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Title 26, Internal Revenue CodeRelease 119-110

§6701 Penalties for Aiding and Abetting Understatement of Tax Liability

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

Last updated Sep 22, 2026|Official source

Summary

Anyone who helps prepare or advises on part of a tax return, claim, affidavit, or other tax document, and who knows (or should know) that the part will be used in an important tax matter and would make someone owe less tax, must pay a penalty for each such document. The usual penalty is $1,000. If the document is about a corporation’s tax, the penalty is $10,000. One person can be charged only once for a given taxpayer for a given tax period or event. “Procures” means causing or ordering a subordinate to act, or knowing a subordinate is taking part and not trying to stop it. “Subordinate” means anyone you direct, supervise, or control. The taxpayer does not have to know about the understatement. Typing, copying, or other mechanical work is not treated as helping prepare the document. This penalty is added to other penalties, except it won’t be applied in place of certain other preparer or promoter penalties for the same document.

Full Legal Text

Title 26, §6701

Internal Revenue Code, Source: USLM XML via OLRC

(a)Imposition of penalty
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,
shall pay a penalty with respect to each such document in the amount determined under subsection (b).
(b)Amount of penalty
(1)In general
Except as provided in paragraph (2), the amount of the penalty imposed by subsection (a) shall be $1,000.
(2)Corporations
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)Only 1 penalty per person per period
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)Activities of subordinates
(1)In general
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)Subordinate
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)Taxpayer not required to have knowledge
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)Certain actions not treated as aid or assistance
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)Penalty in addition to other penalties
(1)In general
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)Coordination with return preparer penalties
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)Coordination with section 6700
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

Sep 22, 2026

Release point: 119-110