IRS Penalty Provisions

The Tax Code contains a number of provisions that impose penalties on delinquent or non-compliant taxpayers.

Some of these penalties may be abated or eliminated if the taxpayer can show that his failure to comply was due to reasonable cause and not to willful neglect.

Generally, the IRS will automatically assess a penalty and thereby put the burden on the taxpayer to request its abatement or elimination.

What Constitutes “Reasonable Cause” For Purposes of Eliminating Penalties?

The IRS and the Courts have accepted the following arguments for abatement of penalties:

• Reliance on the advice of a qualified tax advisor
• Incapacitating illness
• Natural catastrophe
• Isolated Incident
• Reliance on the written advice of an IRS official

The IRS and the Courts have rejected the following arguments for abatement of penalties:

• Financial problems
• Ignorance of the law
• Reliance on the verbal advice of an IRS official

Should Taxpayers Write a Letter to the IRS Asking for Penalty Relief?

No.

It is not a simple matter to get the IRS to abate a penalty.

Penalty abatement requests are formal petitions for tax relief and, in order to be successful, must be well developed and thoroughly supported by corroborating documents and current case law.