You’ve probably heard a lot of news related to the IRS over the past couple of years. Understaffing has historically been a problem, and with the new presidential administration, there will inevitably be more changes. It sounds like the IRS is on a trail without a map, so you may wonder if the IRS agents got it right when you receive a penalty notice.
Anytime you receive a penalty notice from the IRS, it’s worth double-checking. The experienced tax professionals at Highland Tax Group can help you understand if the IRS penalty issued against you is above board and how you should respond. First, let’s examine whether your penalty was subject to a Supervisory Review.
What is Supervisory Review?
The IRS is obligated to follow strict procedures to ensure taxpayers are issued unjustified tax penalties. An entire section of the tax code (Internal Revenue Code § 6751(b)) is dedicated to ensuring that many tax penalties get Supervisory Review. Supervisory Review is exactly as it sounds; it’s a review of a case and the proposed penalties by an IRS supervisor before they are issued. Essentially, it’s double-checking the work of the initial tax agent reviewing your filling.
When is a Supervisory Review Required?
Supervisory Review is required when the IRS intends to issue one of these types of penalties:
- Accuracy-related penalties
- Fraud penalties
- Failure-to-file or Failure-to-pay penalties (if do not qualify for automatic assessment)
- Information returns penalties
- Any other manually assessed (non-automatic) penalty
If you aren’t sure if the penalty being issued against you requires a Supervisory Review, ask a tax professional at Highland Tax Group.
How the Supervisory Review Process Works
The Supervisory Review process is simple. An IRS agent identifies a potential penalty and sends the proposed penalty to their supervisor. Their supervisor must ensure the penalty is consistent with the facts of the case before approving the penalty in writing. If the penalty is approved, the taxpayer will receive a notification.
How to Know if a Supervisory Review Occurred
If the IRS proposes a penalty against you, you will have received either a Letter 950, a Notice of Deficiency, or a Form 4549 (audit report). If the penalty has undergone Supervisory Review, there will be an indication of this in the document the IRS sent you.
If you don’t see any indication that there was approval when reviewing the document, you can challenge the validity of the penalty. IRS documents can be hard to navigate, but a qualified tax professional at Highland Tax Group can review the IRS document you received and let you know if a review occurred and what your possible next steps are.