Kingsfield · Research · Tax

What penalty applies to an underpayment of tax caused by negligence or a substantial understatement?

Published 2026-06-23 · U.S. federal law

Section 6662 adds to tax a penalty equal to 20 percent of the portion of an underpayment attributable to negligence, disregard of rules, or a substantial understatement of income tax.

The answer

The penalty

26 U.S.C. § 6662(a) imposes a penalty equal to 20 percent of the portion of an underpayment of tax that is attributable to one of the listed grounds, including negligence and substantial understatement.

The grounds

The penalty applies to specific causes. Section 6662(b) lists negligence or disregard of rules or regulations and any substantial understatement of income tax among the conduct that triggers the 20 percent addition.

The judged input

What the AI drafted

Submitted to the judge

This is an excerpt from a draft client tax opinion letter — the kind of work product a lawyer generates with a legal-AI drafting tool, then has to stand behind. Kingsfield does not write it; it rules on the citations the model put in it. This draft cites two authorities; one of them is wrong.

AI draft excerpt — client tax opinion letter

We advise that an underpayment resulting from the position you describe could expose the Company to an accuracy-related penalty. Under 26 U.S.C. § 6662(a), a penalty of 20 percent of the portion of an underpayment attributable to negligence or a substantial understatement is added to the tax. This penalty for negligent underpayment should not be confused with the addition to tax for late filing under 26 U.S.C. § 6651.

The judge ruled on every citation as the draft used it — it accepted 26 U.S.C. § 6662(a) and rejected 26 U.S.C. § 6651. Here is why.

The verdict

How Kingsfield ruled

Ruled 2026-06-23

Each citation in the draft above was submitted to the Kingsfield judge and ruled against the primary-law corpus — Accept, Reject, or Inconclusive, per citation. These are live verdicts, not editorial. Each card shows the claim the draft made and the verbatim authority the verdict was rendered against.

Accept26 U.S.C. § 6662(a)

The draft claimed: There is added to the tax an amount equal to 20 percent of the portion of an underpayment of tax attributable to one of the listed grounds, such as negligence or a substantial understatement of income tax.

“§ 6662(a) If this section applies to any portion of an underpayment of tax required to be shown on a return, there shall be added to the tax an amount equal to 20 percent of the portion of the underpayment to which this section applies.”

Cite found; proposition supported by the cited text.

Reject26 U.S.C. § 6651

The draft claimed: Section 6651 imposes the 20 percent accuracy-related penalty on an underpayment attributable to negligence or a substantial understatement of income tax.

Cite found, but the cited text does not support the claim. 26 U.S.C. 6651 imposes additions to tax for failure to file a return or to pay tax on time; the accuracy-related penalty for negligence or substantial understatement is at 26 U.S.C. 6662. Regenerate with the correct authority.

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This page is legal information, not legal advice, and does not create an attorney-client relationship. The draft shown is an illustration of a typical AI answer; verdicts reflect the cited authority in the Kingsfield corpus as of the ruling date shown above.