IRS Updates Penalty Avoidance Procedure for Understatement of Taxes

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IRS updates several previous revenue procedures to identify the circumstances under which the disclosure for an item or a position on a taxpayer's return is adequate to reduce the understatement of income tax. Revenue Procedure 2012-15 updates Rev. Proc. 2011-13 to address accuracy-related penalties and tax return preparer penalties. It provides guidance for determining when disclosure by return is adequate for purposes of tax code Section 6662 and Section 6694. For Schedules M-1 and all Schedules M-3 the information provided must reasonably inform the service of the potential controversy concerning the tax treatment of the item, the guidance says.