Taxpayers Could Not Rely on IRS Correspondence Waiving Penalties

In a recent U.S. District Court decision, the taxpayers were audited, and ultimately received a letter from the auditing agent that “the penalties had been waived.” The taxpayers signed a Form 4549 document which did not assess penalties.

Subsequently, the IRS sent a Form 4549-A assessing a civil penalty under §6707A for failure to disclose a listed transaction. The taxpayers argued that the IRS had waived penalties and could not assess this new penalty, or alternatively the IRS was equitably estopped from asserting the penalty. The court ruled in favor of the IRS and allowed the penalty.

Code §7121(a) authorizes the IRS to enter into agreements. . .

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