Specific Penalty Not Waived by Accepting Return. The specific penalty is not waived or remitted by the fact that the Commissioner accepts a delinquent return.10

Intentional Neglect or Refusal to Make Returns. The same specific penalties apply to intentional neglect or refusal to make returns as apply to all cases of failure to make returns, but in the case of intentional neglect or refusal the penalty of 100% of the tax is added, unless the neglect is due to sickness or absence.11

False Returns. The law provides that "in case a false or fraudulent return or list is wilfully made, the Commissioner of Internal Revenue shall add to the tax 100 per centum of its amount. This provision does not seem to include returns which are false in the sense of containing mistakes or unintentional misstatements. A return may be false, in the sense used in those sections of the law which permit summary assessments in the case of erroneous, false or fraudulent returns, without being false in the sense used in the provision prescribing the penalty tax of 100%.12 There seems to be no penalty imposed in case a return is false in the sense of being incorrect in the absence of wilful intent to make a false return.

Fraudulent Returns. Where a false or fraudulent return is wilfully made the Commissioner of Internal Revenue adds to the tax 100% of its amount. This

10 U. S. v. Suprise 5, 10 & 19c Store, not yet officially reported. 11 T. D. 1950.

12 Act of September 8, 1916, § 9 (a) and § 14 (a). Eliot Nat. Bank v. Gill, 218 Fed. 600.

increase is only made in case the return is fraudulently false,18

Fine Against Officer of Corporation. In case an officer of a corporation, charged with the duty and responsibility of making and verifying a return, makes a false or fraudulent return, with the intent of defeating or evading any assessment or tax, he is guilty of a misdemeanor and subject to a fine not to exceed $2,000, or to imprisonment not to exceed one year, or both, at the discretion of the court, together with the costs of prosecution.14

Failure to File Information at Source. Any person, corporation, partnership, association or insurance company called upon to supply information required by the law, who refuses or neglects to do so at the time or times specified in each year, shall be liable to a penalty of not less than $20 nor more than $1,000.15

FAILURE TO WITHHOLD TAX AT THE SOURCE. Any person required by law to deduct and withhold the tax at the source is personally liable for such tax.16

Delay in Payment of the Tax. In the case of individuals any sum or sums due and unpaid after the 15th day of June in any year, and for ten days after notice and demand thereof by the collector, there shall be added the sum of 5% on the amount of tax unpaid,

13 National Bank of Commerce v. Allen, 223 Fed. 472. 14 T. D. 1950, Act of September 8, 1916, § 18.

15 Act of September 8, 1916, § 18, as amended by Act of October 3, 1917.

16 Act of September 8, 1916, §9 (b).

and interest at the rate of 1% per month upon said tax from the time the same became due. In the case of corporations, the same penalty, and the same rate of interest, is added to any sum or sums due and unpaid after the 15th day of June in any year (or after 105 days from the date on which the return of income is required to be made in the case of corporations reporting for their fiscal years) and for ten days after notice and demand thereof by the collector.17 This penalty and interest do not accrue in case of any tax due from the estates of insane, deceased or insolvent persons, where the return was made by the incapacitated person and he becomes insane, or dies, or becomes insolvent, after making the return and prior to the required date of payment of the tax.18 When an assessment has been made for a tax or penalty and within ten days after demand a claim for abatement is filed, and accepted by the collector, the time ceases to run against the claimant as to the 5% penalty, until the claim is rejected. Upon receipt of the notice of rejection of the claim, the tax may be paid within ten days from the date of the notice, without penalty. Interest at the rate of 1% per month, however, continues to run and is collected for the full number of calendar months which intervene between the date of the expiration of the first ten days' notice and the date of payment of the tax, notwithstanding that a claim for abatement has been filed.19

17 Act of September 8, 1916, § 9 (a) and § 14 (a).

18 Letter from Treasury Department dated April 1, 1916; I T. S. 1917, ¶ 476.

19 Reg. No. 14, October 15, 1911; Reg. No. 1, page 110.

Statute of Limitations. The Revised Statutes 20 provide that no suit or prosecution for any penalty or forfeiture, pecuniary or otherwise, accruing under the laws of the United States, shall be maintained, except in cases where it is otherwise specially provided, unless the same is commenced within five years from the time when the penalty or forfeiture accrued. The statute does not run, however, if the person liable for the penalty is not to be found within the United States so that proper process may be served against him.

Compromise of Penalties. The Commissioner of Internal Revenue, with the advice and consent of the Secretary of the Treasury, may compromise any civil or criminal case arising under the internal revenue laws instead of commencing suit thereon; and, with the advice and consent of the said Secretary, and the recommendation of the Attorney General, he may compromise any case after a suit thereon has been commenced. Whenever a compromise is made in any case there shall be placed on file in the office of the Commissioner the opinion of the Solicitor or Internal Revenue, or of the officer acting as such, with his reasons therefor, with a statement of the amount of tax assessed, the amount of additional tax or penalty imposed by law in consequence of the neglect or delinquency of the person against whom the tax is assessed, and the amount actually paid in accordance with the terms of the compromise.21 He has under this section no power to compromise a suit against the Government,22 the power

20 R. S., § 1047.

21 R. S., § 3229; see § 3469, as to compromise of cases after judgment.

22 23 Op. Atty. Gen. 507.

being limited to suits which the Government may prosecute. A compromise operates for the protection of the offender against subsequent proceedings as fully as a formal conviction or acquittal, and is a bar to further action.23 Where an action is brought by the United States against a delinquent taxpayer, for having failed to file a return, the verdict must specifically state the amount of the penalty, after which the only remedy of the defendant (other than an appeal) is to apply for a compromise.24 Offers in compromise should include payments of cost.25 The amount of the offer should be deposited with the Commissioner, but cannot be held or set off against the tax due.26

SPECIFIC PENALTIES. While the sections of the Revised Statutes relating to compromises 27 do not in express language refer to the compromise of the specific penalty for failure to file the return, neither are they restricted in terms, nor by any reason of public policy, to penalties for the non-payment of taxes. In the opinion of the Attorney General the application of these sections to compromise of penalties for failure to file returns in time is proper, and, further, that in such compromises the Commissioner is authorized to consider not only the pecuniary interests of the Treasury, but also general considerations of justice, equity and public policy.28

23 U. S. v. Chouteau, 102 U. S. 603.

24 U. S. v. Acorn Roofing Co., 204 Fed. 157.

25 T. D. 642, March 20, 1903.

26 Boughton v. U. S., 12 Ct. Cls. 330.

27 R. S., §§ 3229 and 3469.

28 29 Op Atty. Gen. 217.