IRS Penalty Abatement: What Counts as Reasonable Cause
The IRS can reduce or eliminate your tax penalties if you can prove that you tried to stay compliant with tax laws but were unable to do so due to reasons beyond your control. To qualify, the reason must align with what the IRS constitutes as reasonable cause. That said, the IRS still evaluates each case on its specific facts and evidence, so presenting the strongest case you can matters.
It’s generally better to focus on a well-documented explanation that highlights the facts, rather than a sympathetic explanation that you can’t back up.
Schedule a consultation with us to find out if you qualify for a reasonable cause and learn how our penalty abatement attorney can help prepare a strong request.
Key Takeaways
- Reasonable cause generally exists when circumstances beyond your control prevent compliance even though you exercise ordinary business care and prudence.
- Serious illness, death in the immediate family, disasters, and an inability to obtain necessary records are examples of acceptable reasonable cause.
- Forgetfulness, being busy, relying on another person to file, and not having money are usually not considered reasonable cause.
- A successful request must explain how it happened, how it prevented compliance, and how quickly you resolved the problem.
- A denied request may be appealed, but you do have to meet the IRS deadline to request an appeal.
The IRS Has a Legal Standard, Not a Sympathy Test
The IRS doesn’t remove penalties just because a taxpayer experiences financial or personal hardship. They look at the evidence to determine whether a taxpayer acted as a reasonably prudent person would have under the circumstances. If someone exercises ordinary business care and prudence but still fails to meet a tax obligation because of specific circumstances, the IRS may grant reasonable cause penalty abatement.
You must be able to tie a specific event that caused noncompliance to a specific missed filing or payment deadline.
“When they call the IRS themselves, the IRS is never going to offer up any source of penalty abatement of any kind. We have to work the case to find those savings. When we reduce those penalties, we also reduce the interest that was tacked on with them, which is significant.” – tax attorney Stephen Kass.
The difference between an approved request and a denied request isn’t always the actual event that led to noncompliance. It’s the quality of the timeline, evidence, and legal framing that you provide. Call us at 212-843-0050 or learn more about how we help with penalty abatement.
What the IRS Accepts vs. What They Deny
Here is a quick summary of what the IRS generally considers reasonable cause and what is denied:
| Reason Given | Accepted or Denied? | What the IRS Looks for or Contributing Factors |
|---|---|---|
| Serious illness or incapacitation of taxpayer or immediate family | Usually accepted | Whether the dates of illness align with deadlines, physician letters, hospital records, and proof that you complied once able |
| Death in the immediate family | Usually accepted | Timing relative to the tax deadline, documentation of the death, and how promptly you complied with the filing or payment requirement |
| Fire, casualty, or natural disaster | Usually accepted | FEMA declarations, insurance claims, photos, and impact on ability to pay or file |
| Inability to obtain records | Often accepted | Evidence of attempts to get the records, why they were unobtainable, and proof of third-party causes |
| Incorrect written advice from the IRS | Accepted | The written advice, your written request for it, and evidence of your reliance on it |
| Reliance on a professional’s incorrect advice (example: whether a return was required) | Sometimes accepted | Evidence of the advisor’s competence, full disclosure of facts to the advisor, and reliance on the advice |
| Reliance on an accountant or preparer to file the return | Denied | Supreme Court (United States v. Boyle) determined duty to file on time cannot be delegated to others |
| Not having the money | Usually denied | Lack of funds alone is not a reasonable cause for failure to file; it may be a reasonable cause for late payment if you can document why funds were unavoidably unavailable |
| Forgetting or being too busy | Denied | Ordinary business care and prudence include remembering deadlines |
| Not knowing that you had to file | Often denied | Ignorance of tax law is usually not reasonable cause, although there are exceptions |
The Four Things Every Successful Reasonable Cause Request Proves
The IRS receives thousands of reasonable cause requests, so anything vague is automatically denied, even when a taxpayer actually has a reasonable cause. Here’s what a strong IRS penalty abatement reasonable cause letter should establish:
What happened and when
Include a clear timeline of the circumstances that led you to not file or pay. Use specific dates, rather than referring to vague times like “at the end of tax season” or “in the spring.”
How the event prevented compliance
Your letter should also specify how the issue prevented compliance with tax law. Do not just explain what happened and expect the IRS to connect the dots. Spell out exactly how the situation kept you from filing or paying on time.
For example, don’t just say that you were in the hospital for the first 17 days of April and could not file your taxes. Say the dates you were in the hospital, why you were there, and that your time in the hospital prevented access to records and communication with your tax preparer.
How you exercised ordinary care
Remember, the IRS wants to see that you acted with ordinary care and prudence. You may want to outline the precautions and systems you already have in place to ensure that your taxes are handled properly under normal circumstances. You may want to specify that you work with a preparer, keep your tax records organized, and set reminders on your phone to stay on top of deadlines. This also includes making provisions for reasonably foreseeable events.
What you did once your circumstances changed
This is a very important thing to address in your letter. You don’t just want to prove why you failed to comply with tax law. You also want to outline the steps you took to get back into compliance once your circumstances improved. Perhaps you filed immediately or logged onto your IRS account to make a payment. Reasonable cause may explain why you are initially behind, but it doesn’t extend for months or years after your circumstances change.
Why Reasonable Cause Requests Get Denied (Even Good Ones)
Every year, taxpayers submit reasonable cause requests that appear perfectly legitimate and worthy of abatement, yet they are still denied. Requests may be denied because:
- The explanation does not identify the tax years involved.
- The event occurred before or after the relevant filing deadline.
- Medical, financial, and other third-party documentation is missing.
- The submitted records do not match the provided timeline.
- The taxpayer handled other important obligations during the time you claim to have been unable to handle your taxes.
- After the hardship ended, the taxpayer did not comply with tax requirements within a reasonable amount of time.
- The letter tells a very sympathetic story, but does not explain how the taxpayer exercised ordinary care.
Even after an IRS penalty abatement reasonable cause letter is denied, it’s not necessarily the end of the road. You may be able to request a review of the decision by the IRS Independent Office of Appeals.
Appeal review is often important when an initial determination doesn’t appear to fully consider the taxpayer’s documentation. Documentation may tell the full story in context, but if it’s cluttered, disorganized, or hard to follow, the IRS may deny the claim. Appealing the decision with the help of a reasonable cause penalty abatement lawyer may help you present a stronger case.
Reasonable Cause for Accuracy-Related Penalties
Accuracy-related penalties are generally 20% of the portion of an underpayment that can be attributed to negligence, a substantial understatement, or some valuation errors. These penalties are typically applied when an IRS audit discovers unreported income. Administrative first-time relief does not apply in these cases.
For a taxpayer to get relief from accuracy-related penalties, they must establish reasonable cause. A taxpayer’s effort to calculate the correct tax liability is a very important factor. The IRS may look at the taxpayer’s knowledge and experience, the complexity of the tax issue, whether there was an honest misunderstanding of law, and reasonable reliance on professional advice.
However, as is the case with reasonable cause abatement for other penalties, reliance on professional advice alone does not prove good faith or ordinary care. Be prepared to demonstrate the advisor’s qualifications, knowledge of relevant facts, and that you relied on their guidance.
An accuracy-related penalty arising from an audit can drastically increase a final tax bill, so if penalty abatement is part of your strategy, you may want to discuss how abatement fits into the broader picture of your audit, administrative appeal, or Tax Court litigation strategy.
How to Request Penalty Relief
Depending on the penalty and your preferred approach, you may:
- Respond to the notice in writing.
- Call the IRS directly (for an FTA request)
- File Form 843, Claim for Refund and Request for Abatement ( this is the form you use to request penalty abatement if you have reasonable cause).
For a reasonable cause, you’ll need to provide supporting documents and give an explanation, which plays a significant part in whether your request is approved or not. Even if you have already paid the penalty, you may be able to request an abatement to receive a refund if you are still within the limitation period.
First-Time Abatement: Automatic Exemption From Penalty
An important thing to note: if you qualify for first-time abatement, the IRS will apply it automatically starting in the summer of 2026, as the agency is switching to an Automatic Exemption from Penalty (AEP) approach.
However, if you are seeking help with a tax return from a prior period or you’re seeking relief during the transition period, you should discuss strategy with your tax professional. The IRS may apply first-time abatement before reasonable cause, which essentially wastes your first-time abatement on what may be a small penalty.
In cases involving multiple years’ worth of penalties, penalties that dramatically increase your tax bill, or when you owe more than $100,000 in tax debt, bringing in a professional is a practical choice that protects your options.
Frequently Asked Questions (FAQs)
Here are common questions we receive on requesting penalty relief:
What qualifies as reasonable cause for the IRS?
The IRS looks at whether a taxpayer facing uncontrollable circumstances acted with ordinary business care and prudence, which basically means acting in the same way that a reasonable person would. IRS reasonable cause examples include serious illness, death in the immediate family, natural disasters, and an inability to obtain records.
Does not having money to pay taxes count as reasonable cause?
Lack of funds is generally not enough for a successful penalty relief request. It is not a reasonable cause for late filing of a tax return, and it’s only a valid reason for paying late if you can prove why the funds were unavailable, whether the circumstances were outside your control, and any efforts you made to pay.
Is relying on my accountant reasonable cause for filing late?
Usually it is not. The Supreme Court held that the duty to file a tax return on time cannot be delegated. Even if you depended on your accountant to file on time, the responsibility is ultimately yours.
Can I request reasonable cause abatement after paying the penalty?
Yes. You can use Form 843 to claim a refund of qualifying penalties that have already been paid, provided the deadline has not passed (usually 3 years from the date you filed your original return or 2 years from the date you paid the tax).
What should I do if my reasonable cause request was denied?
You may be able to appeal the IRS’s decision. You should check the protest or appeal instructions given in your denial notice.
Does reasonable cause abatement remove interest too?
Reasonable cause abatement removes the interest that had accrued on the abated penalty, but the total interest on the tax bill remains.
Get Penalties Removed—the Right Way
Penalties can make an already stressful tax debt even more intimidating. Luckily, if most of your tax debt is from penalties and you have a reasonable cause as to why you were unable to comply with tax laws, you may be able to get rid of the accrued penalties.
That said, reasonable cause cases are won on documentation and framing, not just how sympathetic your situation is. At the Law Offices of Stephen B. Kass, we help you understand your tax notices, evaluate the relief available to you, and seek penalty abatement as part of a broader tax relief strategy. Contact us online to learn more about our penalty abatement services or call us at 212-843-0050 to schedule a consultation.
Sources:
https://www.irs.gov/payments/penalty-relief-for-reasonable-cause
https://www.irs.gov/payments/penalty-relief
