Version 5.5 improves support for Canadian customers, refines the Bills & Income view, fixes report and investment features and improves overall stability and performance across the product.
Reason 6.5.3 Product Key
The full range of activities (design, production, marketing, distribution and support to the final consumer, etc) that are divided among multiple firms and workers across geographic spaces to bring a product from its conception to its end use and beyond.
Cross-border production has been made possible by the liberalization of trade and investment, lower transport costs, advances in information and communication technology, and innovations in logistics (e.g. containerization). While cross-border production itself may not be new, it has expanded rapidly in many industries in recent decades. This development has largely been driven by transnational corporations (TNCs) in industrialized economies, which continuously restructure their businesses and reorganize/ relocate their operations for reasons of competition. The manifest example of relocation is the offshoring of labour-intensive stages of production from industrialized economies to low wage, labour abundant developing countries. Business operations are, however, also reshuffled among industrialized economies.
Countries can participate in GVCs by engaging in either backward or forward linkages. Backward linkages are created when country A uses inputs from country B for domestic production. Firms in country A can source inputs from country B through direct as well as indirect imports, i.e. inputs are either supplied by local affiliates of TNCs from country B or by locally owned firms that import inputs from other countries. Being able to source foreign inputs is particularly advantageous if the inputs required for production are either not available locally or available but deficient in some aspects (e.g. quantity, quality and price).
Core subject: Environment, subclause 6.5The organization has a responsibility to reduce and eliminate unsustainable volumes and patterns of production and consumption and to ensure that resource consumption per person becomes sustainable.
Although penalties support and encourage voluntary compliance, they also serve to bring additional revenues into the Treasury and indirectly fund enforcement costs. However, these results are not reasons for creating or imposing penalties.
Example: A taxpayer was assessed the FTP penalty for unpaid tax on their 2018 Form 1040. The taxpayer contacted IRS on August 1, 2019, requesting reasonable cause penalty relief and provided proof of a timely payment made on April 15, 2019, which would full pay the tax due. Research shows the payment had been erroneously applied to another module. The payment was transferred to the 2018 Form 1040 module and that correction resulted in a systemic reversal of the FTP penalty which alleviated the need to take any further actions for penalty relief.
When penalty relief is warranted (including a determination not to assert a penalty that is otherwise warranted), a penalty reason code (PRC) is required to indicate the reason a penalty is being removed or suppressed. See IRM 20.1.1.5.1, Master File Penalty Reason Codes. Also, see Exhibit 20.1.1-2, Penalty Reason Code Chart.
In the interest of equitable treatment of the taxpayer and effective tax administration, the non-assertion or abatement of certain civil penalties based on reasonable cause or other relief provisions provided in this IRM must be made in a consistent manner and should conform with the considerations specified in the IRC, Treasury Regulations (Treas. Regs.), policy statements, and IRM Part 20.1, Penalty Handbook.
For those penalties where reasonable cause can be considered, any reason which establishes that the taxpayer exercised ordinary business care and prudence, but nevertheless was unable to comply with a prescribed duty within the prescribed time, will be considered.
If a reasonable cause provision applies only to a specific IRC section, that reasonable cause provision will be discussed in the IRM 20.1, Penalty Handbook, section relating to that specific IRC section. See IRM 20.1.1.1.2, Authority, and Exhibit 20.1.1-1, Penalty Relief Application Chart.
The wording used to describe reasonable cause provisions varies. Some IRC penalty sections also require evidence that the taxpayer acted in good faith or that the taxpayer's failure to comply with the law was not due to willful neglect. See specific IRM 20.1, Penalty Handbook, sections for the rules that apply to a specific IRC penalty section. See IRM 20.1.1.1.2, Authority.
Taxpayers have reasonable cause when their conduct justifies the non-assertion or abatement of a penalty. Each case must be judged individually based on the facts and circumstances at hand. Consider the following in conjunction with specific criteria identified in the remainder of this subsection:
Ordinary business care and prudence includes making provisions for business obligations to be met when reasonably foreseeable events occur. A taxpayer may establish reasonable cause by providing facts and circumstances showing that he or she exercised ordinary business care and prudence (taking that degree of care that a reasonably prudent person would exercise), but nevertheless were unable to comply with the law.
Death, serious illness, or unavoidable absence of the taxpayer, or a death or serious illness in the taxpayer's immediate family, may establish reasonable cause for filing, paying, or depositing late for the following:
If someone other than the taxpayer, or the person responsible, is authorized to meet the obligation, consider the reasons why that person did not meet the obligation when evaluating the request for relief. In the case of a business, if only one person was authorized, determine whether this was in keeping with ordinary business care and prudence.
For taxpayers not considered an "affected taxpayer," reasonable cause relief from a penalty may be requested if there was a failure to timely comply with a requirement to file a return or pay a tax as the result of a fire, casualty, natural disaster, or other disturbance. However, one of these circumstances by itself does not necessarily provide penalty relief.
The taxpayer may try to establish reasonable cause by claiming that a mistake was made. Generally, this is not in keeping with the ordinary business care and prudence standard and does not provide a basis for reasonable cause.
However, the reason for the mistake may be a supporting factor if additional facts and circumstances support the determination that the taxpayer exercised ordinary business care and prudence but nevertheless was unable to comply within the prescribed time.
The taxpayer may try to establish reasonable cause by claiming he or she relied on another party to comply on his or her behalf. Generally, this is not a basis for reasonable cause, particularly for filing or paying obligations, since the taxpayer is responsible for meeting his or her tax obligations and that responsibility cannot be delegated. However, other factors to consider include:
In some instances taxpayers may not be aware of specific obligations to file and/or pay taxes. The ordinary business care and prudence standard requires that taxpayers make reasonable efforts to determine their tax obligations. See IRM 20.1.1.3.2.2, Ordinary Business Care and Prudence.
The taxpayer may try to establish reasonable cause by claiming forgetfulness or an oversight by the taxpayer, or another party, caused the noncompliance. Generally, this is not in keeping with the ordinary business care and prudence standard and does not provide a basis for reasonable cause. See IRM 20.1.1.3.2.2, Ordinary Business Care and Prudence.
If penalties were assessed, the account must be carefully reviewed to determine if penalty relief is appropriate, and if so, the correct reason for relief. Did the taxpayer state he or she met all requirements for an interest-free adjustment?
Per IRM 20.1.1.3, Criteria for Relief From Penalties, penalty relief under Administrative Waivers, including FTA, is to be considered and applied before reasonable cause. If FTA criteria are met, the FTA waiver will be applied before reasonable cause and the taxpayer must be notified that we removed their penalty or penalties based on their prior history of compliance and not based on their reasonable cause statement.
Do not provide relief under the FTA waiver if there is clear and convincing evidence that the taxpayer did in fact comply and is not subject to any penalties or if the penalty or penalties is/are the result of an IRS error. Take appropriate corrective actions that will result in systemic reversal of the penalty or penalties. If the module is restricted from removing the penalty or penalties systemically or the penalty or penalties is/are clearly the result of an IRS error then input the penalty abatement transaction(s) with penalty reason code (PRC) 045.
When penalty relief under the FTA waiver is granted, notify the taxpayer that the penalty or penalties have been removed based on their prior history of compliance and not based on a reasonable cause explanation provided, if applicable. Correspondex Letters 168C, 3502C (RCA only), and 3503C (RCA only), as well as ICS (integrated collection system) macro letters 4722, 4723, and 4724, contain appropriate paragraphs to use for this notification requirement. The following is an example of this paragraph:
We approved your request to remove the penalties. However, we only granted penalty relief because you have a good history of filing and paying on time. This type of penalty removal is only available one time. We will base our decisions to remove any future penalties on reasonable cause criteria.
If the tax is not paid in full on the module that meets FTA criteria and the taxpayer is current with installment agreement payments (and has filed all returns currently due), allow abatement of the FTP penalty under the FTA waiver determined to the current date and use reason code (RC) 062 with the TC 271. While the FTA waiver is an administrative waiver and not reasonable cause, the RC 062 will not restrict Master File from continuing to compute the FTP penalty on the unpaid tax and is to be used in this instance only. 2ff7e9595c