Penalty abatement is a provision that allows taxpayers to remove penalties and interests imposed on them for unpaid taxes by the IRS. Taxpayers who have unfiled or unpaid tax debts and have a “reasonable cause” for the noncompliance, can apply for penalty abatement relief. It is, however, important to know that the abatement does not reduce the actual tax amount; it only removes the penalties or interest. Another aspect to remember is that there are a set of causes that are considered to be reasonable enough to waive off a penalty or interest. Continuing on the subject, in this blog post, we cover all you need to know about a “reasonable cause” for IRS penalty abatement and what it really means. Read on.
What is a “Reasonable Cause”?
Reasonable cause is any legitimate excuse a taxpayer may have for not filing or paying their taxes on time. It is, however, essential for the taxpayer to prove their claim with appropriate documentation, proving the circumstance made it impossible for them to pay or file taxes. A few examples that the IRS considers to be a reasonable cause for unfiled or unpaid tax returns include:
- Natural Disaster
- Fire or Casualty
- Records Cannot Be Obtained
- Serious Illness, Incapacitation, or Death
- Civil Disturbance
- Received Incorrect Advice from a Tax Professional
- Unavoidable Absence
- Hostage Situation
Establishing a Reasonable Cause
When the IRS investigates your case, they will cross-check the information given to establish whether the circumstance or situation that prevented you from filing of paying taxes was legitimate and “reasonable” or not. A few of the facts that help in establishing the authenticity of reasonable cause includes:
- What and when did the situation or circumstance occur
- What reason stopped you from filing or paying the taxes in time
- How did the circumstance affect the process of filing and paying of taxes
- If the circumstances change, would you be able to pay or file the taxes in time?
The documents you will require include:
- Documentation supporting the claim that the taxpayer experienced a circumstance or situation that made it impossible for them to file or pay taxes.
- In case of a serious illness, incapacitation, or death, the IRS will need the necessary documentation that supports the claim, such as hospital records or a doctor’s letter.
Now that you know what exactly a reasonable cause for IRS penalty abatement means, speak with an experienced IRS tax attorney at The Law Offices of Nick Nemeth to find your way out of an IRS penalty or interest. We have a team of experienced IRS tax lawyers with proven expertise in dealing with all types of IRS tax-related issues, especially penalty and interest abatement. For a confidential, no-obligation consultation, fill out our contact form or simply call (972) 627-4580.