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Title 26 — Internal Revenue CodeRelease 119-73

§6701 Penalties for aiding and abetting understatement of tax liability

Title 26 › Subtitle Subtitle F— - Procedure and Administration › Chapter CHAPTER 68— - ADDITIONS TO THE TAX, ADDITIONAL AMOUNTS, AND ASSESSABLE PENALTIES › Subchapter Subchapter B— - Assessable Penalties › Part PART I— - GENERAL PROVISIONS › § 6701

Last updated Apr 6, 2026|Official source

Summary

Anyone who helps prepare, encourages, or advises on part of a tax return, form, or claim, knows it will be used for an important tax matter, and knows it will cause someone to owe less tax than they should, can be fined. The usual fine is $1,000. If the document is about a corporation’s taxes, the fine is $10,000. A person can only get this fine once for a given taxpayer and taxable period or event. “Procures” means ordering or letting a subordinate do the act, or knowing about a subordinate’s participation and not stopping it. “Subordinate” means anyone under your direction or control. Doing only typing, copying, or other routine mechanical work is not treated as helping prepare the document. The fine is in addition to other penalties, though it replaces certain overlapping penalties for the same document.

Full Legal Text

Title 26, §6701

Internal Revenue Code — Source: USLM XML via OLRC

(a)Any person—
(1)who aids or assists in, procures, or advises with respect to, the preparation or presentation of any portion of a return, affidavit, claim, or other document,
(2)who knows (or has reason to believe) that such portion will be used in connection with any material matter arising under the internal revenue laws, and
(3)who knows that such portion (if so used) would result in an understatement of the liability for tax of another person,
(b)(1)Except as provided in paragraph (2), the amount of the penalty imposed by subsection (a) shall be $1,000.
(2)If the return, affidavit, claim, or other document relates to the tax liability of a corporation, the amount of the penalty imposed by subsection (a) shall be $10,000.
(3)If any person is subject to a penalty under subsection (a) with respect to any document relating to any taxpayer for any taxable period (or where there is no taxable period, any taxable event), such person shall not be subject to a penalty under subsection (a) with respect to any other document relating to such taxpayer for such taxable period (or event).
(c)(1)For purposes of subsection (a), the term “procures” includes—
(A)ordering (or otherwise causing) a subordinate to do an act, and
(B)knowing of, and not attempting to prevent, participation by a subordinate in an act.
(2)For purposes of paragraph (1), the term “subordinate” means any other person (whether or not a director, officer, employee, or agent of the taxpayer involved) over whose activities the person has direction, supervision, or control.
(d)Subsection (a) shall apply whether or not the understatement is with the knowledge or consent of the persons authorized or required to present the return, affidavit, claim, or other document.
(e)For purposes of subsection (a)(1), a person furnishing typing, reproducing, or other mechanical assistance with respect to a document shall not be treated as having aided or assisted in the preparation of such document by reason of such assistance.
(f)(1)Except as provided by paragraphs (2) and (3), the penalty imposed by this section shall be in addition to any other penalty provided by law.
(2)No penalty shall be assessed under subsection (a) or (b) of section 6694 on any person with respect to any document for which a penalty is assessed on such person under subsection (a).
(3)No penalty shall be assessed under section 6700 on any person with respect to any document for which a penalty is assessed on such person under subsection (a).

Legislative History

Notes & Related Subsidiaries

Editorial Notes

Amendments

1989—Subsec. (a)(1). Pub. L. 101–239, § 7735(a)(1), struck out “in connection with any matter arising under the internal revenue laws” after “other document”. Subsec. (a)(2). Pub. L. 101–239, § 7735(a)(2), inserted “(or has reason to believe)” after “who knows”. Subsec. (a)(3). Pub. L. 101–239, § 7735(a)(3), substituted “would result” for “will result”. Subsec. (f)(1). Pub. L. 101–239, § 7735(b)(2), substituted “paragraphs (2) and (3)” for “paragraph (2)”. Subsec. (f)(3). Pub. L. 101–239, § 7735(b)(1), added par. (3).

Statutory Notes and Related Subsidiaries

Effective Date

of 1989 Amendment Pub. L. 101–239, title VII, § 7735(c), Dec. 19, 1989, 103 Stat. 2404, provided that: “The

Amendments

made by this section [amending this section] shall take effect on December 31, 1989.”

Effective Date

Pub. L. 97–248, title III, § 324(c), Sept. 3, 1982, 96 Stat. 616, provided that: “The

Amendments

made by this section [enacting this section] shall take effect on the day after the date of the enactment of this Act [Sept. 3, 1982].”

Reference

Citations & Metadata

Citation

26 U.S.C. § 6701

Title 26 — Internal Revenue Code

Last Updated

Apr 6, 2026

Release point: 119-73