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Can an IRS examination assess fraudulent filing penalties enforceable outside of tax court?

Fort Washington, MD |

My 2011 tax return was audited. I provided the IRS with everything with the exception of documentation for my cash contribution. The auditor tried to assess me with fraudulent filing penalties. I appealed it and went to examination. Providing the same thing except the documentation for the cash contribution, the appeals officer assessed the penalties. I've provided nothing fraudulent. I just kept bad records for cash contributions. I filed an amendment and paid the difference of $861 removing the contributions and it was rejected and the check not cashed. I am waiting on the Notice of Deficiency. Question is does the examiner have the authority to assess fraud penalties without a judge approving it? If so I am going to tax court. If not what is the next step?

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Attorney answers 3

Best Answer

Yes, the auditor can assess those penalties (and any other they feel may be applicable). You can also appeal. The auditor is not the decision maker, the tax court is. As my colleagues have noted, this can often be abated.

Good luck.

Evan A. Nielsen is licensed to practice law in California and handles federal tax matters throughout the U.S. The information provided here is for educational purposes only and is not intended as legal advice for a particular matter. This response does not create any attorney-client relationship with the author. For specific advice about your particular situation, please consult an attorney.


This is an issue of record keeping - an obligation the taxpayer must comply with in order to substantiate a deduction. "Fraud" penalty is possible....What % is the penalty and what amount of deduction was denied?



The amount I didnt provide documentation for was a little over $2000. Removed from the return resulted in a difference of $861. I sent that back and they rejected the attempted payment. I was under the impression it would be treated as an error but they are treating it as if I filed something fraudulently, and I didnt. It seems rather aggressive on the IRS's part. If I am wrong it is the attorney's for the Commissioner who will recommend fraud penalties to the court, not the examiner. If this is the case I am going to file a petition with tax court and let the Commissioner prove fraud. And there was no fraud. Just bad record keeping.


Yes, penalties, including fraud penalties, are commonly asserted by agents during examination or in a notice of deficiency. You can, of course, litigate the issue and the IRS will bear the burden of proving fraud.

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