Wis. Admin. Code § Tax 2.85 — Penalty for failure to produce records under s. 71.80 (9m), Stats

71.80 (9m), Stats.

Tax 2.85(1) (1) General. A person who fails to produce records or documents, as provided under ss. 71.74 (2) and 73.03 (9) , Stats., that were requested by the department may be subject to any of the following penalties under s. 71.80 (9m) , Stats.:

Tax 2.85(1)(a) (a) The disallowance of deductions, credits, exemptions or income inclusion to which the requested records relate.

Tax 2.85(1)(b) (b) In addition to any other penalties that the department may impose, a penalty for each violation that is equal to the greater of $500 or 25% of the amount of the additional tax on any adjustment made by the department that results from the person’s failure to produce the records.

Tax 2.85(2) (2) Definitions. In this section:

Tax 2.85(2)(a) (a) “Disallowance,” “inclusion,” or “adjustment” means that an item is disallowed, included or adjusted through action taken by the department when a proposed assessment or refund or notice of assessment or refund is issued to a taxpayer.

Tax 2.85(2)(b) (b) “Records” include both paper and electronic formats. Examples include bills, receipts, invoices, contracts, letters, memos, accounting statements or schedules, general ledgers, journal entries, and board of director’s minutes. “Records” do not include items protected by attorney-client privilege, if the taxpayer provides a brief description or summary of the contents of each record, the date each record was prepared, the person or persons who prepared each record, the person to whom each record was directed, or for whom each record was prepared, the purpose in preparing each record, and how each element of the privilege is met as to each record.

Tax 2.85(2)(c) (c) “Records requested were not provided” means that all records requested were not provided to the department within the time specified by the department.

Tax 2.85(2)(cm) (cm) “Summons request” means a request for records issued by the department pursuant to s. 73.03 (9) , Stats.

Tax 2.85(2)(d) (d) “Written request for records” includes requests made by letter, e-mail, fax or any other written form.

Tax 2.85(2)(e) (e) “Provided” means the records are provided by electronic means or in paper format to the address specified by the department in its written request for records. If the address specified by the department is the person’s location, the records are considered provided on the date the person notifies the department they are available for review at that location.

Tax 2.85(3) (3) Procedures. The penalties in this section may be imposed if the records requested were not provided and the department provided the notifications in pars. (a) , (b) , and (c) regarding the records requested. The number of days established by the department for the person to respond to the record requests should be reasonable based on the facts of each situation.

Tax 2.85(3)(a) (a) A first written request for records where the department allowed the person a minimum of 30 days from the date of request for the records to be provided.

Tax 2.85(3)(b) (b) After the time period to respond to the first written request has expired as provided in par. (a) , a second written request for records where the department allowed the person a minimum of 30 days from the date of request for the records to be provided. This second written request for records shall include a statement explaining that if the requested records are not provided by the date specified, the penalties provided by s. 71.80 (9m) , Stats., may be imposed.

Tax 2.85(3)(c) (c) After the time period to respond to the second written request has expired as provided in par. (b) , a summons request for records where the department allowed the person a minimum of 30 days from the date of receipt of the request for the records to be provided. This summons request shall be prepared on a form prescribed by the department and shall be served:

Tax 2.85(3)(c)1. 1. By certified mail, evidenced by a return receipt signed by the taxpayer or an authorized representative.

Tax 2.85(3)(c)2. 2. By personal service pursuant to sec. 801.11, Stats., if unable to obtain a signature as provided in subd. 1.

Tax 2.85(4) (4) Waiver of penalties.

Tax 2.85(4)(a) (a) The penalties in this section may be waived if the person whose records were requested can show that, under all the facts and circumstances, its response to the written request for records or its failure to respond to the written request for records was reasonable or justified by factors beyond the person’s control. In determining whether the penalties will be waived, the department may consider any of the following factors:

Tax 2.85(4)(a)1. 1. Death of the taxpayer, tax preparer, accountant or other responsible party.

Tax 2.85(4)(a)2. 2. Onset of debilitating illness or injury of the taxpayer, tax preparer, accountant or other responsible party.

Tax 2.85(4)(a)3. 3. Natural disaster such as tornado, flood or fire.

Tax 2.85(4)(a)4. 4. Records that were destroyed due to events beyond control of the taxpayer or other responsible party and not due to neglect.

Tax 2.85(4)(a)5. 5. Any other facts and circumstances that the department believes pertinent.

Tax 2.85(4)(b) (b) Providing requested records after the time period required for providing the records has expired, as provided in sub. (3) , shall result in a reduction of the penalties provided in sub. (1) (a) and (b) if the department determines that these records support a reduction in the disallowance or inclusion previously made by the department.