ORIGIN
PENALTY REASON CODE
DEFINITION
SERVICE
*21 LEM Criteria
REASONABLE CAUSE
(RC62)
22 Taxpayer exercised ordinary business care
and prudence. 20.1.1.3.1.2
24 Death, Serious illness or Unavoidable
absence of taxpayer or immediate family member of the party responsible. (IMF) 20.1.1.3.1.2.4
25 Records inaccessible. 20.1.1.3.1.2.5
26 Death, Serious illness or Unavoidable
absence of party responsible (or member of immediate family). (BMF) 20.1.1.3.1.2.4
*30 Other 20.1.1.3
GENERAL
PENALTY RELIEF
*43 Administrative Waiver 20.1.1.3.2
*31 Erroneous oral advice from the Service
20.1.1.3.2.4.2
*44 Statutory Exception 20.1.1.3.2
23 Taxpayer relied on practitioner or third
party 20.1.1.3.2.4.3
27 Timely mailed/timely filed 20.1.1.3.2.3
23 Disaster Area 20.1.1.3.2.6
29 Undue economic hardship/inability to pay
20.1.1.3.2.3
*45 Service Error 20.1.1.3.3
APPEALS
*40 Appeals abatement (Hazards of Litigation)
*41 Appeals sustains penalty
*42 Appeals partially sustains penalty
Exhibit 20.1.1-4 Penalty Transaction Codes Penalty Transaction Codes
IRC
is required to deposit electronically.
20X 6723 Failure to provide a Taxpayer Identification Number (TIN). The penalty is $50 per
failure, not to exceed $100,000.
23X 6652(c) Daily Delinquency Penalty-$10 times the number of days the return was filed after
the due date or extended due date, not to exceed $5,000.
240** Assesses a Miscellaneous Penalty generally associated with a Reference Number.
241** Abates a Miscellaneous Penalty generally associated with a Reference Number.
246 6698 Assesses the Failure to File a Partnership return or missing information associated
with a partnership return. The penalty is $50 per partner, per month, for not more than 5 months.
247 Abates the Failure to File a Partnership return or missing information penalty associated with a partnership return.
27X 6651(a)2 Failure to Pay (FTP) is 1/2 of 1% (.005) per month, for each month or part of a month, from
the due date of the return to the date the tax is paid or the maximum of 25% of the unpaid tax is reached, or
6651(a)3 Failure to Pay is 1/2 of 1% (.005) for each month or part of a month, from 10 days after notice and demand until the tax is paid or the maximum of 25% of the unpaid tax is reached, or
6651(d) Increases the penalty from 1/2 of 1% (.005) to 1% (.01) per month, the earlier of the
day on which notice and demand for immediate payment is given or 10 days after the
service has issued the notice of intent to levy.
28X 6657 Bad Check Penalty - If the check- is $750 or more, the penalty is 2 percent of the amount of the check, is
less than $750, the penalty is the penalty is the lesser of: $15, or the amount of the check.
31X* 6652(b) Failure to Report Tips Penalty - imposes a penalty on the employee (who received the tips) equal to 50 percent
of the employee's portion of the FICA tax or Railroad Retirement tax applicable to the tip amount that was not reported at the time and in the manner required.
32X* 6653(b) R Fraud Penalties assessed for returns with a due date prior to January 1, 1990.
6663 Fraud Penalties assessed on returns due after December 31, 1989.
35X* 6662(c) Negligence penalties assessed for returns with a due date after December 31, 1989, are 20% of the
underpayment of tax due to negligence.
R This IRC section was repealed, the law may or may not have been incorporated into another Code section.
* The penalty was assessed as the result on an examination or other compliance employee determination. These penalties should be abated only by the area responsible for assessing the penalty or by Appeals.
** See Reference Numbers in Exhibits 1-5 and 1-6.
Exhibit 20.1.1-5 Penalty Reference Numbers (500 Series)
Penalties assessed using the reference numbers 500 through 514 are assessed using the following computational formula. Only one penalty, per return, can be assessed regardless of the number of failures associated with that return. Therefore, the computer paragraph associated with the
respective reference number relates to the type of failure, not the way the penalty was computed.
IRC
RN section Description
6721 Imposition of the Failure to Comply with Certain Information Reporting Requirements.
These reference numbers should only be used for returns and statements due after December 31, 1989.
$50 per failure/maximum $250,000.
correctly and timely filed, and
A penalty is charged for each Form 1098, 1099, W-2G, or W-2 that was:
not correctly and timely filed,
filed with missing or incorrect TINs, and
not submitted in the proper format as provided for in either the IRC, Treas. Regs. or SSA procedures.
513 6721 Magnetic Media, Missing or Incorrect TIN, and Improper Format Penalty
A penalty is charged for each Form 1098, 1099, W-2G, or W-2 that was:
not filed either electronically or using magnetic media, filed with missing or incorrect TINs, and not submitted in the proper format as provided for in either the IRC, Treas. Regs. or SSA procedures.
514 6721 Late, Magnetic Media, Missing or Incorrect TIN, and Improper Format Penalty
A penalty is charged for each Form 1098, 1099, W-2G, or W-2 that was:
not correctly and timely filed,
either electronically or using magnetic media, filed with missing or incorrect TINs, and
not submitted in the proper format as provided for in either the IRC, Treas. Regs. or SSA procedures.
549 6721(e) Penalty in the Case of Intentional Disregard. (CAWR Penalty Program)
The penalty is assessed at $100 per failure to file Form W-2 A penalty is charged for each Form W-2 that was not filed as required by IRC section 6051
1/ Any applicable suffix
Exhibit 20.1.1-6 Penalty Reference Numbers (600 Series) RN IRC
section
Description
600 6721 Failure to File Correct Information Returns.
- This reference number should only be used for returns and statements due after December 31, 1989.
- $50 per failure/maximum $250,000.
- $15 per failure/maximum $75,000.
If a failure is corrected within 30 days, after the due date of the information return, the penalty will be decreased to $15 per failure. The maximum annual penalty per filer shall not exceed $75,000.
- $30 per failure/maximum $150,000. If the failure is corrected more than 30 days after the due date of the information return, the penalty will be
decreased to $30 per failure. The maximum annual penalty per filer shall not exceed $150,000.
- For other circumstances that may apply, see IRM 20.1.10.
601 6723 Failure to Include Correct Information.
- This reference number should only be used for return periods beginning after December 31, 1985 and ending prior to January 1, 1990.
- $5 per failure, with a maximum not to exceed $20,000.
602 6676 Failure to Supply Identifying Numbers.
- This reference number should only be used for returns and statements due prior January 1, 1990.
- This penalty was incorporated into IRC section 6723.
603 6676 Failure to Supply Identifying Numbers
- This reference number should only be used for returns and statements due prior to January 1, 1990.
- The TIN penalty was incorporated into IRC 6721 for information returns and IRC section 6723 for other documents.
604 6676 Failure to Supply Identifying Numbers.
- This reference number should only be used for returns and statements due prior to January 1, 1990.
- The TIN penalty was incorporated into IRC 6721 for information returns and IRC section 6723 for other documents.
605 6676 Failure to Supply Identifying Numbers.
- This reference number should only be used for returns and statements due prior to January 1, 1990.
- The TIN penalty was incorporated into IRC 6721 for information returns and IRC section 6723 for other documents.
606 6676 Failure to Supply Identifying Numbers.
- This reference number should only be used for returns and statements due prior to January 1, 1990.
- The TIN penalty was incorporated into IRC 6721 for information returns and IRC section 6723 for other documents.
607 6721 Failure to File a Correct Information Returns.
- This reference number should only be used for returns due after December, 31, 1986 and before January 1, 1990.
608 6721 Failure to File a Correct Information Returns.
- This reference number should only be used for Forms 1099 INT, DIV, and PATR returns due after December 31, 1985 and before January 1, 1990.
609 6721 Failure to File a Complete Form 8300, Report of Cash Payments Over
$10,000. (Detroit Computing Center) 610 6721 Failure to Furnish Correct Payee Statement.
- This reference number should only be used for returns due after December 31, 1986 and before January 1, 1990.
611 6722 Failure to Furnish Correct Payee Statement.
- This reference number should only be used for Forms 1099 INT, DIV, OID, and PATR returns due after December 31, 1986 and before January 1, 1990.
612 6722 Failure to Furnish Correct Payee Statement.
- For returns required to be filed after December 31, 1989, a penalty will be imposed for each failure to:
- furnish a payee statement on or before the due date to the person to whom
the statement must be furnished, - furnish all information required, and - furnish correct information.
- The $50 penalty for failure to furnish payee statements is not reduced if returns are corrected or filed after the due date.
- Only one penalty per statement, regardless of the number of failures per statement.
- The total penalty for all such failures during any calendar year shall not exceed $100,000.
613 6679 Failure to File Returns, Etc, With Respect to Foreign Corporations or Foreign Partnerships.
- Failure to File Form 5471 and Schedule O.
- The penalty is assessed at $1,000 per failure.
614 6679 Failure to File Returns, Etc, With Respect to Foreign Corporations or Foreign Partnerships.
- Failure to File Form 5471 and Schedule N.
- The penalty is assessed at $1,000 per failure.
615 6682 False Information with Respect to Withholding.
- False information on Form W-9.
- $500 for each false statement (W-9).
616 6682 False Information with Respect to Withholding.
- False information on Form W-4.
- $500 for each false statement (W-4).
617 6723 Failure to Include Correct Information. This reference number should only be used for returns due after December 31, 1986, and before January 1, 1990.
- See reference number 647 and 648 for 6723 penalty computation.
618 6672 Failure to Collect and Pay Over Tax, or an Attempt to Evade or Defeat Tax.
- Trust Fund Recovery Program. The penalty is assessed against responsible corporate officers.
- 100% of the tax required to be collected, accounted for, and paid over.
619 6679 Failure to File Returns with Respect to Foreign Corporations or Foreign Partnerships.
- Failure to File such form as Treas. Reg. provides - The penalty is assessed at $1,000 per failure.
620 6693 Failure to Provide Reports on Individual Retirement Accounts or Annuities.
6693(b)(1) Overstatement of Designated Nondeductible Contributions-$100 per overstatement.
6693(b)(2) Failure to File an IRA Form--$50 per failure.
621 6723 Failure to Comply with Other Reporting Requirements.
- For returns and statements required to be filed after December 31, 1989, - A penalty of $50 per failure
- to comply timely with specified information reporting requirements, or - to include correct information.
- The maximum penalty is $100,000 per year
622 6694(a) Understatement of Taxpayer's Liability by Income Tax Return Preparer.
- This reference number should only be used for documents prepared prior to January 1, 1990.
- Prior to January 1, 1990, this penalty was assessed at $100 per return or claim for refund.
623 6038(b) Failure to Furnish Information with Respect to Certain Foreign
Corporations.
- Failure to File Form 5471 and Schedule M.
- $1,000 per accounting period. If the failure continues for more than 90 days after notice of failure mailed an additional $1,000 for each subsequent 30-day period not to exceed $24,000.
624 6695 Other Assessable Penalties with Respect to the Preparation of Income Tax Returns for Other Persons.
- Any failure by the preparer to:
6695(a) furnish a copy of the return to the taxpayer, 6695(b) sign the return,
6695(c) furnish the preparer's identifying number,
6695(d) retain a copy, return or list, as required by IRC 6107(b),
6695(e) file a correct information return or other requirement of IRC 6060.
- these penalties are assessed at $50 per failure, not to exceed $25,000 per year.
625 6038A(d) Information with Respect to Certain Foreign owned Corporations.
- failure to furnish information or maintain records as required by IRC 6038A(a) and 6038A(b)
- $10,000 for each taxable year with respect to which the failure occurs. If the failure continues for more than 90 days after notice of failure mailed, an additional $10,000 is imposed for each 30-day period during which the failure continues after the expiration of the original 90 day period.
626 6695(d) Other Assessable Penalties with Respect to the Preparation of Income Tax Returns for Other Persons.
- endorses or otherwise negotiates a refund check (made with respect to income tax) issued to a taxpayer.
- $500 per check.
627 Reserved
628 6700 Promoting Abusive Tax Shelters
- the lessor of $1,000 or 100% of the gross income for each such activity.
629 Reserved
630 6701 Penalties for Aiding and Abetting Understatement of Tax Liability.
- Aiding and abetting--Promoter
- The penalty is assessed for each document that relates to the tax liability of:
- noncorporate-at $1,000, or - corporate-at $10,000
631 6701 Penalties for Aiding and Abetting Understatement of Tax Liability.
- Aiding and abetting-Preparer
- The penalty is assessed for each document that relates to the tax liability of:
- non-corporate-at $1,000, or - corporate-at $10,000.
632 6705 Failure by a broker to Provide Notice to a Payor. $500 for each failure.
633 6713 Disclosure or Use of Information by Preparer of Returns
- $250 per disclosure or use with a maximum of $10,000 per calendar year.
634 6707 Failure to Furnish Information Regarding Tax Shelters - the greater of 1 percent of the amount invested, or
- $500.
635 7216 Disclosure or Use of Information by Preparers of Returns.
- when convicted of knowingly or recklessly disclosing information (misdemeanor), the person shall be:
- fined no more than $1,000, or - imprisoned not more than 1 year, or
- both, plus
- the cost of the prosecution.
636 6708 Failure to Maintain Lists of Investors in Potentially Abusive Tax Shelters.
- $50 per failure,
- not to exceed $100,000 per calendar year.
637 6676 Failure to Supply Identifying Numbers. This reference number should only be used for returns due prior to January 1, 1990.
- The penalty was incorporated into IRC section 6723.
638 6652 Failure to Supply Identifying Numbers. This reference number should only be used for returns due prior to January 1, 1990.
- The penalty was incorporated into IRC section 6721.
639 6652 Failure to Supply Identifying Numbers. This reference number should only be used for returns due prior to January 1, 1990.
- The penalty was incorporated into IRC section 6721.
640 6652 Failure to Supply Identifying Numbers. This reference number should only be used for returns due prior to January 1, 1990.
- The penalty was incorporated into IRC section 6721.
641 6652 Failure to Supply Identifying Numbers. This reference number should only be used for returns due prior to January 1, 1990.
- The penalty was incorporated into IRC section 6721.
642 6673(a) Sanctions and costs awarded by Courts
- A Tax Court determined that the taxpayer filed frivolous suit for damages against the United States.
- Court awarded sanctions, penalties, or costs not to exceed $25,000.
643 6673(b) Sanctions and costs awarded by Courts (IRC section 7433).
- A Court (other than the Tax Court) determination that the taxpayer filed frivolous suit for damages against the United States.
- Court awarded sanctions, penalties, or costs not to exceed $10,000.
644 Reserved
645 6694(a) Understatement of Taxpayer's Liability by Income Tax Return Preparer.
- This reference number is to be used for documents prepared after December 31, 1989.
- The penalty is assessed against an income tax preparer. _ The penalty is based on an understatement or return for which the preparer took a position that did not have a realistic possibility of being sustained on its merits, and - which was not disclosed or was frivolous.
- The penalty is assessed at $250 per return or claim.
646 6694(b) Understatement of Taxpayer's Liability by Income Tax Return Preparer.
- This reference number should only be used for documents prepared prior to January 1, 1990.
- The penalty is assessed: if any part of the understatement is due to willful attempt to understate the tax liability or reckless conduct in preparing the return or claim, at $500 per return or claim reduced by any amount assessed under 6694(a).
647 6723 Failure to Include Correct Information.
- This reference number should only be used for returns prepared prior to January 1, 1990.
- The penalty was self-assessed at $5 for each return or statement that was reported incorrectly.
648 6723 Failure to Include Correct Information.
- This reference number should only be used for returns due prior to January 1, 1990.
- The penalty was at $5 for each return or statement that was reported incorrectly.
649 6652(c)(2) Failure by Exempt Organization or Certain Trusts to file returns required by IRC 6034 or 6043(b).
- For any one return, the penalty is assessed at $10 per day, not to exceed
$5,000 for all persons for the failure to file any one return.
650 6694(b) Understatement of Taxpayer's Liability by Income Tax Return Preparer.
- This reference number should only be used for documents prepared after December 31, 1989.
- The penalty is assessed if any part of the understatement is due to willful or reckless conduct or intentional disregard of the rules or regulations in
preparing the return or claim for refund.
- After December 31, 1989 this penalty was assessed at $1,000 per return or claim reduced by any amount of penalty paid under 6694(a).
651 6721 Failure to Comply with Certain Information Reporting Requirements -- Form 8300.
- This penalty applies to returns required to be filed after December 31, 1989.
- The penalty is assessed at $50 per Form 8300 not timely and correctly filed.
652 6721(e) Intentional Disregard of the Failure to comply with Certain Information Reporting Requirements.
- This reference number is used to assess the intentional disregard penalty when the Form 8300 is not timely or correctly filed.
- This penalty applies to returns pertaining to amounts received after November 5, 1990.
- The penalty is assessed at the greater of:
- $25,000, or
- the amount of cash received in such transaction, to the extent the cash does not exceed $100,000.
- The $250,000 yearly limitation under IRC 6721 shall not apply.
653 6722 Failure to Furnish Correct Payee Statements
- This penalty applies to payee statements required to be filed after December 31, 1989.
- The penalty is assessed at $50 per payee statement not timely furnished or containing incorrect or incomplete information.
- The maximum penalty shall not exceed $100,000 per year.
654 6722(c) Intentional Disregard of the Requirement to Furnish a Correct Payee Statement -- Form 8300.
- This penalty applies to payee statements required to be filed after December 31, 1989.
- The intentional disregard penalty for failing to provide a payor of cash with a statement as required by IRC sections 60501(e) after December 31, 1989, is the greater of $100 or 10 percent of the amount required to be reported correctly on the statement.
- The $100,000 yearly limitation does not apply.
655 7342(c) Penalty for Refusal to Permit Entry or Examination.
- A penalty of $500 for each refusal to admit or to permit examination.
- A penalty of $1,000 for each refusal to admit or to permit examination if the refusal is related to 4083(c), place where taxable fuel is stored or produced.
656 6715 Dyed Fuel Sold For Use or Used in Taxable Use, Etc.
- This penalty is effective beginning after December 31, 1993.
- The penalty is assessed on any dyed diesel fuel (nontaxable use), sold or
held for sale as taxable use of such fuel.
- 1st offense:
- The penalty is the greater of $10 per gallon of dyed fuel involved, or
$1,000,
- subsequent violations:
- multiply the number of prior violations times the greater of $10 per gallon per prior violation or $1,000 per prior violation.
657 6715 Failure to Post or Provide Notice with Respect to any Dyed Diesel Fuel as required by IRC section 4082(c) j.
- This penalty is effective beginning after December 31, 1993.
- The penalty is assessed on any dyed diesel fuel (non-taxable use), sold or held for sale as taxable use of such fuel.
- The penalty is the greater of:
- 1st offense, $10 per gallon, or $1,000,
- subsequent violations, multiply the number of violations times the greater of $10 per gallon or $1,000.
658 Reserved 659 Reserved 660 Reserved 661 Reserved 662 Reserved 663 Reserved 664 Reserved
665 6702 Frivolous Income Tax Return.
- If any individual files what purports [sic] to be an income tax return, which either:
- contains insufficient information, or
- contains on its face substantially incorrect information, and
- where the conduct will delay or impede the administration of Federal income tax laws or is a frivolous position.
- The penalty is assessed at $500 per return deemed to be frivolous.
Each of the following eight reference numbers relate to a specific type of frivolous return.
666 6702 Frivolous arguments (General) to reduce taxes or delay the collection of taxes.
- The penalty is assessed at $500 per return deemed to be frivolous.
667 6702 The "penalty of perjury" statement was altered or deleted
- The penalty is assessed at $500 per return deemed to be frivolous.
668 6702 The return did not contain enough information to be processed.
- The penalty is assessed at $500 per return deemed to be frivolous.
669 6702 The claim that wages not paid in gold or silver is frivolous [sic].
- The penalty is assessed at $500 per return deemed to be frivolous.
670 6702 The war credit or deduction claimed is not provided for in the Internal Revenue Code.
- The penalty is assessed at $500 per return deemed to be frivolous.
- The penalty is assessed at $500 per return deemed to be frivolous.