Procedural Requirements for Imposition of Penalties and Additions to Tax
The Internal Revenue Service Restructuring Act required that each notice imposing a penalty include the name of the penalty, the Code section imposing the penalty, and a computation of the penalty. The Act also requires the specific approval of IRS management to assess all non computer generated penalties unless excepted. This provision does not apply to failure to file penalties, failure to pay penalties, or to penalties for failure to pay estimated tax.
About 7 million U. S. Taxpayers fail to file required income tax returns each year, while 146 million Americans dutifully file their returns each year. That means that about 5% of the populace fail to meet their obligations to Uncle Sam. As part of its National Research Program the IRS released a study in 2011 of 2006 returns which found that as result of non-filing, the government loses $28 billion per year. Although the IRS makes efforts to force non-filers into compliance, the continuing improvident cutting of the IRS budget allows more taxpayers to duck their filing obligations because the IRS has fewer resources to pursue non-compliant taxpayers.
As a tax controversy lawyer I frequently meet with taxpayers who have failed to file multiple years of returns. Many of those clients ask, “Should I file the return right now, or wait until I have the money to pay it?” The answer is simple: file it as soon as possible!