Substantial Understatement Penalty
The substantial understatement component of the accuracy-related penalty provides for a dollar criteria. If the understatement exceeds the greater of 10% of the tax required to be shown on the return, or $5,000 ($10,000 for corporations other than S corporations or personal holding companies), the penalty applies.
More from H&R Block
If you understate the tax on your return by 10% (or more) of what you should have reported — or if the understated amount is more than $5,000, the IRS can charge a substantial understatement accuracy penalty.
If you can show that you made a reasonable attempt to report the correct tax, the IRS typically doesn’t charge the 20% substantial understatement penalty.
Learn how to address IRS penalties, or get help from a trusted IRS expert.
Get help from an IRS expert
H&R Block’s experts can solve any IRS problem, no matter how complex.
Learn how to address and understand an IRS tax penalty from the tax experts at H&R Block.
The IRS grants four types of penalty relief, but many taxpayers don't ever ask. Learn how to request penalty abatement from the IRS.
Learn how the IRS matches your information to generate CP2000 notices, and how to handle one of these underreporter inquiries if the IRS contacts you.
With CP2000 notices, make sure you preserve your rights when you respond to the IRS. Mainly, your right to protest penalties and your right to appeal.
Learn what the IRS is looking for during an audit, the steps you should take to prepare for an IRS audit, and when it's best to get expert help.