26 U.S.C. § 6701 — Penalties for aiding and abetting understatement of tax liability
submitted 44 years ago by Pub. L. 97-248 to r/title-26-INTERNAL-REVENUE-CODE · 496 words · no verdicts yet
A person who helps prepare or present a document knowing it will be used for a material tax matter and will understate another person’s tax owes a penalty. The amount is generally $1,000, or $10,000 for a corporate tax document, with rules for subordinates and overlapping penalties.
(a) Imposition. A person who (1) aids, assists, procures, or advises about preparing or presenting part of a return, affidavit, claim, or other document; (2) knows or has reason to believe that part will be used for a material matter under the internal revenue laws; and (3) knows that its use would understate another person’s tax liability owes a penalty for each document under subsection (b). (b) Amount. (1) The penalty is $1,000. (2) If the document concerns a corporation’s tax liability, it is $10,000. (3) After a person is penalized for one document concerning a taxpayer* and taxable period, or taxable event if there is no period, that person cannot be penalized under this section for another document concerning the same taxpayer and period or event. (c) Subordinates. “Procures” includes (1) ordering or otherwise causing a subordinate to act and (2) knowing a subordinate is participating and not trying to prevent it. A “subordinate” is another person, whether or not the taxpayer’s director, officer, employee*, or agent, whom the person directs, supervises, or controls. This section does not otherwise define these quoted terms. (d) Taxpayer knowledge not required. The rule applies whether or not the authorized or required presenter knew of or consented to the understatement. (e) Mechanical help. Typing, reproducing, or other mechanical assistance alone does not count as aiding or assisting preparation. (f) Other penalties. Except as paragraphs (2) and (3) provide, this penalty is additional to other penalties. No section 6694 penalty may be assessed for a document for which this person has a subsection (a) penalty, and no section 6700 penalty may be assessed for that document.
Any person—
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,
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
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).
Except as provided in paragraph (2), the amount of the penalty imposed by subsection (a) shall be $1,000.
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.
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).
For purposes of subsection (a), the term “procures” includes—
ordering (or otherwise causing) a subordinate to do an act, and
knowing of, and not attempting to prevent, participation by a subordinate in an act.
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.
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.
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.
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.
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).
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).
Source credit: (Added Pub. L. 97–248, title III, § 324(a), Sept. 3, 1982, 96 Stat. 615; amended Pub. L. 101–239, title VII, § 7735(a), (b), Dec. 19, 1989, 103 Stat. 2403.)
- 1982Enacted · Pub. L. 97-248 · 96 Stat. 615
- 1989Amended · Pub. L. 101-239 · 103 Stat. 2403
A history note hasn’t been published yet. The record shows enactment by Pub. L. 97-248 on 1982-09-03.
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