P-3 Taxpayer Penalties and Interest Flashcards
What is form 843?
Form 843 is used to file a claim for a refund or abatement for certain taxes, penalties, and additional tax.
What should be written on top of form 843 (Claim for refund or abatement) if the taxpayer believes the IRS assessed interest during a period of which interest should have been suspended?
The taxpayer should write “section 6404(g) notification” across the top.
What consequences does a taxpayer face if he agrees with changes made during an audit and signs an agreement but fails to promptly pay the taxes due?
He will be charged interest on the additional taxes from the due date of the return until the payment date.
If the IRS disallows, rejects, or fails to address within six months a taxpayer’s timely filed claim for a refund, what are three actions the taxpayer do?
The taxpayer can, Enlist the assistance of Taxpayer advocate service, appeal the decision with the Appeals office or file a claim in the Federal District Court.
If the IRS assesses interest for periods during which interest should have been suspended because the IRS did not mail a notice in a timely manner, what can the taxpayer do?
If the taxpayer believes that the IRS assessed interest with respect to a period during which interest should have been suspended, submit Form 843, writing “Section 6404(g) Notification” at the top of the form, with the IRS Service Center where the return was filed.
The Tax Court has generally held that taxpayers who rely on software to justify errors on self-prepared returns are?
The taxpayers are liable for the Section 6662 accuracy-related penalty.
When does section 6662 penalty apply?
Section 6662 penalty applies when there is negligence or disregard of rules or regulations or any substantial understatement of income tax.
Does a section 6662 penalty apply if a taxpayer uses software to file their tax return?
Yes,
Software is only as good as the information the taxpayer puts into it. The tax courts have held that the misuse of tax preparation software, even if unintentional or accidental, is no defense to penalties under Section 6662.
IRC §6664(c); Reg. 1.6664-4(b)(1); Anyika v. Commissioner, T.C. Memo. 2011-69
Section 6662 accuracy-related penalty of 20% of unpaid tax may be due if the tax is underpaid due to what two instances?
- Negligence or disregard of the rules or regulations, or
- Substantial understatement of income tax.
The penalty is increased to 40% for a gross valuation misstatement.
