Title 26 — Internal Revenue Code — § 6701. Penalties for aiding and abetting understatement of tax liability
Summary
Section 6701 of Title 26 of the Code, on page 3806, imposes a penalty on any person who aids, assists in, procures or advises on preparing any portion of a return, affidavit, claim or other document, knowing or having reason to believe it will be used in a material matter under the internal revenue laws and knowing it would result in an understatement of another person's tax liability. The penalty is $1,000 per document, or $10,000 where the document relates to a corporation's tax liability, and only one penalty applies per person per taxpayer and taxable period. Procuring includes ordering a subordinate to act or knowingly failing to prevent a subordinate's participation; typing or reproducing a document is not aid. The page also begins section 6702, a $5,000 penalty for frivolous tax returns.
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§ 6701 TITLE 26—INTERNAL REVENUE CODE Page 3806
tion [enacting this section] shall take effect on the day ical assistance with respect to a document shall
after the date of the enactment of this Act [Sept. 3, not be treated as having aided or assisted in the
1982].’’ preparation of such document by reason of such
§ 6701. Penalties for aiding and abetting under- assistance.
statement of tax liability (f) Penalty in addition to other penalties
(a) Imposition of penalty (1) In general
Any person— Except as provided by paragraphs (2) and (3),
(1) who aids or assists in, procures, or ad- the penalty imposed by this section shall be in
vises with respect to, the preparation or pres- addition to any other penalty provided by law.
entation of any portion of a return, affidavit, (2) Coordination with return preparer pen-
claim, or other document, alties
(2) who knows (or has reason to believe) that
No penalty shall be assessed under sub-
such portion will be used in connection with
section (a) or (b) of section 6694 on any person
any material matter arising under the inter-
with respect to any document for which a pen-
nal revenue laws, and
(3) who knows that such portion (if so used) alty is assessed on such person under sub-
would result in an understatement of the li- section (a).
ability for tax of another person, (3) Coordination with section 6700
shall pay a penalty with respect to each such No penalty shall be assessed under section
document in the amount determined under sub- 6700 on any person with respect to any docu-
section (b). ment for which a penalty is assessed on such
(b) Amount of penalty person under subsection (a).
(1) In general (Added Pub. L. 97–248, title III, § 324(a), Sept. 3,
Except as provided in paragraph (2), the 1982, 96 Stat. 615; amended Pub. L. 101–239, title
amount of the penalty imposed by subsection VII, § 7735(a), (b), Dec. 19, 1989, 103 Stat. 2403.)
(a) shall be $1,000.
Editorial Notes
(2) Corporations
AMENDMENTS
If the return, affidavit, claim, or other docu-
ment relates to the tax liability of a corpora- 1989—Subsec. (a)(1). Pub. L. 101–239, § 7735(a)(1), struck
tion, the amount of the penalty imposed by out ‘‘in connection with any matter arising under the
internal revenue laws’’ after ‘‘other document’’.
subsection (a) shall be $10,000.
Subsec. (a)(2). Pub. L. 101–239, § 7735(a)(2), inserted
(3) Only 1 penalty per person per period ‘‘(or has reason to believe)’’ after ‘‘who knows’’.
If any person is subject to a penalty under Subsec. (a)(3). Pub. L. 101–239, § 7735(a)(3), substituted
subsection (a) with respect to any document ‘‘would result’’ for ‘‘will result’’.
Subsec. (f)(1). Pub. L. 101–239, § 7735(b)(2), substituted
relating to any taxpayer for any taxable pe-
‘‘paragraphs (2) and (3)’’ for ‘‘paragraph (2)’’.
riod (or where there is no taxable period, any Subsec. (f)(3). Pub. L. 101–239, § 7735(b)(1), added par.
taxable event), such person shall not be sub- (3).
ject to a penalty under subsection (a) with re-
spect to any other document relating to such Statutory Notes and Related Subsidiaries
taxpayer for such taxable period (or event).
EFFECTIVE DATE OF 1989 AMENDMENT
(c) Activities of subordinates
(1) In general Pub. L. 101–239, title VII, § 7735(c), Dec. 19, 1989, 103
Stat. 2404, provided that: ‘‘The amendments made by
For purposes of subsection (a), the term this section [amending this section] shall take effect on
‘‘procures’’ includes— December 31, 1989.’’
(A) ordering (or otherwise causing) a sub-
EFFECTIVE DATE
ordinate to do an act, and
(B) knowing of, and not attempting to pre- Pub. L. 97–248, title III, § 324(c), Sept. 3, 1982, 96 Stat.
vent, participation by a subordinate in an 616, provided that: ‘‘The amendments made by this sec-
act. tion [enacting this section] shall take effect on the day
after the date of the enactment of this Act [Sept. 3,
(2) Subordinate 1982].’’
For purposes of paragraph (1), the term
‘‘subordinate’’ means any other person (wheth- § 6702. Frivolous tax submissions
er or not a director, officer, employee, or (a) Civil penalty for frivolous tax returns
agent of the taxpayer involved) over whose ac-
A person shall pay a penalty of $5,000 if—
tivities the person has direction, supervision,
(1) such person files what purports to be a re-
or control.
turn of a tax imposed by this title but which—
(d) Taxpayer not required to have knowledge (A) does not contain information on which
Subsection (a) shall apply whether or not the the substantial correctness of the self-as-
understatement is with the knowledge or con- sessment may be judged, or
sent of the persons authorized or required to (B) contains information that on its face
present the return, affidavit, claim, or other indicates that the self-assessment is sub-
document. stantially incorrect, and
(e) Certain actions not treated as aid or assist- (2) the conduct referred to in paragraph (1)—
ance (A) is based on a position which the Sec-
For purposes of subsection (a)(1), a person fur- retary has identified as frivolous under sub-
nishing typing, reproducing, or other mechan- section (c), or
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