IRS, Treasury issue guidance on new abusive transaction penalties.

• Position: National

The Treasury Department and the IRS have issued interim guidance on two new penalty provisions enacted as part of the 2004 American Jobs Creation Act.

The act creates a new penalty for the failure to disclose information about "reportable transactions," which are transactions that the Treasury Department and IRS have determined to be potentially abusive.

Notice 2005-11 provides interim guidance regarding application of this penalty to taxpayers who are required to disclose reportable transactions.

The act also creates a new penalty if a taxpayer understates the tax liability relating to a reportable transaction. A higher penalty will apply if a taxpayer does not adequately disclose...