What Is a Reasonable Cause for IRS Penalty Abatement?

Keeping up with ever-changing tax laws and reporting requirements can be challenging for anyone. If you made an honest mistake when filing tax returns, you may fear the potential penalties that will arise. But a penalty abatement could allow you to bypass fees and other consequences. What is reasonable cause for IRS penalty abatement? Here’s what you need to know. 

Exploring IRS Penalty Abatements

The IRS offers penalty abatements in select circumstances to remove a taxpayer’s penalties. You may qualify for this form of penalty relief if you meet one of these criteria:

• First-time offense: The IRS often gives one-time penalty waivers to taxpayers in good standing who have at least three years of compliant tax history. If this is your first penalty, you may qualify for this waiver. 
• Reasonable cause: If you can prove you had reasonable cause for missing a tax deadline or failing to file, the IRS may grant a penalty abatement. 

What Penalties Qualify for Abatement?

Before researching what is reasonable cause for IRS penalty abatement, understand whether your tax penalty qualifies for this form of relief. The IRS offers penalty abatement for the following offenses:

• Failure To File: If you failed to file tax returns, partnership returns, or S-corporation returns, you may qualify for penalty abatement. 
• Failure To Pay: If you did not pay the amount shown on the return by the due date, the resulting penalty may also qualify for abatement. 
• Failure To Deposit: This abatement may be available if you did not deposit the tax in the correct amount or by the prescribed time. 

Penalty abatement may be available no matter the size of the penalty. 

Examples of Reasonable Cause for IRS Penalty Abatement 

If this is your first tax penalty and you are in good standing, apply for a first-time abatement. But if you have received penalty relief in the past, you will need to prove that you had “reasonable cause” for missing the tax deadline or failing to pay. This would mean that you demonstrated ordinary business care and prudence within compliance efforts yet still were unable to meet the tax requirements. 

What is reasonable cause for IRS penalty abatement? These are a few examples of excuses that may qualify:

• Serious illness or unavoidable absence: Perhaps a serious illness or death in the family prevented you from filing on time. 
• Fires, natural disasters, or civil disturbances: The IRS recognizes natural disasters as reasonable causes for failing to meet tax filing requirements. 
• Inability to secure records: Filing tax returns requires you to secure tax records from employers and other entities. If you cannot acquire the necessary tax records, this may be reasonable cause to waive the penalty. 
• System issues: Perhaps a glitch with the e-filing system or another technology error delayed your tax payment. 
• Circumstances beyond control: If you can prove that circumstances beyond your control prevented you from meeting filing deadlines, the IRS may issue a penalty abatement. 

To qualify for a penalty abatement, you’ll need to provide evidence demonstrating reasonable cause. An experienced tax attorney can aid your application process. 

Let Levy & Associates Help You Apply for IRS Penalty Abatement 

Levy & Associates is here to answer questions like “What is reasonable cause for IRS penalty abatement?” and help you file for tax relief. Our team consists of tax attorneys, former IRS revenue officers, CPAs, and enrolled agents who have successfully claimed penalty abatement for countless clients. 

We can help you resolve tax problems and prevent them next year. Contact us today at 313-447-1704 or fill out the contact form for assistance.