What is reasonable cause for penalty abatement?

Death, serious illness, or the inevitable absence of the taxpayer or their immediate family In short, to avoid a fine that the IRS is trying to impose, it's worth looking at the specific sanction in question. Taxpayers want to show how their facts and conduct met all the required evidence. In essence, a taxpayer can have reasonable cause when the evidence of their conduct justifies the non-assertion or reduction of the fine (“Reasonable Cause”). Cases are judged individually; judgments are based on the evidence, facts and circumstances presented.

In addition, many of the rules and requirements for exceptions to sanctions for reasonable causes are frankly difficult to understand. In fact, in many cases, tax regulations require that a taxpayer's request for exemption from the penalty be made in writing and even signed under penalty of perjury. The court ruled that the father's attempt to comply with documentation requirements justified reasonable cause for relief from the sentence. The fines are a slap in the face of the IRS for evading your taxpayer obligations and not paying the full amount in due time.

After all, most people tend to rely on Form 1099 data, so reasonable cause can apply if the taxpayer only reports the amount on the form because it's reasonable to assume it's correct. In fact, in many cases, tax regulations require that a taxpayer's request for exemption from the penalty be made in writing and even signed under penalty of perjury (Regs. The reason for your error must match the period of dates and events related to the fine. To determine whether relying on professional advice constitutes reasonable cause, the IRS applies a three-point test.

Once again, if you want your penalties to be reduced, you must convince the agency that a situation beyond its control caused it to pay or submit the application after the deadline, and a detailed request is essential to this process. If the taxpayer can prove this, then they should be able to reduce penalties without a doubt. To encourage taxpayer self-compliance, the IRS fairly, consistently and accurately administers a sanctions system (“Encourage Voluntary Compliance”). For each case, the IRS judges the facts and circumstances in question and will generally allow relief from the fine for reasonable cause if you exercised ordinary business care and prudence in determining your tax obligations but were unable to comply with those obligations.

However, the IRS generally does not exempt penalties associated with a taxpayer's failure to file a return due to excessive hardship. Reliance on the advice of a tax advisor generally relates to the exception of reasonable cause for the sanction related to accuracy. In making its determination, the IRS will analyze the taxpayer's educational background, whether or not they have been exposed to this type of tax before, if they have been penalized before (the kiss of death for this argument) and if there were recent changes in the law, reporting requirements or forms that the taxpayer would not reasonably be expected to know. Throwing someone else under the bus is a tactic frequently used by tax professionals to reduce penalties in other areas, such as in an audit.

Stewart Schlageter
Stewart Schlageter

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