Accuracy - Annoucement 2002-2 - Audit Techniques Guide | irstaxattorney.com



Accuracy-Related Penalties: Up Introduction Accuracy Related Penalty Negligence of Rules Substantial Understatement Valuation Misstatement Fraud Penalty Reasonnable Cause Annoucement 2002-2 Policy Statements Audit Techniques	Audit Techniques Guide Chapter 8: Announcement 2002-2 Introduction On December 21, 2001, the Service announced a Disclosure Initiative under which the IRS will waive accuracy-related penalties for transactions that produce an underpayment of tax and that the taxpayer discloses to the IRS during the period within which the initiative was in effect. Announcement 2002-2, 2002-2 IRB. For a limited period, Announcement 2002-2 provided an administrative basis under which a taxpayer could avoid the accuracy-related penalty for an underpayment of tax. The IRS will waive the accuracy-related penalty if the taxpayer disclosed an item before the earlier of April 23, 2002, or the date the item was an issue raised during an examination. “Issues Raised During An Examination” For purposes of the announcement, an item was an issue raised during an examination if the agent communicated to the taxpayer knowledge about the specific item, or on or before December 21, 2001, the agent had made a request to the taxpayer for information, and the taxpayer could not make a complete response to the request without giving the agent knowledge of the item. Applicability of Announcement 2002-2 By its express terms, Announcement 2002-2 does not apply to an item that was an issue raised during an examination whether or not the taxpayer itself had disclosed the existence of the item before December 21, 2001. The announcement provides no special rule for taxpayers that disclosed the existence of an item before December 21, 2001, whether on its return, under Rev. Proc. 94-69, or in some other manner. Consequently, if a taxpayer was not eligible under Announcement 2002-2 but disclosed regardless, there is no formal or informal administrative policy of waiving the accuracy-related penalty in the case of a taxpayer solely because the taxpayer disclosed to the examination team the existence of the item. Accordingly, if there is an underpayment of tax attributable to a listed transaction and the taxpayer did not (including because it was unable to) disclose the transaction under Announcement 2002-2, and then the penalty issue should be developed. The fact that the taxpayer did disclose may, however, be a mitigating factor in some circumstances. This position is consistent with the penalty consideration memorandum from the Commissioner of LMSB dated December 20, 2001.