Last week, IRS Commissioner Douglas Shulman agreed to temporarily suspended 6707a penalties until September 30, 2009 in his letter to Congress.
(See Shulman response letter here)
The IRS Commissioner acted in response to a June 12, 2009 letter from the Senate Finance Committee, which urged the IRS to suspend its efforts to collect penalties for some listed tax shelter transactions, or 6707a penalties. (See Congressional letter here.)
Last month, the IRS received a report with recommendations from the Government Accounting Office indicating that the IRS should develop a plan to better focus its penalty efforts (see the GAO report here.)
The report says the GAO conducted their work “from October 2007 through May 2009 in accordance with generally accepted government auditing standards."
The GAO recommended:
"The Commissioner of Internal Revenue should direct the Office of Servicewide Penalties (OSP) to evaluate penalty administration and penalties’ effect on voluntary compliance and develop a plan to focus its efforts. The Commissioner also should use IRS’s standard outreach methods to again alert taxpayers of the need to disclose reportable loss transactions. In commenting on a draft of this report, IRS concurred with GAO’s recommendations, and summarized the actions it plans to take."
Sen. Grassley said “It’s good to have the reprieve from the IRS, though the suspension will probably need to be longer in order to get necessary changes through Congress.”
“The IRS should also do the right thing by studying why only small businesses have been hit with the penalties since they’re less likely to have the expensive lawyers that big corporations do. It’s a matter of tax fairness for both the IRS and Congress.”
Sen. Baucus also commented: “I’m pleased the IRS complied with our request so that Congress can do its part to ensure the Tax Code treats small businesses fairly.”
“Make no mistake, I will continue to go after tax cheats and tax shelter investments, but these are disproportionate and undue penalties on honest, hardworking American business owners and their employees. I appreciate the IRS’ help on this, and I will move this forward until the issue is resolved.”
“We are working — both sides of the aisle and the Capitol — to ensure assessed tax penalties fall in line with received tax benefits. Until we reach that goal, we require cooperation from the IRS so that millions of American small businesses don’t get another chip stacked against them in the lagging economy."
