A frivolous return penalty is the IRS response to a tax return, or a certain kind of filing with the IRS, that rests on arguments the courts have repeatedly rejected or that is aimed at slowing down tax administration. It is different from an honest mistake and different from a good-faith disagreement with the IRS about how the law applies. This page explains what the penalty covers, the dollar amounts, and what to do if you receive one.
What the penalty covers
The IRS describes two categories under section 6702.
Frivolous returns. A return can attract the penalty when it is based on a position the IRS has listed as frivolous or when its purpose is to delay or impede the administration of the tax laws. The IRS publishes its list in a notice, last updated in Notice 2010-33. The IRS says the penalty applies to filings made after March 15, 2007.
Specified frivolous submissions. The penalty also reaches certain requests made to the IRS in the collection and relief process if they are frivolous or meant to delay. The IRS lists these submissions:
- requests for a collection due process hearing under sections 6320 and 6330
- applications for an installment agreement or an offer in compromise
- applications for a taxpayer assistance order
That list is a reason to handle collection requests carefully. A genuine request to pay in installments or to settle for less is not frivolous. A request filled with discredited arguments can be. See our pages on collection due process hearings and the offer in compromise for proper use.
The dollar amounts
| Item | Amount | Who assesses it |
|---|---|---|
| Frivolous return | $5,000 per return | IRS |
| Specified frivolous submission | $5,000 per submission | IRS |
| Frivolous or groundless Tax Court position, or case brought mainly to delay | Up to $25,000 | U.S. Tax Court |
The penalty is a flat amount, so there is no percentage calculation.
Example (hypothetical). A taxpayer files two years of returns based on a position from the frivolous list. The IRS can assess $5,000 for each return, or $10,000, in addition to the tax and any other penalties that apply. If the taxpayer then files a frivolous hearing request, that submission can carry its own $5,000 penalty.
Other penalties on the same filing
A frivolous position almost always produces an underpayment of tax too. The IRS lists the failure-to-file, failure-to-pay and estimated tax charges, the 20% accuracy-related penalty and the 75% civil fraud penalty as other civil penalties that can apply to the same facts. See the pages on the accuracy-related penalty and the civil fraud penalty. Tax return preparers face their own penalties for knowingly assisting with false returns. The IRS also says criminal penalties exist for evasion and false returns. This page covers only the civil side.
Common ways people end up here
- Using a filing template or software from a promoter who promised that wages or other income are not taxable.
- Filing a return that omits income or zeroes out amounts without a valid basis.
- Sending the IRS a hearing request or payment plan application that is mostly legal argument rather than facts about the case.
The IRS says its list is not exhaustive and that the government and courts can penalize unlisted frivolous arguments as well.
What to do if you receive a notice
- Read it carefully for dates and choices. If it describes a way to correct or withdraw the filing, treat that date as firm.
- Gather the filings involved: copies of the returns, the letters you sent, and any communications with the promoter or preparer.
- Do not respond with more of the same arguments. Respond with facts and the correct forms.
- Fix the underlying return. If you filed a return that was wrong, ask a professional about filing an accurate return or an amended return. Our page on unfiled tax returns covers the process when returns are missing.
- Ask a professional whether any review or relief is available on your facts. A lack of knowledge about the law is generally not enough on its own.
If you disagree with the penalty, the notice or follow-up letter explains how to ask for a review. IRS Appeals is one avenue. Because deadlines and rights differ by letter, use the exact dates printed on yours.
How we can help
We can review what was filed, prepare accurate returns to replace ones that should not have been filed, and write a response that sticks to the facts. If a promoter sold you a position, we can help gather what you have. We cannot support or file a position the courts have rejected, and we cannot promise a penalty will be removed.
See our IRS representation service and individual tax preparation, or contact us.
Frequently asked questions
Is a frivolous return penalty the same as a fraud penalty?
No. The frivolous return penalty is a flat $5,000. The civil fraud penalty is 75% of the underpayment due to fraud and requires proof of intent.
Can I be penalized for requesting a payment plan?
Only if the submission is frivolous or meant to delay. The IRS lists installment agreement and offer in compromise applications among the specified submissions, but a good-faith request is not frivolous.
Does the $5,000 apply to each tax year?
It applies to each frivolous return, so multiple years can mean multiple penalties.
Who sets the $25,000 amount?
It is imposed by the U.S. Tax Court under section 6673, and the Court can do so on its own initiative.
Official sources
- IRS: The truth about frivolous tax arguments, Section III
- IRS: The truth about frivolous tax arguments, Introduction
- IRS: Penalties
This page is a plain-language summary. The official source controls if there is any difference.
General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.