(a) Imposition of penalty Any person—
(1) who aids or assists in, procures, or advises with respect to, the preparation or presentation of any portion of a return, affidavit, claim, or other document,
(2) who knows (or has reason to believe) that such portion will be used in connection with any material matter arising under the internal revenue laws, and
(3) who knows that such portion (if so used) would result in an understatement of the liability for tax of another person,
shall pay a penalty with respect to each such document in the amount determined under subsection (b).
(b) Amount of penalty
(1) In general Except as provided in paragraph (2), the amount of the penalty imposed by
subsection (a) shall be $1,000.
(2) Corporations If the return, affidavit, claim, or other document relates to the tax liability of a corporation, the amount of the penalty imposed by
subsection (a) shall be $10,000.
(3) Only 1 penalty per person per period If any person is subject to a penalty under subsection (a) with respect to any document relating to any taxpayer for any taxable period (or where there is no taxable period, any taxable event), such person shall not be subject to a penalty under subsection (a) with respect to any other document relating to such taxpayer for such taxable period (or event).
(c) Activities of subordinates
(1) In general For purposes of subsection (a), the term "procures" includes—
(A) ordering (or otherwise causing) a subordinate to do an act, and
(B) knowing of, and not attempting to prevent, participation by a subordinate in an act.
(2) Subordinate For purposes of paragraph (1), the term "subordinate" means any other person (whether or not a director, officer, employee, or agent of the taxpayer involved) over whose activities the person has direction, supervision, or control.
(d) Taxpayer not required to have knowledge Subsection (a) shall apply whether or not the understatement is with the knowledge or consent of the persons authorized or required to present the return, affidavit, claim, or other document.
(e) Certain actions not treated as aid or assistance For purposes of
subsection (a)(1), a person furnishing typing, reproducing, or other mechanical assistance with respect to a document shall not be treated as having aided or assisted in the preparation of such document by reason of such assistance.
(f) Penalty in addition to other penalties
(1) In general Except as provided by paragraphs (2) and (3), the penalty imposed by this section shall be in addition to any other penalty provided by law.
(2) Coordination with return preparer penalties No penalty shall be assessed under
subsection (a) or (b) of
section 6694 on any person with respect to any document for which a penalty is assessed on such person under
subsection (a).
(3) Coordination with section 6700 No penalty shall be assessed under
section 6700 on any person with respect to any document for which a penalty is assessed on such person under
subsection (a).
Source credit, amendments & notes
(Added Pub. L. 97–248, title III, §324(a), Sept. 3, 1982, 96 Stat. 615; amended Pub. L. 101–239, title VII, §7735(a), (b), Dec. 19, 1989, 103 Stat. 2403.)
Editorial Notes
Amendments
1989—Subsec. (a)(1). Pub. L. 101–239, §7735(a)(1), struck out "in connection with any matter arising under the internal revenue laws" after "other document".
Subsec. (a)(2). Pub. L. 101–239, §7735(a)(2), inserted "(or has reason to believe)" after "who knows".
Subsec. (a)(3). Pub. L. 101–239, §7735(a)(3), substituted "would result" for "will result".
Subsec. (f)(1). Pub. L. 101–239, §7735(b)(2), substituted "paragraphs (2) and (3)" for "paragraph (2)".
Subsec. (f)(3). Pub. L. 101–239, §7735(b)(1), added par. (3).
Statutory Notes and Related Subsidiaries
Effective Date of 1989 Amendment
Pub. L. 101–239, title VII, §7735(c), Dec. 19, 1989, 103 Stat. 2404, provided that: "The amendments made by this section [amending this section] shall take effect on December 31, 1989."
Effective Date
Pub. L. 97–248, title III, §324(c), Sept. 3, 1982, 96 Stat. 616, provided that: "The amendments made by this section [enacting this section] shall take effect on the day after the date of the enactment of this Act [Sept. 3, 1982]."
I.R.C. § 6701 — Penalties for aiding and abetting understatement of tax liability · USC 2024 ed., current through 2025-01-06 · https://pensionresource.website/EAMain?content=EAMain.Law&id=irc-6701 · printed Oct 16, 2026