- 20.1.10.8 IRC Section 6682 False Information with Respect to Withholding
- 20.1.10.9 IRC Section 6697 Assessable Penalties with Respect to Liability for Tax of Regulated Investment Companies
- 20.1.10.10 IRC Section 6702 Frivolous Tax Submissions
- 20.1.10.11 IRC Section 6705 Failure by Broker to Provide Notice to Payers
- 20.1.10.12 IRC Section 6706 Original Issue Discount Information Requirements
- 20.1.10.13 IRC Section 6709 Penalties with Respect to Mortgage Credit Certificates
- 20.1.10.14 IRC Section 6720B Fraudulent Identification of Exempt Use Property
- 20.1.10.15 IRC Section 6720C Penalty for Failure to Notify Health Plan of Cessation of Eligibility for COBRA Premium Assistance
- 20.1.10.16 IRC Section 7268 Possession with Intent to Sell in Fraud of Law or to Evade Tax
- 20.1.10.17 IRC Section 7519 Required Payments for Entities Electing Not to Have Required Taxable Year
- 20.1.10.18 IRC Section 9707 Failure to Pay Premium
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IRC 6697 and IRC 860(j) provide for a penalty on a regulated investment company (RIC) that uses the deficiency dividend procedures under IRC 860, Deduction for deficiency dividends.
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The amount of penalty (along with interest due) on a deficiency dividend is based upon the Form 976, Claim for Deficiency Dividends Deduction Credit, or Refund, etc., filed by the taxpayer or RIC.
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For purposes of this penalty, the term "deficiency dividends" means a distribution of property made by the qualified investment entity on or after the date of the determination and before filing claim under subsection (g), which would have been included in the tax liability computation of the deduction for dividends (distributed during the taxable year) paid under IRC 561 for the taxable year. No distribution of property shall be considered as deficiency dividends for purposes of subsection (a) unless:
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Distributed within 90 days after the determination, and
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A claim for a deficiency dividend deduction to such distribution is filed pursuant to subsection (g).
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Claim required. No deficiency dividend deduction shall be allowed under subsection (a) unless (under regulations) a claim is filed within 120 days after the determination date.
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The deficiency dividend creates a deemed increase in tax under IRC 860(c)(1).
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Interest is due on the deemed increase in tax for the taxable year from the original filing date of Form 1120-RIC, U.S. Income Tax Return For Regulated Investment Companies, to the date Form 976, Claim for Deficiency Dividends Deduction Credit, or Refund, etc. is filed.
Example:
If the Form 976 is filed on January 2 and the payment is not received until November 1 of the same year, interest is only due through January 2.
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The IRC 6697 penalty is equal to the amount of interest calculated in (2) above, but may not exceed 50% of the dividend deduction for the taxable year.
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If the taxpayer making a deficiency dividend procedure payment is under examination, the exam team will generally assess the penalty using Form 8278 and filing the paperwork with Centralized Case Processing (CCP). The exam team may work with LMSB Financial Services Executive Assistant Technical (LMF).
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If the taxpayer making a deficiency dividend procedure payment is not under examination, (generally) the LMSB, Financial Services (LMF) Headquarters, will assert the penalty.
Caution:
Do not work the issue. Contact LMF.
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For RIC self-determinations under IRC 860(e)4, taxpayers can now initiate the process by sending in Form 976 or making a payment. Contact and work with LMF, if there is no examination involved. LMF will assist the taxpayer with processing the Form 976, Claim for Deficiency Dividends Deduction Credit, or Refund, etc. and the payment.
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The penalty is:
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Input on IDRS using the information provided on Form 8278,
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Assessed using PRN 582, and
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Not subject to deficiency procedures.
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IRC 6702 provides for penalties for frivolous tax submissions.
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Unlike many other penalties, this penalty is not based upon a tax liability; therefore, an underpayment or understatement of tax is not necessary for the penalty to be assessed.
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IRC 6702(a) provides for a penalty against persons who file a return that does not contain enough information to determine if the figures reported are correct, or contains data that shows it is mostly incorrect, and if either of the following apply:
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The return is one of the frivolous positions identified in IRC 6702(c), Listing of frivolous positions, or
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The return is filed by a taxpayer with the desire to delay or interfere with the administration of Federal tax laws.
Note:
Per IRC 6702(c), the IRS has issued Notice 2010-33, which lists positions that the IRS has determined are frivolous for purposes of IRC 6702. The IRS updated Notice 2008-14 (which updated Notice 2007-30) with Notice 20010-33 and will intermittently issue updated notices with additional frivolous positions.
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Unlike many other penalties, this penalty is not based upon a tax liability, therefore, an underpayment or understatement of tax on a return is not necessary for the penalty to be assessed.
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The penalty is not limited to income tax returns. It may be asserted on any tax return required to be filed by the Internal Revenue Code, such as income, employment, excise, estate and gift, etc. The penalty is applicable to any initial return or amended tax return.
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The term "persons" applies to entities as well as individuals.
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For frivolous returns or submissions filed after March 15, 2007, the date Notice 2007-30 was issued, the penalty is $5,000 per frivolous return.
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The IRS issued Notice 2007-30, then issued updated Notice 2008-14, then issued updated Notice 2010-33, which identifies positions that the IRS has determined are frivolous. Taxpayers may be subject to a $5,000 civil penalty for frivolous positions that are the same or similar to the positions listed in Notice 20010-33 or any later published list of frivolous positions under IRC 6702(c).
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The penalty is:
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Input on IDRS using information provided on Form 8278,
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Assessed using PRN 666 (after January 24, 2005), and
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Not subject to deficiency procedures.
Note:
See Exhibit 20.1.1-6, for the previous applicable civil penalty reference numbers (PRN 665 through 673) used before January 25, 2005.
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For frivolous income tax returns filed by individuals prior to March 15, 2007, the penalty was:
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$500 per frivolous document,
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Applied only to income taxes, and was not applicable to corporations, partnerships, estates or other entities, and
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Not applicable to hearing requests, installment agreements, offers-in-compromise, or applications for taxpayer assistance orders, Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order).
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Because the penalty is based on each frivolous submission of a return, a taxpayer may be assessed a separate penalty for each frivolous tax return submitted (even if it is a duplicate return) and may have more than one penalty assessment on a tax period of that return.
Example:
In March 2009, Taxpayer A files a 2008 Form 1040, citing a frivolous position and is assessed a $5,000 penalty on MFT 55, Tax Period 200812. In June 2009, Taxpayer A files a second 2008 Form 1040, citing the same frivolous position. Taxpayer A can be assessed an additional $5,000 penalty on MFT 55, Tax Period 200812. If Taxpayer A files a third (or more) frivolous 2008 return in 2010 (or subsequent), then Taxpayer A can be assessed a $5,000 penalty on his MFT 55, Tax Period 200812 account for every additional frivolous return.
Exception:
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Joint filing status frivolous filings will result in separate penalty assessments on the primary and secondary taxpayers, with a $5,000 penalty per frivolous document assessed against each spouse.
Example:
Taxpayer B (primary) and Taxpayer C (secondary) file a 2008 joint return that is deemed to be frivolous. A $5,000 frivolous return penalty will be assessed on the Taxpayer B's and C's 2008 joint account (on the primary taxpayer's TIN) and a $5,000 penalty will be assessed on the Taxpayer C's account (on the secondary taxpayer's TIN). Both penalties must be paid.
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Statute of Limitations. A frivolous valid return should be assessed within three (3) years after the date the return was filed.
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Taxpayers seeking judicial review of a IRC 6702 penalty must first fully pay the entire penalty and then file a claim for refund with the IRS within two years of the date of payment. If the IRS does not issue a determination allowing or disallowing the claim within six (6) months, the taxpayer may file suit in the district court or U.S. Court of Federal Claims. If the IRS issues a disallowance letter, the taxpayer has two (2) years from the date the disallowance letter was sent to the taxpayer to file suit contesting this penalty in the district court or U.S. Court of Federal Claims.
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IRC 6702(b) provides for a penalty against anyone who submits a specified frivolous submission. A specified submission is defined as a(an):
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Hearing request under IRC 6320, Notice and opportunity for hearing upon filing of notice of lien,
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Hearing request under IRC 6330, Notice and opportunity for hearing before levy, i.e., a Collection Due Process (CDP) hearing request (see IRM 5.19.8.4.7.8 Withdrawal of a Request for CDP or Equivalent Hearing Request),
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Installment agreement request,
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Offer-in-compromise request, or
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Application for a taxpayer assistance order (Form 911).
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A taxpayer will be subject to the penalty under section 6702(b) for making any of these specified submissions, if the submission:
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Has been identified by the IRS as frivolous under IRC 6702(c), or
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Is to delay or impede the administration of Federal tax laws.
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For frivolous submissions filed after March 15, 2007, the date Notice 2007-30 was issued, the penalty is $5,000 per frivolous submission. The IRS issued Notice 2007-30, then issued updated Notice 2008-14, then issued updated Notice 2010-33, which identifies positions that the IRS has determined are frivolous. Taxpayers may be subject to a $5,000 civil penalty for frivolous positions that are the same or similar to the positions listed in Notice 20010-33 or any later published list of frivolous positions under IRC 6702(c).
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For frivolous submissions filed by individuals prior to March 15, 2007, the IRC 6702(b) civil penalty did not apply to hearing requests, installment agreements, offers-in-compromise, or applications for taxpayer assistance orders (Form 911).
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Because the penalty is based on each frivolous submission of a return, a taxpayer may be assessed a separate penalty for each frivolous submission or frivolous return submitted.
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Joint filing status frivolous filings will result in separate penalty assessments on the primary and secondary taxpayers, with a $5,000 penalty per frivolous submission assessed against each spouse.
Example:
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The penalty is:
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Input on IDRS using information provided on Form 8278,
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Assessed using PRN 543, and
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Not subject to deficiency procedures.
Note:
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Generally, the Campus identifies frivolous submissions and the Ogden Campus Compliance site Frivolous Return Program (FRP) Unit determines and assesses frivolous submissions penalties.
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If the Field receives a submission that warrants a frivolous submission penalty, the employee should indicate this on Form 3198, Special Handling Notice, which should be attached to the original submission.
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Any frivolous submission should be forwarded to the FRP Unit. See IRM 4.10.12, Frivolous Return Program, for more information.
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Because the penalty is based on each frivolous submission, a taxpayer may be assessed a separate penalty for each frivolous submission (even if it is a duplicate ) and may have more than one penalty assessment on a tax period of that return; however, assess only one penalty per submission in the year the frivolous submission was received.
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Statute of Limitations. A frivolous valid return should be assessed within three (3) years after the date the return was filed.
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Taxpayers seeking judicial review of an IRC 6702 penalty must first fully pay the entire penalty and then file a claim for refund with the IRS within two years of the date of payment. If the IRS does not issue a determination allowing or disallowing the claim within six (6) months, the taxpayer may file suit in the district court or U.S. Court of Federal Claims. If the IRS issues a disallowance letter, the taxpayer has two (2) years from the date the disallowance letter was sent to the taxpayer to file suit contesting this penalty in the district court or U.S. Court of Federal Claims.
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If the IRS issues a notice stating a specified frivolous submission under IRC 6702(b) was made, and the person responds within 30 days after the notice by withdrawing the frivolous submission, then the IRC 6702(b) penalty will not apply. By statute, the opportunity to withdraw applies only to the IRC 6702(b) penalty and not to persons filing a frivolous tax return under IRC 6702(a). See IRM 4.10.12, Frivolous Return Program for more information.
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IRC 6705 provides for a penalty under IRC 3406(d)(2)(B) for the failure by a broker to provide notice to payers that a payee is subject to backup withholding.
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Under IRC 3406(d)(2)(B), Backup withholding, Broker notifies payor, a broker who acquires a readily tradable instrument for a payee (customer) must notify the payor of such instrument within 15 days of the acquisition that the payee is subject to backup withholding if any of the following conditions exist:
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The payee fails to furnish the TIN to the broker, or
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The IRS notifies the broker that the TIN is incorrect, or
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The payee has not provided the broker with a certification that the payee is not subject to backup withholding, or
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The IRS notified the broker before the acquisition that the payee is subject to backup withholding.
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A broker who is required to notify the payor when transferring instructions of a readily tradable instrument may notify the payor by means of magnetic (electronic) media, machine readable document, or any other medium, provided that the notice includes the following information:
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The payee's name, address, and taxpayer identification number (if provided to the broker);
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A statement that the payee is subject to withholding; and (when applicable),
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A statement that the broker was notified by the IRS that the payee is subject to withholding.
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The broker must give the information to the payor with the transfer instructions for the acquisition (including account registration instructions transmitted by a broker in the case of acquisitions of shares in a mutual fund). A notice including the information in (3) above (see IRM 20.1.10.11.) fulfills the broker's requirement to give notice to the payor. Once the broker transmits the transfer instructions containing the required information, the broker has no further responsibility to obtain a missing taxpayer identification number or missing certification or to provide additional notices to the payee or payor for the acquisition of the instrument. Upon receiving the notice from a broker, the payor must impose withholding on the account.
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For purposes of this penalty, the term "broker" includes:
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A dealer,
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Barter exchange, and
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Any other person who regularly acts as a middleman for property or services (for pay).
A person who manages a farm on behalf of another person is not a broker.
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The penalty is $500 per failure by the broker to provide the notice to the payor.
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The penalty is:
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Input on IDRS using the information provided on Form 8278,
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Assessed using PRN 632, and
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Not subject to deficiency procedures.
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IRC 6706 provides for a penalty for Original Issue Discount (OID) information requirements.
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For the purposes of this penalty, "original issue discount" means the excess of the stated redemption price at maturity over the issue price. "Stated redemption price at maturity" means the sum of all payments provided by the debt instrument other than qualified stated interest payments. Generally, "qualified stated interest" is stated interest unconditionally payable in cash at least annually at a single fixed rate. "Issue price" , in the case of publicly offered instruments not issued for property, means the first price at which a substantial amount of such instruments was sold to the public (excluding bond houses and brokers).
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IRC 6706(a) provides for a penalty for the failure to show the information required under IRC 1275(c)(1) Other definitions and special rules, Information requirements, Information required to be set forth on instrument, on a debt instrument, Form 8281, Information Return for Publicly Offered Original Issue Discount Instruments.
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In the case of any debt instrument having original issue discount (OID), the following information must be shown on the debt instrument:
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The amount of the original issue discount, and
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The issue date.
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The penalty is $50 per failure.
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The penalty is:
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Input in IDRS using information provided from Form 8278,
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Assessed using civil PRN 678, and
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Not subject to deficiency procedures.
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IRC 6706(b) provides for a penalty for failing to timely furnish Form 8281, Information Return for Publicly Offered Original Issue Discount Instruments, required under IRC 1275(c)(2) Information required to be submitted to Secretary.
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An issuer of a publicly offered debt instrument (obligation) having an Original Issue Discount (OID), such as a bond, debenture, or note, must file Form 8281. Form 8281 must be filed:
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Within 30 days of the date of issuance of an OID instrument, and
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Using a separate Form 8281 for each issue.
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Publicly offered debt instruments also may include:
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Serial obligations,
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Debt instruments issued in exchange for other debt instruments or for stock,
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A debt instrument sold together with options or warrants (an investment unit),
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Sinking fund instruments, and
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Convertible instruments.
An obligation registered with the Securities and Exchange Commission (SEC) is a publicly offered debt instrument. An obligation exempt from SEC registration may be publicly offered.
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Exceptions. The form is not required to be filed for the following:
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Regular interests of a real estate mortgage investment conduit (REMIC) or collateralized debt obligations (CDOs). REMICs and issuers of CDOs must file Form 8811, Information Return for Real Estate Mortgage Investment Conduits (REMICs) and Issuers of Collateralized Debt Obligations,
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Instruments on which OID is de minimis,
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Tax-exempt obligations (interest on them is not taxable),
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Short-term obligations (those that mature in 1 year or less from their issue date),
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Certificates of deposit (CDs) issued by banks or other financial institutions,
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CDs that are sold by brokers or other middlemen, and
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A public offering of stripped bonds or stripped coupons, including instruments issued under the Department of the Treasury's STRIPS program and instruments that constitute ownership interests in U.S. Treasury securities.
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The penalty is 1% of the aggregate issue price.
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The maximum penalty is limited to $50,000.
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The penalty is:
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Input on IDRS using information provided on Form 8278,
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Assessed using PRN 678, and
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Not subject to deficiency procedures.
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IRC 6709 provides for penalties for mortgage credit certificates.
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For purposes of this penalty, the term "mortgage credit certificate" means any certificate which is:
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Issued under a qualified mortgage credit certificate program by the State or political subdivision having the authority to issue qualified mortgage bonds to provide financing on the principal residence of the taxpayer,
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Issued to the taxpayer in connection with the acquisition, qualified rehabilitation, or qualified home improvement of the taxpayer's principal residence, and
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Specifies - (i) the certificate credit rate, and (ii) the certified indebtedness amount, and
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In the form required by law.
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The term "qualified mortgage credit certificate program" means any program that is established by a state or political subdivision for any calendar year that it is authorized to issue qualified mortgage bonds under which the issuing authority elects not to issue private activity bonds.
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IRC 6709(a) provides for a penalty for making a material and negligent misstatement in any verified written statement made under penalties of perjury with respect to the issuance of a mortgage credit certificate.
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The penalty is $1,000 for each mortgage credit certificate where a misstatement was made, if the misstatement is due to negligence.
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The penalty is:
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Input on IDRS from information provided on Form 8278,
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Assessed using PRN 578, and
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Not subject to deficiency procedures.
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IRC 6709(b) provides for a penalty if a misstatement described in subsection (a)(1) is due to fraud on the part of the person making the misstatement.
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The penalty is $10,000 for each mortgage credit certificate where a misstatement is made, in addition to any criminal penalty.
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The penalty is:
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Input on IDRS from information provided on Form 8278,
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Assessed using PRN 579, and
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Not subject to deficiency procedures.
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IRC 6709(c) provides for a penalty for failure to file a report with respect to any mortgage credit certificates required by IRC 25(g), Reporting requirements.
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Any person (lender) who makes a loan that is a "certified indebtedness amount" on any Mortgage Credit Certificate (MCC) must maintain books and records of such activity and file Form 8329, Lender's Information Return for Mortgage Credit Certificates (MCC). The lender must provide IRS with information regarding the issuance of MCCs under IRC 25, Interest on certain home mortgages, containing:
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The name, address, and social security account number of the individual to which the certificate was issued,
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The certificate's issuer, date of issue, certified indebtedness amount, and certificate credit rate, and
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Other information required by regulations.
Each person who issues a mortgage credit certificate shall file a timely and accurate report showing information required by regulations and signed by an authorized representative of the lender.
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Form 8329 is due by January 31 following the close of the calendar year in which the lender made certified indebtedness loans. A separate Form 8329 must be filed for each issue of MCCs for which the lender made mortgage loans during the calendar year.
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Each issuer (States and political subdivisions) of MCCs are to provide IRS with information required by IRC 25 and Treas. Reg. 1.25-8T(b).
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Form 8330, Issuer's Quarterly Information Return for Mortgage Credit Certificates (MCC), must be filed on a quarterly basis beginning with the quarter in which the election was made.
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More than one Form 8330 may be filed for a particular quarter for an issuer if the issuer had more than one MCC program in operation during a calendar quarter.
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Certificates under an MCC program may be issued for indebtedness up to the close of the 2nd calendar year following the calendar year for which the issuing authority made the election to issue MCCs in lieu of qualified mortgage bonds. There may be as many as 12 consecutive quarterly reports filed for a particular MCC program.
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Form 8330 must be signed by an authorized representative of the issuer.
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The penalty is $200 for each failure to file a form by the due date.
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The maximum limit is $2,000.
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The penalty is:
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Input on IDRS using information provided on Form 8278,
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Assessed using PRN 580, and
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Not subject to deficiency procedures.
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In addition to any criminal penalty provided by law, IRC 6720B provides for a penalty against any person who identifies "applicable property" as defined in IRC 170(e)(7)(C) for a purpose or function based on the donee's exemption under IRC 501 and who knows that the property is not intended for that use.
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For purposes of this paragraph, the term "applicable property" means charitable deduction property as defined in IRC 6050L(a)(2)(A)), which is a tangible personal property, and in which a deduction in excess of the donor's basis is allowed.
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The term "charitable deduction property" means any property (other than publicly traded securities) donated in a contribution for which a deduction was claimed under IRC 170 if the claimed property value (plus the claimed value of all similar items of property donated by the donor to one (1) or more donees) exceeds $5,000.
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The penalty is $ 10,000 for each identification made after August 17, 2006.
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The penalty is:
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Input on IDRS using information provided on Form 8278,
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Assessed using PRN 551, and
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Not subject to deficiency procedures.
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The American Recovery and Reinvestment Act of 2009, enacted on February 17, 2009, contained an employer-provided subsidy of 65% of the total amount of insurance coverage for employees who are involuntarily terminated between September 1, 2008 and December 31, 2009. IRC 6720C provides for a penalty against individuals for failure to notify their health plan when they no longer qualify for COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985) premium assistance.
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The Department of Defense Appropriations Act, 2010, Sec. 1010, enacted on December 19, 2010, extended the eligibility period to provide a two-month extension (through February 28, 2010) of the eligibility period for COBRA assistance, and increased the maximum duration of COBRA assistance from nine months to 15 months.
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The Continuing Extension Act of 2010, enacted April 15, 2010, reinstated the COBRA subsidy, which had expired on March 31. As a result, workers who are involuntarily terminated from employment between September 1, 2008 and May 31, 2010, may be eligible for a 65% subsidy of their COBRA premiums for a period of up to 15 months. In some cases, workers who had their hours reduced and later lose their jobs may also be eligible for the subsidy. The COBRA subsidy is now also available to people who become eligible for COBRA coverage as a result of a reduction in hours occurring between September 1, 2008, and May 31, 2010, followed by an involuntary termination between March 2, 2010 and May 31, 2010.
Note:
An involuntary termination of employment that occurs on or after March 2, 2010 but by May 31, 2010 and follows a qualifying event that was a reduction of hours that occurred at any time from September 1, 2008 through May 31, 2010 is also a qualifying event for purposes of ARRA.
Exception:
This subsidy phases out for individuals whose modified adjusted gross income exceeds $125,000, or $250,000 for those filing joint returns. Taxpayers with modified adjusted gross income exceeding $145,000, or $290,000 for those filing joint returns, do not qualify for the subsidy.
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Individuals receiving COBRA premium assistance are required to notify their group health plan in writing when they become eligible for benefits under:
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Medicare or
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Any other group health plan.
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They are not required to notify their group health plan if the coverage:
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Consists only of dental, vision, counseling, or referral services (or a combination of such services),
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Is under a flexible spending arrangement, or
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Is for treatment furnished in an on-site, employer maintained medical facility that consists primarily of first-aid services, prevention and wellness care, or similar care (or a combination of such care).
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For more information, see IRM 21.6.4.4.18, COBRA Premium Subsidy.
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≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
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≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
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≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
Note:
≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
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For additional information on COBRA subsidies, see IRM 21.7.2.5.10, Premium Assistance for COBRA Benefits .
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The penalty is 110 percent of the total amount the health care payment was reduced during the time the individual was not eligible for COBRA premium assistance (the penalty amount is equal to the amount of subsidy credit paid by the employer or entity making the subsidy payments after the taxpayer became ineligible, plus 10% of the total).
Note:
There is no penalty assessed on the recapture of a COBRA subsidy, which is when a taxpayers' modified adjusted gross income exceeds $145,000 ($290,000 for married filing joint returns), and they must report and repay the entire subsidy on their income tax return.
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The penalty is:
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Input on IDRS using information provided on Form 8278,
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Assessed using PRN 563, and
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Not subject to deficiency procedures.
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≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
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≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
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≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
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≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
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≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
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≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
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≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
Note:
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No penalty shall be imposed under subsection (a) with respect to any failure if it is shown that such failure is due to reasonable cause and not to willful neglect.
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The examiner's supervisor must approve all penalty determinations (assertions and non-assertions).
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IRC 7268 provides for a penalty for possessing taxable goods, wares, merchandise, articles, or objects for the purpose of fraudulently selling or avoiding paying taxes. See IRM 9.1.3, Criminal Statutory Provisions and Common Law.
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The penalty is $500 or not less than double the amount of taxes illegally evaded.
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The penalty is administered by the Alcohol and Tobacco Tax and Trade Bureau (TTB).
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IRC 7519 provides for a penalty for partnerships and S corporations that elect a taxable year other than their required year under IRC 444Election of taxable year other than required taxable year for failure to timely make a required payment of the tax that would have been paid if they were a calendar year filer.
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For purposes of this penalty, the term "required payment" means an amount equal to the result of:
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The applicable percentage of the adjusted highest section 1 rate, multiplied by
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The net base year income of the business, over
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The net required payment balance.
The term "adjusted highest section 1 rate" means the highest rate of tax under section 1 at the end of the base year plus 1 percentage point (currently 36 percent).
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These payments are due on or before May 15 and are not credited against the partners' or shareholders' tax liabilities, but are a payment that is adjusted each year with the filing of Form 8752, Required Payment or Refund Under Section 7519.
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If the required payment is not more than $500 and the partnership or S corporation has not had to make a required payment for a prior year, the partnership or S corporation is not required to make a payment for the applicable election year.
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If the partnership or S corporation willfully fails to comply with the requirements, IRC 444 will no longer apply to the partnership or S corporation.
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For more information, see IRM 21.7.4.4.7, Form 8752, Required Payment or Refund Under Section 7519.
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The penalty is 10% of the underpayment.
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For purposes of this penalty, the term "underpayment" means the remainder of the amount of the required payment after it is subtracted from the payment (if any) made on or before the due date.
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If the penalty is for negligence and/or fraud penalties, then the payment will be treated as a tax.
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The penalty is systemically assessed as TC 246 with PRN 684.
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The 10% election penalty may be manually assessed if it is not systemically generated when the return posts.
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Input TC 290 for .00 and PRN 684 with the correct penalty amount on IDRS, Master File Tax (MFT) 15.
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The penalty assessment will post to the Master File Tax (MFT) 15 account as a TC 240 with PRN 684.
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The 10% election penalty may be manually abated by inputting TC 290 for .00 ( MFT 15) and PRN 684 with the amount to be reversed.
Note:
For penalty reversal, use a minus sign after the money amount. The penalty abatement will post to the MFT 15 account as a TC 241 with PRN 684.
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Penalty relief may be granted if the partnership or S corporation (that elected a taxable year other than their required year) proves the failure to timely make a required payment (of the tax that would have been paid if they were a calendar year filer) was due to reasonable cause and not willful neglect.
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The First-Time Abate policy does not apply to this penalty.
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Oral testimony does not apply to this penalty.
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IRC 9707 provides for a penalty for failure to pay premiums or installments required under IRC 9704Liability of assigned operators and/or for failure to make contributions required under IRC 402(h)(5)(B)(ii) of the Surface Mining Control and Reclamation Act of 1977 to a plan referred to in IRC 402(h)(2)(C) Taxability of beneficiary of employees' trust - Special rules for simplified employee pensions - Limitations on employer contributions.
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Assigned operators are required to pay premiums for eligible beneficiaries.
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Contributions are required under the mining laws for the failure of any person to make a contribution required under IRC 402(h)(5)(B)(ii) of the Surface Mining Control and Reclamation Act of 1977 (Act) to a plan under IRC 402(h)(2)(C) of the Act.
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Each required monthly contribution for the hours worked by any individual shall be treated as if it were a premium required to be paid for the eligible beneficiary.
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For purposes of this penalty, the term "noncompliance period" means, the period beginning on the due date for such premium or installment and ending on the date of payment of the premium or installment.
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The penalty shall be treated in the same manner as tax.
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The penalty is $100 per day beginning on the due date of the premiums or installments and ending on the date of payment for each failure.
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There is no maximum limitation. The penalty continues to accrue until it is fully paid.
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The Plan is responsible for notifying the Internal Revenue Service of any delinquency.
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The Department of the Interior-Office of Surface Mining will contact Large Mid-size Business (LMSB)-NRC in Houston, TX with any penalty referrals.
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The penalty is asserted using PRN 593.
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Penalty relief may be given if the taxpayer:
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Proves the failure was due to reasonable cause and not to willful neglect, and/or
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Corrects the failure during the 30-day period beginning on the first date that the taxpayer knew, or if exercising reasonable diligence would have known, that the failure existed.
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If the failure that is due to reasonable cause and not to willful neglect, the penalty may be waived entirely or partially if it is excessive compared to the failure involved.