IRS Updates Procedures for Avoiding Taxpayer, Tax Preparer Penalties

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IRS issues Revenue Procedure 2011-13, which identifies circumstances under which the disclosure on a taxpayer's income tax return for an item or position is adequate for reducing the understatement of income tax for accuracy-related penalties, and for avoiding tax return preparer penalties. IRS publishes the guidance every year to update the procedures for avoiding penalties that could result under new tax forms and tax law changes. The main changes this year relate to the tax code Section 6662(i) increased accuracy-related penalty for nondisclosed noneconomic substance transactions; the Section 6662(j) increased accuracy-related penalty for undisclosed foreign financial asset understatements; and the new Schedule UTP, the Uncertain Tax Position Statement, required for some corporations.