IRS Resists Negotiation on Penalties—Appraiser News Online, Bloomberg BNA

If IRS Imposes a Penalty, That Penalty Cannot be Negotiated as Part of a Settlement on Another Tax Matter 

The Internal Revenue Service is opposed to negotiating penalties with noncompliant taxpayers, a stance that should benefit appraisers and tax advisors because individuals will be required to assume more responsibility for their deductions, Bloomberg BNA (subscription required) reported this month.   Appraisers News Online offers details at its site: 

Lisa Flores, deputy area counsel for the IRS Large Business and International Division, spoke at New York University’s Fifth Annual Tax Controversy Forum June 7, where she said that if the agency imposed a penalty on a taxpayer, that penalty cannot be negotiated as part of settlement of another tax matter.

“The one thing I want to stress … is there’s no horse-trading of penalties,” she told the forum, Bloomberg BNA reported. “That is not allowed and that is not how we do things. You look at penalties on their own, what are the merits of the penalties independent of other subject adjustments.”

Flores’ announcement is a change in practice from the past, Bloomberg BNA noted. Previously, taxpayers making administrative appeals could get penalties removed during negotiations. However, Flores pointed out that the Internal Revenue Manual refers to only four reasons for which the IRS should remove penalties: reasonable cause, statutory exceptions, administrative waivers and corrections due to IRS errors.

The IRS explained that its increasing narrowing acceptance of taxpayer claims is in part due to advice from hired professionals, including appraisers and and tax advisors.  Read the whole piece here. 

The IRS resists negotiation on penalties, reports Bloomberg BNA and Appraiser News Online