Is the accuracy-related penalty on underpayments under section 6662 applicable where a taxpayer does not report the amount of LRA money as income in the year received?
Response: If a taxpayer properly claimed a casualty loss deduction and in a later year receives reimbursement for the loss, the taxpayer reports the amount of the reimbursement in gross income in the tax year it is received to the extent the casualty loss deduction reduced the taxpayer’s income tax in the tax year in which the taxpayer reported the casualty loss deduction. This question is addressed on pages 5-7 of Publication 547, Casualties, Disasters, and Thefts in the section entitled “Insurance and Other Reimbursements.” Section 6662 imposes an accuracy-related penalty on underpayments in an amount equal to 20 percent of the portion of an underpayment attributable to, among other things: (1) negligence or disregard of rules or regulations or (2) any substantial understatement of income tax. Negligence generally includes any failure to make a reasonable attempt to comply with the provisions of the Internal Revenue Code or to exercise ordinary and reasonable care in the preparation
Related Questions
- Is the accuracy-related penalty on underpayments under section 6662 applicable where a taxpayer does not report the amount of LRA money as income in the year received?
- Whether penalty can be imposed under section 23(4) if any person fails to report the name of the child to the Registrar within the time prescribed in the state rules?
- What are the applicable interest and penalty rates for underpayments of Delaware Income Tax?
