IRS Notice CP72 tells you that the IRS is accusing you of taking a frivolous position on your tax return. Therefore, this is a dangerous letter to receive because the IRS is allowed to unilaterally charge you a $5,000.00 penalty without a hearing or trial. (See Notice CP15 & Letter 3176C)
Respond to Notice CP72
You can Appeal this penalty within the IRS administrative process or you can pay the penalty and seek a refund (Form 843). The IRS will often ignore your claim & you will be forced to file suit in US District Court.
Essentially, you'll have to examine the tax return in question & discover what item the IRS claims is frivolous. If warranted, you may want to file an amended return. The IRS has a webpage devoted to describing various frivolous positions & a publication entitled "The Truth About Frivolous Tax Arguments".
If you've been charged with a Frivolous Tax Return Penalty, you may use Form 14402 to argue for a reduction or removal of the penalty. However,the IRS will generally not reduce your penalty & you'll be forced to sue them in US District Court.
If you want to report someone for evading taxes use Form 14242.
Please follow the Prep Steps & contact J. David Hopkins, JD, LLM for further investigation or the Court Prep Steps if you want to challenge the IRS!