Washington (March 31, 2004) -- The average penalties for pursuing frivolous cases to delay tax collections increased to $5,509 during the past year, up from an average of $3,316 during the previous period, the Internal Revenue Service reported.

"The courts are increasingly recognizing the need to impose penalties on taxpayers pursuing frivolous cases," said IRS Commissioner Mark W. Everson. "During the past year, we saw bigger penalties than we did for the two previous years combined."

In the past year, the U.S. Tax Court imposed nearly $136,000 in penalties on 23 taxpayers for pursuing frivolous cases to delay tax collections. Penalties assessed on 38 taxpayers from 2001 until March 2003 totaled $126,000, according to the IRS.

The IRS Restructuring and Reform Act of 1998 set forth taxpayer rights related to tax liens or levies, including the right to seek judicial review. While the IRS usually can't enforce collection while an appeal is pending, the Tax Court may impose sanctions of up to $25,000 on those who misuse their right to a court review merely to stall their tax payments.

Tax professionals who use such arguments for their clients are also subject to penalties. In Hillen v. Commissioner, the Tax Court imposed a penalty of more than $14,000 against attorney Paul Chappell, after finding his frivolous arguments caused the court to incur more than 50 hours of unnecessary work. The court stated that Chappell, who had clerked for the court and worked at the IRS, "should have known better than to make the arguments that he did."

-- WebCPA staff

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