The Internal Revenue Service also imposes penalties to tax advisers that are involved in the promotion of tax shelters. Any tax advisor is supposed to disclose and maintain the transaction lists of his clients which are to be reported. Failing to do so may result in a penalty from the IRS for the unreported transactions. These penalties imposed are monetary fines and can be severe in
many cases.
Basically, these are the cases where the taxes are understated and paid for accordingly by the taxpayers. If any person is an aid to such a taxpayer and assists him in the preparing and presenting the tax returns which have been understated with the help of some affidavits and documents is liable for penalties from the IRS under the law. Also, if the person is aware of the fact that filing such returns can lead to any sort of material matters arising according to the internal revenue laws, can be penalized.
For these situations, the amount of penalty that is imposed on the tax advisor is $1,000 if the tax returns belong to an individual. Suppose the filed returns along with the documents such as affidavits and claims are related to a corporation, the penalty to tax advisors is $10,000.
These penalties are also applicable on subordinates who were ordered to carry out the improper filing of taxes and despite having the knowledge about the tax being understated they made no attempt towards preventing it. These subordinates are considered to be involved in the understatement and are penalized by the IRS accordingly. Besides that, there are certain types of aids or assistance provided which are not treated as actions that can be penalized under this penalty. People who are involved in the typing of these returns or any other mechanical work related to it are considered to be innocent and not involved in the preparation if any documents. Thus, no penalty in respect to the situation is levied upon them. Even in the event when these penalties are being imposed on the tax advisor or an ally in the understatement of taxes or intentional improper filing of returns, the person is liable to other penalties at the same time.