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January/February 2023 » Reassessing the Erroneous Refund...
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Megan L. Brackney, JD, LLM (Tax)
Under IRC section 6676, the IRS has the authority to assess penalties against taxpayers for making erroneous claims for refund or credit. In a 2013 report, the Treasury Inspector General for Tax Administration found that the IRS had only imposed the excess refund penalty 84 times in the first six years after its enactment. That same report recommended that the IRS increase assessment of the penalty such that it would apply to over 575,000 taxpayers each year; however, the IRS did not expand enforcement to these levels [“The Law Which Penalizes Erroneous Refund and Credit Claims Was not Properly Implemented,” No. 2013-40-123, pp. 5–6 (Sept. 26, 2013)]. This made the IRS's attempt to assess a $200 million erroneous refund penalty against Exxon Mobil Corp. especially surprising [43 F.4th 424 (5th Cir. 2022)]. This article first discusses the erroneous refund penalty, followed by a discussion of its application in the Exxon case.
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