Monday, August 31, 2009

AICPA: Make Tax Penalties More Fitting to Conduct, Less Punitive

An AICPA report criticized the U. S. Treasury and Internal Revenue Service for overly broad and disproportionate penalties. Among criticisms: recently enacted penalities do not necessarily encourage voluntary compliance, poorly defined tax terms (examples: tax shelter and significant purpose), failure to distinguish between willful misconduct and negligent noncompliance regarding severity of penalties, an overemphasis on strict liability vs. taxpayer/preparer judgment, a bias favoring charging penalties in borderline cases and erosion of due process.
Finally, the report called for better oversight of penalty administration and for Congress and the IRS to get greater input from practitioners and professional organizations on penalty reform.

In many ways, the AICPA report is consistent with those who have criticised the government, both in the present and previous administration, of being too willing to flex state power at the risk of stifling speech and other civil liberties. I believe that most of the AICPA complaints are reasonable; hopefully, Congressional committees will take the report to heart and avoid the need for Taxpayer Bill of Rights III.


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