Information Returns
Civil Damages for Fraudulent
Filing
A person may bring civil actions for damages against persons filing
fraudulent information returns (W-2, 1099, etc) purportedly for
payments made to that person.
The action must be brought within the later of 6 years after the
filing of the fraudulent document or 1 year after it would have been
discovered.
The award is limited to the greater of $5,000 or the sum of actual
damages, the costs of the action, and reasonable attorney's fees.
Effective for fraudulent information returns filed after enactment.
Requirement to Conduct
Reasonable Investigations
In any court proceeding, if the taxpayer reasonably disputes an
income item reported on an information return, and has fully
cooperated with the IRS, the burden of producing reasonable and
probative information concerning the deficiency as well as the
information return itself is placed upon the IRS.
Effective on the date of enactment.
Litigation Costs and Attorneys' Fees
IRS Must Establish Substantial Justification
Shifts the burden of proof to the IRS to show substantial
justification for its position against a taxpayer if the taxpayer has
prevails in litigation.
If the IRS cannot show substantial justification, the taxpayer may
then recover attorney's fees from the action.
If the IRS failed to follow its own published guidelines, it is
presumed not to have substantial justification.
Effective for proceedings commenced after the date of enactment.
Increase Limit on Attorney's
Fees
Increases the allowable statutory rate recoverable by prevailing
parties for attorney's fees from $75 per hour to $110 per hour and is
indexed for inflation after 1996.
Effective for proceedings commenced after date of enactment.
