December 15 2019

IRS issues updated guidance on penalties for understatement of income tax

Source: IBFD Tax Research Platform News

The US Internal Revenue Service (IRS) has issued Revenue Procedure 2019-42 to identify circumstances under which the disclosure on a taxpayer's income tax return with respect to an item or position is adequate for the purpose of reducing the understatement of income tax under section 6662(d) of the US Internal Revenue Code (IRC) (relating to the substantial understatement aspect of the accuracy-related penalty), and for the purpose of avoiding the tax return preparer penalty under IRC section 6694(a) (relating to understatements due to unreasonable positions) with respect to income tax returns.

Revenue Procedure 2019–42 was published in the IRS Internal Revenue Bulletin (IRB) as part of IRB 2019-49 dated 2 December 2019.

Revenue Procedure 2019–42 applies to any income tax return filed on 2019 tax forms for a taxable year beginning in 2019, and to any income tax return filed in 2020 on 2019 tax forms for short taxable years beginning in 2020.