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IRS, Treasury issue guidance on new abusive transaction penalties.

The Treasury Department and the IRS have issued interim guidance on two new penalty provisions enacted as part of the 2004 American Jobs Creation Act.

The act creates a new penalty for the failure to disclose information about "reportable transactions," which are transactions that the Treasury Department and IRS have determined to be potentially abusive.

Notice 2005-11 provides interim guidance regarding application of this penalty to taxpayers who are required to disclose reportable transactions.

The act also creates a new penalty if a taxpayer understates the tax liability relating to a reportable transaction. A higher penalty will apply if a taxpayer does not adequately disclose the facts of the reportable transaction. If the taxpayer discloses the transaction, the penalty may be avoided if the taxpayer had reasonable cause and acted in good faith.

Notice 2005-12 provides interim guidance to taxpayers regarding these provisions, including when a taxpayer may rely on the advice of a tax advisor to establish reasonable cause and good faith.

This article ran in the Ohio e-CPA Weekly on Jan. 25.
COPYRIGHT 2005 Ohio Society of Certified Public Accountants
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2005 Gale, Cengage Learning. All rights reserved.

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Title Annotation:National
Publication:Catalyst (Dublin, Ohio)
Date:Mar 1, 2005
Words:174
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