Tax Return Penalties Phoenix AZ - Phoenix AZ, legal attorney, Phoenix AZ legal help, Phoenix AZ legal advice, Phoenix AZ penalties, Phoenix AZ negligence, Phoenix AZ disregard of rules and regulations

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Joanne Martone, CPA
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Phoenix, AZ

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This penalty is really composed of two alternative penalties. The first is the negligence prong and the second is the disregard of the rules and regulations prong.

"Negligence"
"Disregard of rules & regulations"

"Negligence"

"Negligence" includes (but is not limited to) any failure:

(1) to make a reasonable attempt to comply with the internal revenue laws;
(2) to exercise ordinary and reasonable care in preparation of a tax return; or
(3) to keep adequate books and records or to substantiate items properly.

Moreover, taking a position on your return that has a reasonable basis is not negligence. The IRS will typically find negligence if a taxpayer (1) fails to include on an income tax return income reported on an information return (such as an IRS Form 1099) or (2) fails to make a reasonable attempt to ascertain the correctness of a deduction, credit, or exclusion that would seem to a reasonable person to be "too good to be true".

"Disregard of rules & regulations"

This prong may be asserted if you carelessly, recklessly or intentionally disregard IRS rules and regulations - by taking a position on your return with little or no effort to determine whether the position is correct or knowingly taking a position that is incorrect.

Adequate disclosure on your tax return is not a defense against the negligence prong of the penalty, but may be a defense against the disregard prong. However, disclosure alone is not enough - you must show that there was a reasonable basis for the position.

Featured Local Company

Leonard F. Baker, CPA, PC

(602) 277-4008
77 E. Weldon Avenue
Phoenix, AZ