IRS Penalty Abatement: What are the Reasonable Cause Criteria?
Internal Revenue Service (IRS) penalties for filing or paying your taxes late can add up quickly and be financially detrimental. If you owe back taxes to the IRS, you should work to develop a plan that allows you to pay off your debt as soon as possible to help avoid additional interest and/or penalties. There are instances in which the IRS will abate the penalties that you owe. The most common reason for penalty abatement is called “reasonable cause.” The IRS will take each request for penalty abatement on a case-by-case basis and you should be prepared to provide a very compelling reason why you are requesting that your penalty be waived. In most cases, the issue that prevented you from filing must be out of your control. Some common examples of reasonable cause include:
- Death or unexpected serious illness of the taxpayer, a family member or loved one
- Natural disasters such as a fire, flood, or other unexpected disturbance
- Unavoidable absence, including being incarcerated or being in a rehabilitation facility
- Inability to determine the amount that you owe for a reason that was out of your control
- Another reason which clearly shows that you used all ordinary business care and prudence to meet your Federal tax obligations but were still unable to do so.
Gathering the Information for File a Request for Penalty Abatement
It is also important to note that insufficient funds are not considered a reasonable cause for failure to file or pay your taxes to the IRS. However, the reason that you don’t have sufficient funds may meet the criteria for a reasonable cause penalty abatement. Additionally, interest cannot be abated for reasonable cause. An interest that is charged on a penalty that you owe will be reduced or removed when that penalty is reduced or removed.
If you decide to request a penalty abatement for reasonable cause, you should be prepared to provide detailed information to the IRS about the circumstances that prevented you from paying and/or filing on time. Relevant documentation may include hospital records, a death certificate, letter from a physician with a description of illness, or documentation of a natural disaster. You should provide as much detail as you can, specifically about dates of the event.
Support for Penalty Abatement Requests to the IRS
If you think that you may be able to make a case for penalty abatement due to reasonable cause, you should consider partnering with a tax relief firm that can help you make the strongest possible case to the IRS.
Success Tax Relief has experienced tax relief specialists who work directly with the IRS on your behalf to minimize the stress of the situation and to maximize the chance of receiving a favorable outcome. We have specific experience requesting penalty abatements for reasonable cause and helping taxpayers navigate other difficult and complex situations with the IRS. For more information or to speak with a member of our Success Tax Relief team, call us today at 877-825-1179 or contact us online.