8.11.8 Miscellaneous Penalties18.104.22.168 IRC Section 6673 - Sanctions and Costs Awarded by the Courts22.214.171.124.1 Account and Processing Support (APS) Card-in and Closing Procedures for IRC 6673 Penalties126.96.36.199.2 Appeals Technical Employee (ATE) Consideration of IRC 667188.8.131.52 IRC 6702 - Frivolous Tax Submissions184.108.40.206 IRC 6695A - Substantial and Gross Valuation Misstatements Attributable to Incorrect Appraisals220.127.116.11.1 ATE Consideration of IRC 6695A18.104.22.168 IRC 6709 - Penalties with Respect to Mortgage Credit Certificates22.214.171.124 IRC 6721- Failure to File Correct Information Returns Part 8. AppealsChapter 11. Penalties Worked in AppealsSection 8. Miscellaneous Penalties 8.11.8 Miscellaneous Penalties Manual Transmittal October 24, 2014 Purpose (1) This transmits revised IRM 8.11.8, Miscellaneous Penalties. Background This section contains general information about Miscellaneous Penalties Worked in Appeals. Material Changes (1) Moved IRM 126.96.36.199.1 Account and Processing Support (APS) Card-in and Closing Procedures for IRC 6673 Penalties and cross-referenced to IRM 188.8.131.52.5, IRC 6673 Penalties Case Carding and IRM 184.108.40.206.1, IRC §6673 Penalty Closing Procedures (220.127.116.11.1) respectively. (2) Deleted IRM 18.104.22.168.1 APS Card-in and Closing Procedures for IRC 6702 as APS will follow normal card-in and closing procedures. IRM 22.214.171.124.1 is now titled ATE Consideration of IRC 6695A. (3) Clarifying IRM 126.96.36.199, IRC 6721-Failure to File Correct Information Returns in (2) regarding Primary Business Code (PBC 217). Effect on Other DocumentsThis IRM supersedes IRM 8.11.8 dated 10/28/13. AudienceAppeals Effective Date(10-24-2014)John V. CardoneDirector, Policy, Quality and Case Support 188.8.131.52 (10-28-2013) IRC Section 6673 - Sanctions and Costs Awarded by the Courts The IRC 6673 penalty is imposed by the U. S. Tax Court against a taxpayer who initiates proceedings in the court primarily to delay the case or whose position in the proceedings is frivolous or groundless, or who has unreasonably failed to pursue available administrative remedies. The IRC 6673 penalty can also be imposed by the Tax Court against any person admitted to practice before the Tax Court who has unreasonably and vexatiously multiplied the proceedings. See IRM 184.108.40.206.2, Assessment of Civil Penalties under IRC 6673, for more information on CDP cases, Assessment of Civil Penalties under IRC 6673, and IRM 220.127.116.11, IRC Section 6673Sanctions and Costs Awarded by Courts. These cases are controlled on Appeals Centralized Database System (ACDS) with TYPE Code = OTHPEN - Other IRC penalty code sections not identified. Appeals Technical Employees (ATE) may be assigned post-assessed IRC 6673 penalty cases for consideration if the taxpayer appeals after assessment or during consideration of a CDP case. 18.104.22.168.1 (10-24-2014) Account and Processing Support (APS) Card-in and Closing Procedures for IRC 6673 Penalties APS Card-in and Closing Procedures for IRC 6673 Penalties has been moved to IRM 22.214.171.124.5, IRC 6673 Penalties Case Carding and IRM 126.96.36.199.1, IRC §6673 Penalty Closing Procedures (188.8.131.52.1) respectively. 184.108.40.206.2 (10-01-2012) Appeals Technical Employee (ATE) Consideration of IRC 6673 The penalty is imposed on various types of cases which include both deficiency and Collection Due Process (CDP) cases. See IRM 220.127.116.11 for more information on IRC 6673(a)(1), Tax Court Imposed Penalty. For information on the statute of limitations for assessing costs under IRC 6673(b)(2) for proceedings in any court other than the Tax Court, see IRM 18.104.22.168.2.1, Statute of Limitations for Assessing Costs Under Section IRC 6673(b)(2). The penalty amount imposed by the Tax Court cannot exceed $25,000, is assessed at the same time as the deficiency, and is collected as part of the tax. See the IRC 6673 Penalty web page within the Office of Servicewide Penalties (OSP) web site. 22.214.171.124 (10-28-2013) IRC 6702 - Frivolous Tax Submissions IRC 6702 provides for civil penalties for frivolous tax submissions. Penalties assessed under IRC 6702(a) or IRC 6702(b) are not subject to administrative appeal rights. Taxpayers seeking judicial review of an IRC 6702(a) or IRC 6702(b) penalty must first fully pay the entire penalty and then file a claim for refund with the IRS within two years of the date of payment. If the IRS does not issue a determination allowing or disallowing the claim within six (6) months, the taxpayer may file suit in the district court or U.S. Court of Federal Claims. If the IRS issues a disallowance letter, the taxpayer has two (2) years from the date the disallowance letter was sent to the taxpayer to file suit contesting this penalty in the district court or U.S. Court of Federal Claims. Taxpayers may seek a reduction of the frivolous tax submission penalty under IRC 6702(d). Per section 5.03 of Rev. Proc. 2012-43, penalty reduction requests are also not subject to administrative appeal. For more information on IRC 6702 reduction, see IRM 126.96.36.199, IRC 6702(a) and 6702(b) Frivolous Return/Submission and IRC 6682 Questionable W-4 Penalties. See IRM 20.1.10 for general information on IRC 6702 penalties, and IRM 8.22.8 for information on IRC 6702 penalty issues raised as part of a Collection Due Process case. 188.8.131.52 (10-01-2012) IRC 6695A - Substantial and Gross Valuation Misstatements Attributable to Incorrect Appraisals IRC 6695A applies to any person who prepared an appraisal of the value of property and who knew, or reasonably should have known, the appraisal would be used in connection with a return or claim for refund and that appraisal results in a substantial valuation misstatement (within the meaning of IRC 6662(e)), a substantial estate or gift tax valuation understatement (within the meaning of IRC 6662(g)), or a gross valuation misstatement (within the meaning of IRC 6662(h)) with respect to such property. See IRM 20.1.12, Penalties Applicable to Incorrect Appraisals for more information. These cases are controlled on ACDS with TYPE Code = 6695A. The penalty may apply whenever value is at issue, such as in the following: Charitable contribution Estate and Gift taxes 184.108.40.206.1 (10-01-2012) ATE Consideration of IRC 6695A The ATE works appeals of IRC 6695A penalties in the same manner as appeals of any other proposed liability not subject to the deficiency procedures of subchapter B of Chapter 63 of the Internal Revenue Code. IRC 6695A is an immediately assessable penalty, with post-assessment (but pre-payment) appeal rights. See IRM 220.127.116.11, Appeal Rights - IRC 6695A cases. There should be two case files: the related income, estate or gift tax case file, and the penalty case file. There should be two separate work unit numbers for each. The amount of the IRC 6695A penalty is the lesser of: the greater of 10 percent of the amount of the underpayment (defined by IRC 6664(a)) attributable to the misstatement or $1000 or 125 percent of the gross income received from the preparation of the appraisal. See Appraiser Penalties - IRC 6695A webpage within the Office of Servicewide Penalties (OSP) web site and IRM 20.1.12, Penalties Attributable to Incorrect Appraisals. The ATE will close the case with a Form 5402Appeals Transmittal and Case Memo (ACM), Form 8278, Computation and Assessment of Miscellaneous Penalties, Form 3870Request for Adjustment for abatements, and Letter 1364 for notification of full or partial disallowance. 18.104.22.168 (10-01-2012) IRC 6709 - Penalties with Respect to Mortgage Credit Certificates This penalty is for making a material and negligent misstatement in any verified written statement made under penalties of perjury with respect to the issuance of a mortgage credit certificate. These cases are controlled on ACDS with TYPE Code = 6709. See IRM 22.214.171.124, Penalties with Respect to Mortgage Credit Certificates. 126.96.36.199 (10-24-2014) IRC 6721- Failure to File Correct Information Returns The term "information return" means any statement, form, or return as described in Treasury Regulation (Treas. Reg.) and Internal Revenue Code (IRC) 6724(d)(1). Cases involving Form 8300 violations are controlled on ACDS with TYPE Code = 6721 (IRC 6721 Bank Secrecy Case and Primary Business Code (PBC 217)). Change if necessary or submit the correction to APS. See IRM 20.1.7, Penalty Handbook, Information Return Penalties.