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

Summary

If a person leaves out required information about a reportable tax transaction on a tax return or statement, they must pay a penalty. The penalty is generally 75 percent of the tax reduction caused by the transaction. But the penalty has limits. For a listed transaction the penalty can’t be more than $200,000 ($100,000 for an individual). For other reportable transactions it can’t be more than $50,000 ($10,000 for an individual). The penalty for any one transaction can’t be less than $10,000 ($5,000 for an individual). A “reportable transaction” is one the IRS says must be reported because it might help avoid taxes. A “listed transaction” is a reportable transaction the IRS has specially identified. The IRS Commissioner can cancel part or all of a penalty for non-listed reportable transactions if canceling it helps tax compliance and administration. That decision cannot be reviewed in court, and the Commissioner must file a written explanation of the facts, reasons, and amount canceled. These penalties are in addition to any other tax penalties.