Small Business Jobs Act Provides Needed Relief on 6707A Penalties

Reportable and listed transactions. The Senate bill limits the section 6707A penalty for failure to disclose a reportable transaction (that is, a transaction determined by the IRS to have a potential for tax avoidance or evasion) to 75% of the decrease in tax resulting from the transaction. The maximum annual penalty allowed will be $10,000 in the case of a natural person and $50,000 for all other persons for failure to disclose a reportable transaction. For listed transactions, the maximum penalty will be $100,000 in the case of a natural person and $200,000 for all other persons. The minimum penalty is $5,000 for natural persons and $10,000 for all other persons.

The bill also requires the IRS to report to Congress by Dec. 31, 2010, and then annually, on penalties assessed for certain tax shelters and reportable transactions (under sections 6662A, 6700(a), 6707, 6707A and 6708). The penalty under section 6707A has been criticized because the penalty amounts often exceed the tax benefit of the targeted transactions. The IRS has since last July been working under a self-imposed moratorium on collection enforcement of the section 6707A penalty to give Congress time to amend the penalty amounts. The AICPA has recommended that the IRS be allowed to abate the section 6707A penalty in cases where the taxpayer has acted reasonably and in good faith. The AICPA also believes that judicial review should be allowed in cases where the IRS has assessed a penalty under section 6707A. The Senate bill does not adopt either of these recommendations. http://www.journalofaccountancy.com/Web/20103340.htm



Also see:
1. http://blogs.forbes.com/deanzerbe/2010/09/14/small-business-tax-bill-moves-forward-as-senate-invokes-cloture/?boxes=financechannelforbes
2. http://www.webcpa.com/debits_credits/Small-Business-Bill-Offers-Tax-Shelter-Penalty-Relief-55620-1.html
3. http://www.fastpitchnetworking.com/pressrelease.cfm?PRID=46367