  1. Any person who fails to register shall be liable to a penalty of $50.

  2. After December 31, 2004, see IRM 20.1.10.17.12 , American Jobs Creation Act (AJCA.)

20.1.10.21.3  (01-01-2006)
Assertion / Assessment

  1. Reserved

20.1.10.21.4  (01-01-2006)
Penalty Relief

  1. Reserved

20.1.10.22  (01-01-2006)
IRC section 7273, Penalties For Offenses Relating To Special Taxes

  1. IRC section 7273 is administered by the Bureau of Alcohol, Tobacco and Firearms. See LEM 20.1.10 .

20.1.10.23  (01-01-2006)
IRC section 7275, Penalty For Offenses Relating To Certain Airline Tickets And Advertising

  1. Tickets for airline passenger transportation must show the total of the tax and the transportation charge, IRC IRC section 7275(a). IRC section 7275(c) provides that any person who violates the provisions of this section is guilty of a misdemeanor for each violation and upon conviction shall be fined not more than $100.

20.1.10.23.1  (01-01-2006)
Who Asserts / Assesses

  1. Reserved

20.1.10.23.2  (01-01-2006)
Penalty Computation

  1. Reserved

20.1.10.23.3  (01-01-2006)
Assertion / Assessment

  1. Reserved

20.1.10.23.4  (01-01-2006)
Penalty Relief

  1. Reserved

20.1.10.24  (01-01-2006)
IRC section 7304, Penalty for fraudulently claiming drawback

  1. IRC section 7304 is administered by the Bureau of Alcohol, Tobacco and Firearms. See LEM 20.1.10 .

20.1.10.25  (01-01-2006)
IRC section 7342, Penalty for refusal to permit entry or examination

  1. IRC section 7342 provides for a penalty against a person who refuses to admit any officer or employee of the Treasury Department, or refuses to permit him to examine such article or articles.

    Note:

    See IRM 20.1.10.17.1 for application of the penalty when the IRS is refused entry for purposes of:

    1. examining the equipment used to determine the amount or composition of such fuel and the equipment used to store such fuel

    2. taking and removing samples of such fuel, or

    3. inspecting books and records as authorized by IRC section 4083(d)(1).

20.1.10.25.1  (01-01-2006)
Who Asserts / Assesses

  1. This penalty is asserted by Compliance on any document used to assess/assert this penalty.

20.1.10.25.2  (01-01-2006)
Penalty Computation

  1. For each refusal to permit entry or examination, the penalty is five hundred ($500.)

20.1.10.25.3  (01-01-2006)
Assertion / Assessment

  1. The penalty is assessed using PRN 655.

20.1.10.25.4  (01-01-2006)
Penalty Relief

  1. There is no reasonable cause exception to this penalty.

  2. If the taxpayer disagrees with the penalty, two options are available:

    1. Make an administrative appeal to the Exam group manager at the time the violation is found, or

    2. Pay the penalty and timely file a Form 843, Claim for Refund and Request for Abatement.

  3. If the claim is disallowed, the taxpayer can file suit in either US District Court or US Court of Federal Claims per IRC section 6532 , Periods of limitation on suits.

  4. If the penalty was erroneously assessed, it should be abated.

20.1.10.26  (01-01-2006)
IRC section 7519, Required payments for entities electing not to have required taxable year

  1. IRC section 7519 requires partnerships and S corporations that elect a taxable year other than their required year under IRC section 444 to make a payment approximating the tax that would have been paid if the entity had changed to a calendar year. These payments are not credited against the partners' or shareholders' tax liabilities, but, in effect, are a deposit, the amount of which is adjusted each year with the filing of Form 8752.

  2. IRC section 7519(f)(4), Penalties, provides for a penalty for failure to pay on the date prescribed if a partnership or S corporation fails to comply with the required payment rules.

20.1.10.26.1  (01-01-2006)
IRC section 7519(f)(4)(A), Required payments for entities electing not to have required taxable year (In general)

  1. IRC section 7519(f)(4)(A) provides for an underpayment penalty on IRC Section 444 election payment amounts unpaid on or before the payment due date, May 15.

20.1.10.26.2  (01-01-2006)
Penalty Computation

  1. The penalty shall be (10%) ten percent.

20.1.10.26.3  (01-01-2006)
Assertion / Assessment

  1. For tax returns filed after December 31, 1991, TC 246, PRN 684, will be computer generated to assess the ten percent (10%) election penalty when Form 8752 posts to a tax module (MFT 15) that is not fully paid by May 15.

  2. The ten percent (10%) election penalty may be manually assessed if it is not computer generated at the time the return posts. Input on IDRS a TC 290 for .00 (MFT 15) with PRN 684 for the correct penalty amount. The penalty assessment will post to (master file) MFT 15 showing a TC 240 with PRN 684.

  3. The ten percent election (10%) penalty may be manually abated by inputting TC 290 (MFT 15) for .00 with PRN 684 for the correct amount to be reversed.

    Note:

    For penalty reversal, use a minus sign after the number. The penalty abatement will post to MFT 15, showing a TC 241 with PRN 684.

20.1.10.26.4  (01-01-2006)
Penalty Relief

  1. The IRC Section 444 ten percent election penalty is subject to reasonable cause (effective 7/97).

  2. See the AIMS Handbook, BMF and NMF Adjustments, regarding IRC Section 444 elections.

20.1.10.27  (01-01-2006)
Form 720 Federal Tax Deposit Penalties

  1. See IRM 20.1.4

20.1.10.28  (01-01-2006)
Foreign Bank and Financial Accounts Report (FBAR) Penalty

  1. Reserved.

Exhibit 20.1.10-1  (01-01-2006)
Penalty Relief—Application Chart

Penalty Relief Chart

IRC Section Type of Penalty Reasonable Cause Relief Other Relief
       
6166(g)(3) Failure to Make Payment of Principal or Interest Payment of Estate Tax No No
       
6652(a)(2) Failure to File Certain Information Returns with Respect to Certain Payments Aggregating less than $10 N/A N/A
       
6652(j) Failure to File Certification with Respect to Certain Residential Rental Projects Yes Yes
       
6652(k) Reserved    
       
6652(l) Reserved    
       
6653 Failure to Pay Stamp Tax (AT&F) N/A N/A
       
6657 Bad Checks Yes Yes
       
6674 Fraudulent Statement or Failure to Furnish Statement to Employee No No
       
6675 Excessive Claims with Respect to the Use of Certain Fuels Yes Yes
       
6697 Assessable Penalties with Respect to Liability for Tax of Regulated Investment Companies No No
       
6702 Frivolous Income Tax Return No No
       
6705 Failure by Broker to Provide Notice to Payors No No
       
6706(a) Failure to Show Information on Debt Instrument Yes Yes
       
6706(b) Failure to Furnish Information to Secretary Yes Yes
       
6707 Reserved Yes  
       
6707(b)(1) Failure to Furnish Tax Shelter ID # Sellers, etc No  
       
6708 Reserved    
       
6709(c) Penalties with Respect to Mortgage Credit Certificates Filing Reports Yes Yes
       
6715 Dyed Fuel Sold for Use or Used in Taxable Use No Yes
       
7268 Reserved    
       
7271 Reserved Yes Yes
       
7272 Penalties for Failure to Register as Required by Subtitle E    
       
7273 Reserved No No
       
7275 Penalties for Offenses Relating to Airline Tickets and Advertising    
       
7304 Reserved    
       
7342 Penalty for Refusal to Permit Entry or Examination No No
       
7519(f)(4) Required Payments for Entities Electing Not to Have Required Taxable Year. Yes No

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