Erroneous claim for refund or credit

The Erroneous Claim for Refund or Credit penalty applies if you submit a claim for refund or credit of income tax for an excessive amount and a reasonable cause does not apply. This IRC 6676 penalty provision was enacted on May 25, 2007, by the Small Business and Work Opportunity Act of 2007.

How you know you owe the penalty

We send you a notice or letter if you owe an Erroneous Claim for Refund or  Credit  penalty. For more information, see Understanding Your IRS Notice or Letter.

How we calculate the penalty

In cases of erroneous claim for refund or  credit, a penalty amount is 20 percent of the excessive amount claimed.

• An “excessive amount” is defined as the amount of the claim for refund or credit that exceeds the amount allowable for any taxable year.

• Even though your refund has been held, and not refunded to you while your tax return is being audited, the amount of the claim may be assessed an accuracy-related penalty if there is not a reasonable cause.

• The penalty shall not apply to any disallowed portion of the claim for refund or credit that is subject to any component of the Accuracy-Related Penalty or the Imposition of Fraud Penalty.

Interest on a penalty

We charge interest on penalties.

The date from which we begin to charge interest varies by the type of penalty. Interest increases the amount you owe until you pay your balance in full. For more information about the interest we charge on penalties, see Interest.

Pay a penalty

Send us a payment or pay your taxes in full to stop future penalties and interest from adding up.

Remove or reduce a penalty

We may be able to remove or reduce some penalties if you acted in good faith and can show reasonable cause for why you weren’t able to meet your tax obligations. By law we cannot remove or reduce interest unless the penalty is removed or reduced.

For more information, see penalty relief.

Dispute a penalty

If you disagree with the amount you owe, you may dispute the penalty.

Call us at the toll-free number at the top right corner of your notice or letter or write us a letter stating why we should reconsider the penalty. Sign and send your letter along with any supporting documents to the address on your notice.

Have this information when you call or send your letter:

• The notice or letter we sent you
• The penalty you want us to reconsider
• For each penalty, an explanation of why you think we should remove it

If you didn’t receive a notice or letter, get telephone assistance.

Avoid a penalty

You can avoid a penalty by filing your tax return accurately and on time and paying your tax by the due date. If you can’t pay your tax by the due date, you can apply for a payment plan.

Apply for a payment plan

If you can't pay the full amount of your taxes or penalty on time, pay what you can now and apply for a payment plan. You may reduce future penalties when you set up a payment plan.

Get help

For help with a penalty, call the phone number on your notice or letter. If you didn’t receive a letter or notice, use telephone assistance.

Law and regulations

Erroneous Claim for Refund or Credit - 26 U.S. Code § 6676