Excise tax and estate and gift tax penalties are important tools for IRS enforcement. Penalties provide the IRS with an important tool to achieve that goal because they enhance voluntary compliance by taxpayers. See IRM 1.2.1.12.1, Policy Statement 20–1 (Formerly P-1-18), Penalties are used to enhance voluntary compliance.

IRC 6653 provides a penalty for failure to pay stamp tax.

IRC 6675 provides a penalty for excessive claims with respect to the use of certain fuels.

IRC 6715 provides a penalty for dyed fuel sold for use or used in taxable use, etc.

IRC 6715A provides a penalty for tampering with or failing to maintain security requirements for mechanical dye injection systems.

IRC 6717 provides a penalty for refusal of entry.

IRC 6718 provides a penalty for failure to display tax registration on vessels.

IRC 6719 provides a penalty for failure to register or reregister.

IRC 6720A provides a penalty with respect to certain adulterated fuels.

IRC 6725 provides a penalty for failure to report information under IRC 4101.

IRC 5000A provides a penalty for failure to maintain minimum essential coverage.

The Director, Business Support, is the director responsible for the servicewide civil penalty program.

Overall responsibility for civil penalty programs is assigned to OSP. OSP is an organization residing in the Business Support (Small Business/Self Employed) Function. OSP is charged with coordinating policy and procedures concerning the administration of civil penalty programs, ensuring consistency with the penalty policy statement, reviewing and analyzing penalty information, researching penalty effectiveness on compliance trends, and determining appropriate action necessary to promote voluntary compliance.

Each IRS organization is responsible for establishing an internal process for managing their procedures based upon these Servicewide policies and may develop additional guidance or reference materials for their specific functional administrative needs. However, such reference material must receive approval from OSP prior to distribution and must remain consistent with the policies and general procedural requirements set forth in this IRM, Policy Statement 20-1 (e.g., Penalty Policy Statement) in IRM 1.2.1.12.1, Policy Statement 20-1 (Formerly P-1-18), Penalties are used to enhance voluntary compliance, and any other guidance relating to civil penalties.

All employees should keep the following objectives in mind when handling each penalty case:

Every function in the IRS has a role in proper penalty administration. It is essential that each function conducts its operations with an emphasis on promoting voluntary compliance. Appropriate reviews should be conducted to ensure consistency with the penalty policy statement (Policy Statement 20-1) and philosophy.

To promote the goal of consistency and fairness, OSP reviews semi-annually a sample of penalty assessments provided by SB/SE Research. See IRM 20.3.1, Civil Penalty Accuracy Review Process. The report of findings is shared with the Director, Business Support, the CFO, and other leadership as needed. The completed report is uploaded to an enterprise shared folder. Reports may be prepared when a significant issue develops, such as a correction to programming that affects many taxpayers.

See Exhibit 20.1.11-1, Acronyms, for a list of acronyms and definitions used in this IRM.

See the related resources below:

The annual ISRP amount is the greater of a percentage of excess household income or a flat dollar amount, but is capped at the national average premium for a bronze level qualified health plan available through the Marketplace that would cover everyone in the household who does not have coverage and does not qualify for a coverage exemption.

For 2014, the annual ISRP amount is the greater of:

For 2015, the annual ISRP amount is the greater of:

For 2016, the annual ISRP amount is the greater of:

After year 2016, the flat dollar amounts are based on the 2016 amounts plus an inflation adjustment.

Below is the summary table of 2014-2018 annual payment amounts and capped cost of the national average premium for a bronze level health plan available through the Marketplace:

The PRN for ISRP is 692. This is assessed on MFT 35 using Form 8278, Assessment and Abatement of Miscellaneous Civil Penalties. See IRM 20.2.11.14, Affordable Care Act (ACA), for interest information on this penalty.

The law provides coverage exemptions such as the partial list below:

There is no reasonable cause exception for failure to maintain MEC.

The law prohibits the IRS from using liens or levies to collect any ISRP. If taxpayers owe an ISRP, the IRS may offset that liability with any tax refund that may be due to them.

If a taxpayer fails to timely pay the ISRP, the taxpayer is not subject to any criminal prosecution or penalty for the failure.

Unlike the ISRP, the employer shared responsibility payment (ESRP) under IRC 4980H is considered a tax for purposes of the IRC, and not a penalty. ESRP is assessed on BMF MFT 43 with TC 298, see IRM 20.2.11.14(3), Affordable Care Act (ACA), and IRM 4.10.5.13, Health Coverage Information Returns.

The penalty is 50% of the total amount of the underpayment of the tax for each failure to pay any tax that is payable by stamp, coupons, tickets, books, or other devices or methods.

The penalty is assessed on MFT 13 (for BMF) or MFT 55 (for IMF) using PRN 574 on Form 8278, Assessment and Abatement of Miscellaneous Civil Penalties.

If taxpayers want to contest the penalty assessment, they must fully pay the entire penalty and then file a claim for refund with the IRS.

The penalty for excessive claims for the use of certain fuels is an amount equal to the greater of:

The penalty is assessed on MFT 13 (for BMF) or MFT 55 (for IMF) using PRN 661 on Form 8278, Assessment and Abatement of Miscellaneous Civil Penalties.

The amount of an excessive claim, as well as the penalty imposed by IRC 6675 is assessable under IRC 6206, Special Rules Applicable to Excessive Claims Under Certain Sections.

If the taxpayer filed a quarterly claim, the penalty may apply to any excessive payment on the quarterly claim.

The penalty does not apply to an excessive credit taken for taxes on Form 4136, Credit for Federal Tax Paid on Fuels, on an income tax return.

The penalty will not be imposed if the taxpayer demonstrates that the claim for the excessive amount was due to reasonable cause. See IRM 20.1.1.3, Criteria for Relief from Penalties.

The penalty is assessed for misuse.

For the first violation, the amount of the penalty on each act is the greater of:

For additional violations, the amount of the penalty is the greater of:

The penalty is assessed on MFT 13 (for BMF) or MFT 55 (for IMF) using PRN 656 on Form 8278, Assessment and Abatement of Miscellaneous Civil Penalties.

There is no reasonable cause exception to this penalty.

The IRS notifies the taxpayer in writing that the IRS intends to impose the IRC 6715 penalty. Within 30 days from the date of the notification, a taxpayer can contest the penalty by completing Form 12009, Request for an Informal Conference and Appeals Review. If, after the conference, the IRS still proposes to assert the penalty and the taxpayer still disagrees with the decision, the taxpayer can request an Appeals review of the case.

Any person subject to the IRC 6715 penalty at least twice after 10/22/2004 will be denied the right to an administrative appeal of a subsequent IRC 6715 penalty, unless the claim asserts:

If the penalty is assessed on any business, each officer, employee or agent of the business, who willfully participated in any part of the act giving rise to the penalty, is jointly and severally liable with the business for the penalty, per IRC 6715(d), Joint and several liability of certain officers and employees.

The penalty for tampering with mechanical dye injection systems is the greater of:

The penalty for failure to maintain security standards is:

The penalty is assessed on MFT 13 (for BMF) or MFT 55 (for IMF) using PRN 665 on Form 8278, Assessment and Abatement of Miscellaneous Civil Penalties.

There is no reasonable cause exception for tampering with or failing to maintain security requirements for mechanical dye injection systems.

If the penalty is assessed on any business, each officer, employee, or agent of the business, who willfully participated in any part of the act giving rise to the penalty is jointly and severally liable with the business, per IRC 6715A(c)(1), Joint and several liability - In general.

If a penalty under IRC 6715A is assessed against an entity that is part of an affiliated group (as defined in IRC 1504(a)), the parent corporation of the business will be jointly and severally liable with the business for the penalty under IRC 6715A(c)(2).

IRC 7342 penalizes any owner of a building or place, or any person managing or controlling the building, who refuses entry to the IRS under IRC 7606. IRC 7606, Entry of premises for examination of taxable objects, permits the IRS to enter any building or place where anything subject to tax is made, produced or kept for the purpose of examining those taxable articles or objects.

IRC 6717, enacted by the American Jobs Creation Act, adds an assessable penalty for refusing entry (or not permitting an action) per IRC 4083(d)(1). See IRM 20.1.11.8.1.3, Computation for Penalty with IRC 4083(d)(1), regarding IRC 4083(d)(1).

This penalty is effective for penalties assessed after December 31, 2004.

IRC 7272 (civil) provides for a penalty for failing to register or reregister when required to by the IRC.

Beginning on January 1, 2005, the American Jobs Creation Act provided for a penalty for any operator of a vessel who is required to register under IRC 4101 and who does not display proof of registration using an identification device as defined by the IRS on vessels transporting taxable fuel per IRC 4101(a)(3).

IRC 6719 provides that every person who is required to register or reregister under IRC 4101, Registration and bond and fails to do so shall pay an assessable penalty.

IRC 6720A(a) provides for a penalty for any person who knowingly transfers for sale or resale, sells for resale or holds out for sale or resale any liquid for use in a diesel-powered highway vehicle or a diesel-powered train which does not meet applicable Environmental Protection Agency (EPA) regulations (as defined in IRC 45H(c)(3), Credit for production of low sulfur diesel fuel - Definitions and special rule - Applicable EPA regulations).

IRC 6720A(b) provides for a penalty for retailers who knowingly hold out for sale any liquid for use in a diesel-powered highway vehicle or a diesel-powered train, which does not meet EPA regulations (as defined in IRC 45H(c)(3)).

For purposes of this penalty, the term "applicable EPA regulations" means the Highway Diesel Fuel Sulfur Control Requirements of the Environmental Protection Agency.

The Excise Summary Terminal Activity Reporting System (ExSTARS) is the IRS's fuel information reporting system requiring terminal operators and bulk transport carriers to report monthly on the movement of any liquid product into or out of a terminal per IRC 4101(d).

IRC 6725, enacted by the American Jobs Creation Act, provides for an assessable penalty for failing to report as required by the ExSTARS system on a vessel or facility (e.g., a terminal). The failure includes providing inaccurate or incomplete information.

The penalty for failure to comply or the issuance of insurance policies by foreign insurers with the intent to evade tax is a fine of double the amount of the tax.

The penalty is administered by the Excise tax examination function.

Taxpayers must first fully pay the entire penalty and then file a claim for refund with the IRS within two years of the date of payment. If the IRS does not issue a determination allowing or disallowing the claim within six months, the taxpayer may file suit in the district court or U.S. Court of Federal Claims. If the IRS issues a disallowance letter, the taxpayer has two years from the date the disallowance letter was sent to the taxpayer to file suit contesting this penalty in the district court or U.S. Court of Federal Claims.

IRC 6166(g)(3) provides for a penalty when an installment of principal and/or interest is not paid when due, but is paid within six months of the due date to avoid the acceleration of unpaid estate tax installments.

A Late Installment (LI) Penalty is computed on the unpaid interest installment at 5% of the amount of the payment multiplied by the number of months (or fractions thereof) from the installment due date (including any extension of time to pay) until the payment is received.

Input transaction code (TC) 240 on IDRS with the amount for the LI Penalty assessment.

Campus Compliance Services, Estate and Gift Tax Campus Operation, process the requests for deferred tax and assert applicable penalties for defaulted payments.

If the taxpayer fails to make the installment (principal and interest) payment, then:

If the payment is not received within 45 days of the first notice (Letter 6335, Estate Installment Program), then:

If the payment is not received within 45 days of the second notice (Letter 6335), then:

If payment is not received by the payment due date (within 45 days of the third notice), and for more information on computing the Failure to Pay Penalty and Interest on LI payments and concerning defaulted payments, see IRM 4.25.2, Campus Estate and Gift.

There is no penalty relief for reasonable cause.

The penalty is $50 per offense relating to stamps.

The penalty is administered by the Alcohol and Tobacco Tax and Trade Bureau (TTB).

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The penalty is equal to the special tax the business is liable for, but not less than $10.

If the failure is for willful neglect or refusal, then the penalty is twice the liability amount.

The penalty is administered by the Alcohol and Tobacco Tax and Trade Bureau (TTB).

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IRC 7275(a) provides for a penalty for failure to show the total tax and transportation charge on tickets for airline passenger transportation.

In the case of transportation by air that is taxable transportation as defined in IRC 4262, Definition of Taxable Transportation, the ticket for such transportation shall show the total of:

For the purposes of this penalty, the term "taxable transportation" means:

IRC 7275(b) provides for a penalty if in the case of taxable transportation, any advertising made by or on behalf of any person furnishing such transportation (or offering to arrange such transportation), which states the cost of such transportation does not:

The penalty for any person who violates any provision of tickets and advertising will, for each violation be guilty of a misdemeanor, and upon conviction not be fined more than $100.

The penalty is three times the fraudulent amount or $500.

The penalty is administered by the Alcohol and Tobacco Tax and Trade Bureau (TTB).

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For all penalties subject to IRC 6751(b)(1), written supervisory approval required under IRC 6751(b)(1) must be obtained prior to issuing any written communication of penalties to a taxpayer that offers the taxpayer an opportunity to sign an agreement or consent to assessment or proposal of the penalty.