Reasonable Cause and Abatement

Reasonable cause. A term coined by the IRS giving taxpayers a legitimate chance of reducing tax debt or, in some cases, canceling outstanding penalties and interest. The IRS will consider any “sound reason” for failure to file, deposit, or pay tax by a deadline as “reasonable cause”.

According to the IRS, reasonable cause is typically seen as: death, fire, natural disaster, and serious illness. While these are the most common reasonable cause cases, they are not the sole instances. The IRS will look at any case which “…establishes that you used all ordinary business care and prudence to meet your Federal tax obligations but were nevertheless unable to do so” and will classify it as reasonable cause (per IRS.gov).

Tax practitioners utilize a technique known as “penalty abatement” to prove that their client did in fact have reasonable cause for missing tax payments. The practitioner must make it evident to the IRS that as a result of reasonable cause, the taxpayer was delayed or unable to make their tax payment or meet their tax filing requirement. When making this argument, it is helpful to keep in mind that the IRS is more forgiving to those with failure to pay penalties, rather than failure to file penalties. 

The above information is of a general nature only and should not be relied upon for specific situations. Click here for additional tax services information.

Call Marlies Y Hendricks CPA PLLC at either 716-694-3500 or 910-769-8730 as required to set up an appointment.