A Tax Morass Only a Lawyer Could Love

The IRS is beginning to implement a tax penalty that poses some very real economic and constitutional dangers, including the harassment of taxpayers for political ends.

Here’s another concern for beleaguered taxpayers: the next time you file a tax return that requests a refund, you could be slapped with a 20 percent penalty (not a tax) if the IRS thinks you’ve made an “excessive claim” and thereby denies the refund — even if your filing was objectively reasonable and made in good faith! The IRS is beginning to implement the regulations now.
The villain here is a 2007 amendment to the Internal Revenue Code, 26 U.S.C. § 6676, which poses some very real economic and constitutional dangers. It gives the government countless opportunities for abuse of power, including the harassment of taxpayers for political ends. As it chills the process whereby individuals and businesses seek to recover unduly taxed personal property, Section 6676 can cause cascading economic disruptions affecting the entire economy.

Read more: http://www.american.com/archive/2012/december/a-tax-morass-only-a-lawyer-could-love