Statute of limitations does not bar a § 6676 penalty on a fraudulent refund claim

Plain-English summary

This short internal Chief Counsel advice answers a timing question about the Section 6676 penalty, which applies to erroneous claims for tax refunds or credits. A taxpayer had filed a return more than three years earlier claiming a large amount of false withholding, producing an erroneous refund, and the false withholding was shown to be fraudulent. The question was whether the ordinary limitations period barred the IRS from assessing the § 6676 penalty now. Chief Counsel concluded that the statute of limitations does not bar assessment of the § 6676 penalty in this situation. The advice states the conclusion without elaborating the full reasoning.

Ruling snapshot

• Question: Does the statute of limitations bar assessing the § 6676 penalty on a fraudulent, erroneous refund claim filed more than three years ago?
• Outcome: advice (limitations does not bar the penalty)
• Key authorities: IRC § 6676; IRC § 6501

Full text (IRS public release)

ID: CCA_2019111509251413
UILC: 6501.00-00, 6676.00-00

Number: 202044007
Release Date: 10/30/2020
From:
Sent: Friday, November 15, 2019 9:25:14 AM
To:
Cc:
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Subject: Question about statute of limitations and section 6676 penalty

This advice responds to your request for assistance.

Issue: Whether the statute of limitations bars assessment of the section 6676 penalty in the following situation.

Facts: More than three years ago, a taxpayer filed an income tax return claiming a substantial amount of false withholdings, resulting in an erroneous refund for which a section 6676 penalty is warranted. The claiming of the withholdings has been shown to be fraudulent.

Conclusion: The statute of limitations does not bar assessment of the section 6676 penalty in this situation.

Please let us know if you have any follow-up questions.