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June 22, 2012


Robert D Flach


I will never calculate an underpayment penalty when preparing a return, even if I believe one is appropriate. Why would a taxpayer want to charge himself/herself a penalty?

If the IRS wishes to charge a client a penalty let them do the determination and calculation.

When such a penalty notice is received I look into the issue to see if the penalty can be done away with via annualization on Form 2210, if there is a "safe harbor" issue, or if there are other circumstances that would warrant abatement.

To repeat - why would I charge my client an IRS penalty. I am not the IRS. If the IRS wants additional monies let them ask for it.

Neither I, nor a client, ever been further penalized for not self-calculating an underpayment penalty on a tax return.



I have found that clients don't like getting surprise bills and would rather pay the penalty with their returns. In fact, some have gotten very mad about the penalty not being on the return when I knew it was due. As I'm preparing the return I check annualization and other exceptions. This is the first time in over 20 years that I've seen this happen.

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    A reader should seek advice from an independent tax adviser with respect to the information on this blog based on the reader’s particular circumstances. This advice is intended to be general information and cannot be used for the purpose of avoiding penalties that may be imposed by the IRS regarding the transaction or matters discussed here.
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