What is Reasonable Cause for IRS Penalty Abatement?

Reasonable Cause for IRS Penalty Abatement

There are various penalties that businesses may face from tax filing, whether the wrong form is used or it is late. Below are more details on the reasonable cause for IRS penalty abatements.

What does it mean to get penalty abatement?

Since tax law is complex, taxpayers may err for various reasons. However, certain concepts are simple, and other blunders may be easily justified. For example, the IRS states that a taxpayer often does not have reasonable cause when the penalty is for submitting a tax return or paying a late payment. A taxpayer's belief that the tax return deadline was May 15 rather than April 15 is unlikely to prevent them from incurring penalties even if relayed by a tax professional.

All IRS fines should be reasonable and justified.

The IRS could disagree with taxpayers who believe they obeyed the regulations because they were evident. The IRS's evaluation of a specific defense is affected by several factors, including the kind of penalty assessed. Some reasons against punishments include more than just having a good cause, such as the absence of purposeful carelessness.

Concerning tax fines, who comes out on top? It's not like this is a huge shock or anything. That would be the Internal Revenue Service. Therefore, the burden of proof shifts on the taxpayer. Taxpayers should use the common sense and diligence expected in a corporate setting when calculating their tax obligations. Also, remember that tax returns are signed under penalty of perjury.


Taxpayers' eligibility for the "reasonable cause and good faith" exemption is determined case-by-case by the IRS using a "facts and circumstances" test. Different, less-than-factual outcomes are possible in such a scenario. The stakes may be high regarding accuracy-related fines under Section 6662 since they are typically 20% of the sum owed before the reasonable-cause exemption applies.

In addition, penalties for (1) failing to file a tax return and failing to pay under Sec. 6651, (2) filing an incorrect refund or tax credit claim under Sec. 6676, (3) failing to file Form 1099 or other information reporting returns under Sec. 6721, and (4) a tax return preparer understates a taxpayer's liability under Sec. Six thousand six hundred ninety-four are all subject to reasonable-cause exceptions.

Avoiding Penalties

To avoid penalties, filing your taxes on time is crucial. According to the IRS, the primary factor in determining whether a taxpayer has a valid excuse and behaved in good faith while attempting to disclose the correct tax due is whether or not the person has made a genuine effort to do so. It may seem straightforward for a taxpayer to declare the right amount. However, the taxpayer's "reasonable cause" argument is independent of the legitimacy of the taxpayer's position on the return, whereas the taxpayer's "reasonable foundation" defense is dependent on it.

For argument's sake, assume that the taxpayer mistakenly filed the amount on an incorrect Form 1099. It was discovered during an audit that the taxpayer's Form 1099 incorrectly reported a lower amount of income than what was received. Anyone is vulnerable to this kind of thing. Most individuals depend on the information provided on Form 1099. Therefore it may make sense for the taxpayer to report the amount supplied in the form if they believe it to be accurate.


To determine whether a taxpayer used ordinary business care and prudence, the IRS instructs its agents to consider all the facts and circumstances, including the taxpayer's motivation, compliance history, length of time, and events beyond their control. However, you should not limit your thinking to the current tax year.

In rare cases, a taxpayer may avoid paying the penalty by claiming ignorance of the law. Factors that should be taken into account include the taxpayer's level of education, whether or not the tax has been paid previously, whether or not the taxpayer has been punished in the past, the complexity of the tax problem, and whether or not the tax legislation or forms have recently changed.

Discipline for Justifiable Reason Comfort for Precision

Trusting a tax expert who made a mistake is a typical argument for Reasonable Cause. The IRS disagrees with many people's final thoughts since they aren't comprehensive. You may strengthen your case for "reasonable cause" by including details such as the accountant's qualifications and expertise, your tax ignorance, the data you provided to the accountant, and your evaluation of the return, which led you to the conclusion that it was filed appropriately.

Fines Eligible for Waiver:

  • Failure to File
  • A failure to make a required payment
  • Accuracy-Related Errors
  • Invalid Check
  • Lack of Individual Tax Prepayment Estimates

The Best Ways to Avoid Paying a Penalty

Follow the directions in the letter you got from the IRS.

The IRS may take some requests to reduce a penalty over the phone. Call them at the toll-free number in the top right corner of your letter or notice.

Please have the following data on hand when you call:

  • The letter or message we sent you
  • The punishment you want to get rid of
  • Why do you think we should take it away

During the call, the IRS can tell you if your request for penalty abatement is approved. If we can't agree to your replacement over the phone, you can use Form 843, Claim for Refund and Request for Abatement, to ask for relief in writing.

Alternatively, you can opt for the help of a tax professional. The IRS can not cause financial hardship and will do everything in its power to ensure that it can claim (a part) of your debt. The tax consultants at Ideal Tax can give you a free consultation for your situation. In addition, tax professionals are very familiar with IRS processes. Thus, can help you reach the optimal outcome for your debt with programs such as the IRS tax forgiveness program.


As the broad penalty relief initiative rolls out, TAS will keep working with taxpayers and the IRS. We suggest that taxpayers and practitioners check their online accounts and mailboxes to find out when the penalty abatement goes into effect. Taxpayers and tax professionals should also remember that the IRS could take some time to ensure that all taxpayers get the reduced penalty. Those who have already turned in their most recent tax returns do not have to do anything else to qualify. If you haven't filed your taxes yet, you should do so by September 30. If you can, file electronically so your return processes quickly.

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