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:: Accuracy - Announcement 2002-2
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.
See
Exhibit 9,
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. See Exhibit
2.
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