What Does the IRS Believe is ‘Reasonable Cause’?

Though taxpayers, in theory, voluntarily file and pay federal income tax returns to the Internal Revenue Service each year, failure to timely and accurately volunteer your income tax returns and payment to the IRS means you will be facing monetary penalties. The agency commonly assesses penalties against taxpayers for failure to file, failure to pay, failure to make estimated quarterly payments, negligence, and other civil penalties. 

Fortunately, the IRS offers several ways for taxpayers to either get back into compliance or reduce penalties that have been assessed against them. One way taxpayers can avoid having to pay penalties is by requesting Reasonable Cause relief. Put simply, the IRS views reasonable cause as a legitimate reason you did not comply with your federal tax obligations. As long as you exercised “ordinary business care and prudence,” you might have a chance at getting your penalties abated. 

What Does the IRS Consider?

There are several factors the IRS considers to determine reasonable cause, including: 

  • What happened, and when did it happen?
  • What facts or circumstances occurred to cause you to lapse in your tax obligations (either failure-to-pay and/or failure-to-file)? 
  • How did those facts and circumstances affect your ability to file and/or pay taxes in a timely manner? Additionally, how did those facts and circumstances affect your day-to-day responsibilities? 
  • What actions did you take to satisfy your tax obligations once those facts and circumstances were no longer present?
  • “In the case of a Corporation, Estate or Trust, did the affected person or a member of that individual’s immediate family have sole authority to execute the return or make the deposit or payment?”

What Do You Need to Convince the IRS?

Reasons the IRS has previously approved reasonable cause relief to taxpayers include natural disasters, death of incapacitation of the taxpayer or a member of the taxpayer’s immediate family, and inability to obtain pertinent records. However, your request will be considered on its own merits. Even if you were affected by a hurricane, for example, you will not be successful if you are found to have acted carelessly or recklessly indifferent. When you apply for reasonable cause relief, be sure to include any documentation that might support your claim. 

Let Our Attorneys Help

Requesting a reasonable cause penalty abatement will not cause you to incur more penalties from the IRS — even if your request is denied. So, do you have anything to lose by asking for this relief? Only time, if you decide to submit the request yourself without the help of an experienced tax law attorney. Weisberg Kainen Mark has been successfully guiding clients to favorable outcomes from IRS-related disputes. Please contact our legal team today to set up a consultation and discuss your options.

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