Information Returns
TAXPAYER BILL OF RIGHTS II
7. TITLE VI--INFORMATION RETURNS
7.1. Civil Damages For Fraudulent Filing Of Information Returns. Under prior law, federal law provides no private cause of action to a taxpayer who is injured because a fraudulent information return has been filed with the IRS asserting that payments
have been made to the taxpayer The new law provides that, if any person willfully files a fraudulent information return with respect to payments purported to have been made to another person, the other person may bring a civil action for damages against
the person filing that return. A copy of the complaint initiating the action must be provided to the IRS. Recoverable damages are the greater of (1) $5,000 or (2) the amount of actual damages (including the costs of the action) and, in the court's
discretion, reasonable attorney's fees. The court must specify in any decision awarding damages the correct amount (if any) that should have been reported on the information return. An action seeking damages under this provision must be brought within
six years after the filing of the fraudulent information return, or one year after the fraudulent information return would have been discovered through the exercise of reasonable care, whichever is later. Actions brought under this section will be
subject to Rule 11 of the Federal Rules of Civil Procedure, relating to the imposition of sanctions in the case of unfounded or frivolous claims, to the same extent as other civil actions. The provision applies to fraudulent information returns filed
after the date of enactment. TPBR2 §601. IRC §7434. SEC. 601 OF THE BILL
7.2. Requirement To Conduct Reasonable Investigations Of Information Returns. . Deficiencies determined by the IRS are generally afforded a presumption of correctness. The new law provides that, in any court proceeding, if a taxpayer
asserts a reasonable dispute with respect to any item of income reported on an information return (Form 1099 or Form W-2) filed by a third party and the taxpayer has fully cooperated with the IRS, the Government has the burden of producing reasonable and
probative information concerning the deficiency (in addition to the information return itself). Fully cooperating with the IRS includes (but is not limited to) the following: bringing the reasonable dispute over the item of income to the attention of the
IRS within a reasonable period of time, and providing (within a reasonable period of time) access to and inspection of all witnesses, information, and documents within the control of the taxpayer (as reasonably requested by the Secretary). The provision
is effective on the date of enactment. TPBR2 §602. IRC §6201(d). SEC. 602 OF THE BILL
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