§6707A Penalty for Failure to Include Reportable Transaction Information with Return

Summary

If a person leaves off required information about a reportable transaction on a tax return or statement, they must pay a penalty. Usually the penalty is 75% of the tax savings tied to that transaction (or 75% of the tax saved if the transaction had been treated as valid). The penalty cannot be more than $200,000 for a listed transaction ($100,000 for a natural person) or $50,000 for other reportable transactions ($10,000 for a natural person). The penalty is never less than $10,000 ($5,000 for a natural person). A reportable transaction means a deal that rules say must be reported because it may be used to avoid tax. A listed transaction is one the IRS has specifically identified as abusive. The IRS Commissioner can cancel all or part of a penalty for a non‑listed reportable transaction if doing so helps compliance. That decision cannot be appealed in court and must be put on file with the reasons. Public companies must disclose certain penalties in their SEC reports, and the penalty here is in addition to any other tax penalties.