CONTESTING IRS PENALTIES (T/G 504) covers in depth 15 of the most applicable tax penalties to individuals and small businesses, the pertinent tax laws thereon, the exceptions and bases for relief, the forms and rationale for contestations (with examples), and the abusive assertion (by the IRS) of the 75% civil fraud penalty. Also covered:

• Reasonable explanations for late filing
• Court rulings for & against the IRS
• The "penalty of choice" for IRS auditors
• Best defense: disclosures & authorities
• Fines & prison terms for false returns
• Opportunities within the IRS for appeal

Contesting IRS Penalties
Book:  504

Table of Content

1.  FAILURE TO FILE OR PAY                      1-1

    What Constitutes a Return                   1-2
    Tampered Returns Invalid                    1-3
    Penalty Section 6651                        1-5
    Three Basic Penalties                       1-7
    Three Enhanced Penalties                    1-8
    The “Maximum Tax” Penalty                   1-9
    Showing of Reasonable Cause                 1-10
    Failure of Burden                           1-13
    Use Form 4571 or Equivalent                 1-14
    An Example that Worked!                     1-16
    Prepare to Appeal                           1-17

2.  UNDERPAYMENT OF ES TAX                      2-1
    
    Introduction to Section 6654                2-2
    Penalty Rate:  Short-Term Interest          2-4
    Amount of Underpayment                      2-6
    Safe Harbor Rule                            2-7
    Quasi-Quarterly Installments                2-8
    Use 1040-ES Vouchers                        2-9
    Zero Tolerance for Underpayment             2-11
    Exceptions to the Penalty                   2-13
    Request Waiver on Form 2210

3.  FAILURE TO DEPOSIT TAX                      3-1

    Why Deposits Necessary                      3-2
    Authorized Depositories                     3-4
    Use FTD Coupons                             3-6
    Application of Deposits                     3-8
    Penalty Law Section 6656                    3-9
    Exceptions & Safe Harbors                   3-10
    Reasonable Cause Relief                     3-12
    Requests to Pursue                          3-13
    Elements to Establish                       3-17
    A Very Instructive Case                     3-18

4.  NEGLIGENCE & DISREGARD                      4-1

    Overview of Section 6662                    4-2
    The 5 Accuracy Components                   4-3
    How “Negligence” is Defined                 4-4
    Disregard of Rule, Etc.                     4-7
    Where Penalties Upheld                      4-8
    Where Penalties Removed                     4-9
    Underpayment Defined                        4-10
    Example How Penalty Imposed                 4-12
    Reasonable Cause Exception                  4-13
    Example:  Negligence Mitigated              4-15

5.  UNDERSTATEMENT PENALTY                      5-1

    How “Substantial” is Defined                5-2
    Understatement Defined                      5-4
    What is “Substantial Authority”?            5-5
    Weighting of Authorities                    5-7
    Disclosure on Return                        5-8
    Disclosure Via Form 8275                    5-10
    Example:  Part II Detail                    5-13
    Ruling on Form 8275 Above                   5-14
    Adequate Disclosure Rulings                 5-16
    Disclosure Pointers Summarized              5-17
    Tax Shelters:  Special Rules                5-18

6.  VALUATION MISSTATEMENTS                     6-1

    Why “Valuation” Important                   6-2
    IRS Valuation Coarsebook                    6-3
    When is Misstatement “Substantial”?         6-6
    Other Definitional Terms                    6-7
    Section 482:  Misstatements                 6-9
    Overstatement of Pension Liabilities        6-11
    Death Tax Valuation Understatements         6-12
    Gross Valuation Misstatements               6-14
    Engage a Qualified Appraiser                6-15

7.  THE FRAUD PENALTY                           7-1

    Fraud Not Code Defined                      7-2
    No Regulations Either                       7-3
    What Does Congress Say?                     7-5
    Burden of Proof in Fraud                    7-6
    The Fraud Penalty Law                       7-8
    Critique of Section 6663                    7-10
    Preponderance of Evidence?                  7-11
    Badges of Fraud                             7-13
    The Examination Process                     7-15
    Cooperate Without Extending Time            7-16
    Examination Change Report                   7-19
    Response to Transmittal Letter              7-21

8.  TRUST FUND FAILURES                         8-1

    Section 6672: General Rule                  8-2
    The “Rationale” Explained                   8-4
    Withholding Requirements                    8-5
    Responsible Person Defined                  8-7
    Not Dischargeable in Bankruptcy             8-10
    Willfulness Defined                         8-11
    When Notified of Assessment                 8-12
    Importance of “Accounting For”              8-13
    Digest of What to Do                        8-15

9.  WILLFUL TAX EVASION                         9-1

    Basic Law:  Section 7203                    9-2
    Meaning of “Willful Failure”                9-4
    Meaning of “Willful Evasion”                9-5
    Only “Upon Conviction Thereof”              9-6
    Request a Plea Agreement                    9-9
    Pursue Good Faith Defense                   9-10
    A “Clever Scheme” Conviction                9-13
    
10. TRANSACTIONS IN CASH                        10-1

    Meaning of “Cash”                           10-2
    Introduction to Section 6050I               10-3
    The “Return Described”                      10-4
    Structuring to Avoid Reporting              10-8
    Beware of Entrapment                        10-9
    Safest Course: Form 4789                    10-11
    Suspicious Transactions                     10-12
    
11. FRIVOLOUS & FALSE RETURNS                   11-1

    Frivolous Return Defined                    11-2
    Frivolous Return Penalty:  $500             11-4
    Frivolous “Position” Penalty:  $25,000      11-6
    Shelter Return Defined                      11-7
    Shelter Promoter Penalties                  11-10
    False Return Defined                        11-11
    Jurat Clause & Perjury                      11-12
    Other False Statements                      11-14
    General Commentary                          11-17
    
12. APPEALING WITHIN IRS                        12-1

    Jurisdiction & Authority                    12-2
    Benefits of Appealing “Within”              12-4
    Disadvantages of IRS Appeals                12-5
    Initiating Your Appeal                      12-7
    Preparing Your Protest                      12-8
    Specific Protest Examples                   12-11
    Acknowledgment by Appeals                   12-13
    Anticipate Form 872                         12-14
    Appearance at Conference                    12-15
    The Prospects of Relief                     12-16
    An Example That Worked                      12-17
    Appeals Closing Procedures                  12-19