Pursuing Frivolous Tax Arguments: The Penalties

Taxpayers filing returns with frivolous positions may be subject to the accuracy-related penalty under Internal Revenue Code section 6662 (twenty percent of the underpayment attributable to negligence or disregard of rules or regulations) or the civil fraud penalty under Internal Revenue Code section 6663 (seventy-five percent of the underpayment attributable to fraud) or the erroneous claim for refund penalty under Internal Revenue Code section 6676 (twenty percent of the excessive amount). Additionally, late filed returns setting forth frivolous positions may be subject to an addition to tax under Internal Revenue Code section 6651(f) for fraudulent failure to timely file an income tax return (triple the amount of the standard failure to file addition to tax under Internal Revenue Code section 6651(a)(1).

For a more detailed discussion, read the article posted by the IRS.