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More Clarification on IRS Penalty Assessments

David A. Sprecace, P.C.

The U.S. Tax Court recently decided that a 75% civil fraud penalty had not been properly asserted against married taxpayers because the revenue agent did not obtain prior written approval to propose the penalty from her supervisor, as required by IRC Section 6751(b)(1).  That section prohibits assessment of a penalty unless the “initial determination” of the assessment is personally approved by the revenue agent’s immediate supervisor. 

The Tax Court noted that a completed Revenue Agent Report (“RAR”), along with official IRS correspondence, supports the existence of an “initial determination.”  Since the RAR was presented by the revenue agent at the audit closing conference, and the penalty was asserted in the RAR without approval from the supervisor, the Tax Court determined the IRS could not meet its burden of proof, and granted Summary Judgment for taxpayers.


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