§6707A Penalty for failure to include reportable transaction information with return

Summary

If someone leaves out required information about a reportable transaction on a tax return or statement, they must pay a penalty. The usual penalty is 75% of the tax reduction caused by the transaction (or the tax reduction that would have occurred if the transaction were accepted for federal tax purposes). The penalty cannot exceed $200,000 ($100,000 for an individual) for a listed transaction, or $50,000 ($10,000 for an individual) for any other reportable transaction. The penalty for any single transaction cannot be less than $10,000 ($5,000 for an individual). Reportable transaction — a deal the IRS requires to be reported because rules say it may be used to avoid taxes. Listed transaction — a reportable transaction the IRS has specifically identified as a tax-avoidance type. The IRS Commissioner may cancel a penalty for a non-listed reportable transaction if doing so helps tax compliance and administration. That cancellation cannot be reviewed in court, and the Commissioner must file a written note explaining the facts, reasons, and amount cancelled. This penalty is in addition to any other penalties.