IRS Penalty: Accuracy Related Penalty
Internal Revenue Code (IRC) Section: §6662
Other Names This Penalty Is Called: Usually called Accuracy Related Penalty
How This Penalty Is Computed: This penalty is 20% (40% for transactions lacking economic substance) of the underpayment of tax that is related to negligence, disregard of rules, substantial understatement, substantial valuation misstatement, substantial overstatement of pension liabilities, substantial estate or gift valuation understatement or transactions lacking economic substance.
When Does Interest Start To Run On This Penalty: Interest runs on this penalty from the date the IRS assess the penalty if the taxpayer does not pay the penalty within 10 days.
How To Get Out Of This Penalty: Prove to the IRS that the penalty should be abated due to "reasonable cause".
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It is our experience that tax professionals have better luck at getting IRS penalties abated. If you work with a tax professional, we strongly recommend that you contact them about any IRS penalty issues. It should also be pointed out that no one can guarantee that an IRS penalty will be abated. You don't know that your plea for penalty abatement will work until you have an IRS letter stating that they will abate the penalty!
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