July 01, 2017

The Legal Consequences of Noncompliance with Federal Tax Laws: Civil Penalties and Criminal Liability

Allen D. Madison

Reprinted with permission from The Tax Lawyer, Fall 2016 (70:1), at 367–402. Copyright © 2016 American Bar Association. All rights reserved. This information or any or portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.



III. Civil Penalties

A.  Background

One of the potential consequences of noncompliance with the tax laws is the imposition of civil penalties.216 The Code authorizes the government to impose over 100 civil tax penalties.217 In the federal tax system—which relies on voluntary compliance—penalties are important. Without them, it is doubtful taxpayers would ever voluntarily comply.

This Article focuses on penalties the taxpayer must consider in the process of determining whether to comply with the tax laws. In deciding whether to comply, a taxpayer must focus on the basic penalties. It is not necessary to consider all 100 penalties when deciding whether to file a tax return, pay a tax owed, or report all taxable income. Rather, an individual taxpayer need only consider the basic tax filing, paying, and fraud penalties.


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