26 U.S.C. § 6701

Penalties for aiding and abetting understatement of tax liability

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(a) Imposition of penaltyAny person—(1) who aids or assists in, procures, or advises with respect to, the preparation or presentation of any portion of a return, affidavit, claim, or other document,(2) who knows (or has reason to believe) that such portion will be used in connection with any material matter arising under the internal revenue laws, and(3) who knows that such portion (if so used) would result in an understatement of the liability for tax of another person,shall pay a penalty with respect to each such document in the amount determined under subsection (b).(b) Amount of penalty(1) In general

Except as provided in paragraph (2), the amount of the penalty imposed by subsection (a) shall be $1,000.

(2) Corporations

If the return, affidavit, claim, or other document relates to the tax liability of a corporation, the amount of the penalty imposed by subsection (a) shall be $10,000.

(3) Only 1 penalty per person per period

If any person is subject to a penalty under subsection (a) with respect to any document relating to any taxpayer for any taxable period (or where there is no taxable period, any taxable event), such person shall not be subject to a penalty under subsection (a) with respect to any other document relating to such taxpayer for such taxable period (or event).

(c) Activities of subordinates(1) In generalFor purposes of subsection (a), the term “procures” includes—(A) ordering (or otherwise causing) a subordinate to do an act, and(B) knowing of, and not attempting to prevent, participation by a subordinate in an act.(2) Subordinate

For purposes of paragraph (1), the term “subordinate” means any other person (whether or not a director, officer, employee, or agent of the taxpayer involved) over whose activities the person has direction, supervision, or control.

(d) Taxpayer not required to have knowledge

Subsection (a) shall apply whether or not the understatement is with the knowledge or consent of the persons authorized or required to present the return, affidavit, claim, or other document.

(e) Certain actions not treated as aid or assistance

For purposes of subsection (a)(1), a person furnishing typing, reproducing, or other mechanical assistance with respect to a document shall not be treated as having aided or assisted in the preparation of such document by reason of such assistance.

(f) Penalty in addition to other penalties(1) In general

Except as provided by paragraphs (2) and (3), the penalty imposed by this section shall be in addition to any other penalty provided by law.

(2) Coordination with return preparer penalties

No penalty shall be assessed under subsection (a) or (b) of section 6694 on any person with respect to any document for which a penalty is assessed on such person under subsection (a).

(3) Coordination with section 6700

No penalty shall be assessed under section 6700 on any person with respect to any document for which a penalty is assessed on such person under subsection (a).

(Added Pub. L. 97–248, title III, § 324(a), Sept. 3, 1982, 96 Stat. 615; amended Pub. L. 101–239, title VII, § 7735(a), (b), Dec. 19, 1989, 103 Stat. 2403.)Editorial NotesAmendments

1989—Subsec. (a)(1). Pub. L. 101–239, § 7735(a)(1), struck out “in connection with any matter arising under the internal revenue laws” after “other document”.

Subsec. (a)(2). Pub. L. 101–239, § 7735(a)(2), inserted “(or has reason to believe)” after “who knows”.

Subsec. (a)(3). Pub. L. 101–239, § 7735(a)(3), substituted “would result” for “will result”.

Subsec. (f)(1). Pub. L. 101–239, § 7735(b)(2), substituted “paragraphs (2) and (3)” for “paragraph (2)”.

Subsec. (f)(3). Pub. L. 101–239, § 7735(b)(1), added par. (3).

Statutory Notes and Related SubsidiariesEffective Date of 1989 Amendment

Pub. L. 101–239, title VII, § 7735(c), Dec. 19, 1989, 103 Stat. 2404, provided that: “The amendments made by this section [amending this section] shall take effect on December 31, 1989.”

Effective Date

Pub. L. 97–248, title III, § 324(c), Sept. 3, 1982, 96 Stat. 616, provided that: “The amendments made by this section [enacting this section] shall take effect on the day after the date of the enactment of this Act [Sept. 3, 1982].”

Notes of Decisions

Cited in 71 cases (9 in the last 5 years), 1984–2026 · leading case: Cent. Bank of Denver, N. A. v. First Interstate Bank of Denver, N. A., 511 U.S. 164 (1994).

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Cent. Bank of Denver, N. A. v. First Interstate Bank of Denver, N. A., 511 U.S. 164 (1994). · cites it 2× “26 U. S. C. § 6701 (1988 ed. and Supp. IV).”

James M. Mullikin v. United States, 952 F.2d 920 (6th Cir. 1992). · cites it 8× “The Internal Revenue Service (“IRS”) subsequently made the determination that Mullikin’s actions with respect to the various tax forms constituted the aiding and abetting of the understatement of tax liability in violation of 26 U.S.C. § 6701 and assessed penalties against…”

United States v. Ernst & Whinney, a Gen. P'ship, 735 F.2d 1296 (11th Cir. 1984). · cites it 3× “1984) (establishing penalty for "any person who aids or assists in, procures, or advises with respect to, the preparation of any portion of a return, affidavit, claim or other document in connection with any matter arising under the internal revenue laws” who knows that his…”

United States v. Stinson, 239 F. Supp. 3d 1299 (M.D. Fla. 2017). · cites it 2× “26 U.S.C. § 6701 . The term “procures” as used in § 6701 includes “ordering (or otherwise causing) a subordinate to do an act,” as well as “knowing of, and not attempting to prevent, participation by a subordinate in an act.”

Sansom v. United States, 703 F. Supp. 1505 (N.D. Fla. 1988). · cites it 5× “26 U.S.C. § 6701 . The government conceded that the plaintiff was entitled to the refund, and stipulated to an entry of judgment for plaintiff.”

Kuchan v. United States, 679 F. Supp. 764 (N.D. Ill. 1988). · cites it 4× “26 U.S.C. § 6701 . In determining the amount of the § 6701 penalty ultimately imposed on plaintiff, the IRS used listings of Price Coal’s investors for 1982, 1983, and 1984, showing to whom the Schedule C’s were to be sent.”

In Re James E. Mitchell & Diane C. Mitchell, Debtors. James E. Mitchell Diane C. Mitchell v. United States, 977 F.2d 1318 (9th Cir. 1992). · cites it 3× “26 U.S.C. § 6701 (a), (b) (1988). This core adversary proceeding began in the bankruptcy court, the judgment of which the district court affirmed.”

United States v. Thurston Paul Bell, 414 F.3d 474 (3rd Cir. 2005). “Further engaging in any conduct subject to penalty under 26 U.S.C. § 6701 , i.e. assisting others in the preparation of any tax forms or other documents to be used in connection with any material matter arising under the internal revenue laws and which they know will (if so…”

Mitchell v. United States (In Re Mitchell), 109 B.R. 434 (Bankr. W.D. Wash. 1989). · cites it 4× “§ 505 , and Sections 6701 and 6707 of the Internal Revenue Code, 26 U.S.C. §§ 6701 , 6707. This Court has jurisdiction pursuant to 28 U.”

Diversified Grp. Inc. v. United States, 123 Fed. Cl. 442 (Fed. Cl. 2015). · cites it 2× “§ 6700 for promoting abusive tax shelters, or under 26 U.S.C. § 6701 for aiding and abetting an understatement of tax liability, if fifteen percent of the penalty has been paid.”

Christian S. Nielsen v. United States, 976 F.2d 951 (5th Cir. 1992). · cites it 2× “See 26 U.S.C. § 6701 (a)(3). He contends that because treasury regulations do not deem a general partner who prepares a partnership return to have prepared the other partners’ returns for Section 6694 purposes, that the necessary “other person” requirement in Section 6701(a)(3)…”

United States v. Garrity, 304 F. Supp. 3d 267 (D. Conn. 2018). “) In light of the presumption in favor of applying the preponderance standard in all civil actions, the few structural similarities that Defendants point out between the civil FBAR statute and the civil tax fraud statute are not sufficient to warrant applying a higher standard…”

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— 26 U.S.C. § 6701(a)(3) — 1 case

Warner v. United States, 700 F. Supp. 532 (S.D. Fla. 1988).

— 26 U.S.C. § 6701(d) — 1 case

Sansom v. United States, 703 F. Supp. 1505 (N.D. Fla. 1988). “26 U.S.C. § 6701 . The government conceded that the plaintiff was entitled to the refund, and stipulated to an entry of judgment for plaintiff.”

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