More Penalty Challenges Expected After Tax Court Rules That IRS Lacks Authority to Assess Section 6038(b) Penalties

'In the tax world, the Internal Revenue Service’s (IRS’s) assessment authority for penalties is trending. Earlier this month, the government filed its notice of appeal to a recent and precedential Tax Court decision:Farhy v. Commissioner. The Farhy outcome has significant implications, leaving many taxpayers seriously considering how to potentially recoup recently paid penalties connected to IRS Forms 5471, 5472, 8938, or 926. Savvy tax professionals are advising clients to file protective refund claims in some instances. And, it’s been reported that the IRS is projected to concede Internal Revenue Code (IRC) §6038(b) penalties in Collection Due Process (CDP) cases. Let’s take a closer look at Farhy and how the court reached its holding that the IRS lacks the authority to assess noncompliance penalties applicable to Form 5471 (category 4 and category 5) filers.'
This article was written by Frost Law tax attorney, Mary Lundstedt, Esq., with contributions from Joe Goline, a second-year law student at the Thomas R. Kline School of Law at Duquesne University. Frost Law helps provide solutions for complex domestic and international tax issues.


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