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Section 6662(a)
Section 6662(a) imposes a penalty of 20 percent on any
portion of an underpayment of tax that is attributable to
negligence or disregard of rules or regulations. See sec.
6662(a) and (b)(1). “Negligence” is defined as any failure to
make a reasonable attempt to comply with the provisions of the
Internal Revenue Code, to exercise ordinary and reasonable care
in the preparation of a tax return, and to keep adequate books
and records, or to substantiate items properly. See sec. 1.6662-
3(b)(1), Income Tax Regs. The term “disregard” includes any
careless, reckless, or intentional disregard of rules or
regulations. See sec. 6662(c).
Section 6664(c) provides that the penalty under section
6662(a) shall not apply to any portion of an underpayment if it
is shown that there was reasonable cause for the taxpayer’s
position with respect to that portion and that the taxpayer acted
in good faith with respect to that portion. See sec. 6664(c)(1).
The determination of whether a taxpayer acted with reasonable
cause and good faith within the meaning of section 6664(c)(1) is
made on a case-by-case basis, taking into account all the
pertinent facts and circumstances. See sec. 1.6664-4(b)(1),
Income Tax Regs.
Taxpayers are required to keep adequate books and records
sufficient to establish the amount of deductions and other items
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Last modified: May 25, 2011