The IRS has issued procedures in Revenue Procedure 2012-43 concerning under what circumstances a frivolous tax submission penalty would be reduced. The procedure also details how a taxpayer may request a reduction in the penalty, which is assessed under Code Sec. 6702(a) or Code Sec. 6702(b), and the eligibility requirements for reduction.
If a taxpayer satisfies all eligibility criteria of Section 4 of the procedure including filing all tax returns and paying all outstanding taxes, penalties (other than under Code Sec. 6702 ) and related interest, the IRS will generally reduce all unpaid Code Sec. 6702 penalties assessed against that person to $500.
This revenue procedure became effective November 5.