Anyone who has ever encountered a tax problem with the IRS or
a state-taxing agency knows the magnitude of the IRS penalties levied by
the government for non-compliance. Because of the rapid accrual of high tax penalties
and interest, what starts as a manageable tax problem can quickly escalate to
unmanageable levels. Our tax attorneys are often asked to help clients
deal with tax penalty issues.
The Internal Revenue allows you to avoid IRS penalties if you have a good excuse,
known as reasonable cause. The following information is excerpted directly
from the Internal Revenue Manual, IRM 120.1.
Reasonable cause is based on all the facts and circumstances
in each situation and allows the Service to provide relief from a penalty that would
otherwise be assessed. Reasonable cause relief is generally granted when the taxpayer
exercises ordinary business care and prudence in determining their tax obligations
but is unable to comply with those obligations
In the interest of equitable treatment of the taxpayer and effective
tax administration, the nonassertion or abatement of civil penalties based on reasonable
cause or other relief provisions provided in this IRM must be made in a consistent
manner and should conform with the considerations specified in the Internal Revenue
Code (IRC), Regulations (Treas. Regs.), Policy Statements, and Part 120.1.
Reasonable cause relief is not available for all penalties; however,
other exceptions may apply.
- For those penalties where reasonable cause can be considered,
any reason, which establishes that the taxpayer exercised ordinary business care
and prudence, but was unable to comply with a prescribed duty within the prescribed
time, will be considered.
- See IRM Exhibit 120.1.1-2, Penalty Relief-Application Chart.
If a reasonable cause provision applies only to a specific Code section, that reasonable
cause provision will be discussed in the IRM 120.1 chapter relating to that IRC
- When considering the information provided in the following
pages, remember that an acceptable explanation is not limited to those given in
IRM 120.1. Penalty relief granted because the taxpayer provided an "other acceptable
explanation" is identified by use of PRC 30 on either the closing or adjustment
- The wording used to describe reasonable cause provisions
varies. Some IRC penalty sections also require evidence that the taxpayer acted
in good faith or that the taxpayer's failure to comply with the law was not due
to willful neglect. See specific IRM sections for the rules that apply to a specific
- Taxpayers have reasonable cause when their conduct justifies the
nonassertion or abatement of a penalty. Each case must be judged individually based
on the facts and circumstances at.
reviews each client's special situation to determine if any IRS penalties
might be waived. If our tax attorneys determine that a reasonable cause
might exist, we aggressively pursue the Abatement of IRS Penalties.
Click here for Penalty Abatement help!