Hoping Mr. Mopsick will chime in on this, but it seems every time I read something and begin to understand it, it either changes or I cannot find the text for clarification.
My understanding of the Internal Revenue Code 6677, specifically title 26, was that the IRS could not penalize you for more than the account was worth (for failure to file paperwork). In other words, if the gross reportable amount of an account was 1000 dollars, the penalty would be 10k, or 35% of 1000, but in no case would said penalty exceed 1000 ( in this case).
It seems that an individual on one of the tax forms has been penalized 10k for a 1000 dollar account. Now…this individual does go on to mention that, when confirmed he did send a reasonable cause letter for his late filing of a 3520 form, the IRS agent told him on the phone to ignore the fine.
I have re-read the code…but find myself more confused than before as i cannot find the language that says ‘at no time shall the penalty exceed the gross reportable amount’….and it is driving me crazy because i DO remember reading that.
If this is not the case…does it not seem that the punishment does not fit the crime if the IRS is able to hand out 10k penalties for accounts with a reportable amount of 1, 100, or even 1000 dollars??