Do I Have Reasonable Cause For Penalty Abatement?

It's no fun when the IRS adds penalties and interest to30. Incorrect Verbal Advice from the IRS:
your balance due. In fact, it can feel like they are just31. - If an IRS employee gives you erroneous advice
trying to add insult to injury. What the IRS is actuallyeither over the phone or in person, the IRS may abate
trying to do is encourage voluntary compliance withthe penalty that resulted from you following the advice.
American tax laws. Even the IRS knows that certainThis type of reasonable cause is not as effective as
events are out of your control and may cause you tohaving incorrect written advice because it is essentially
file a return late or make a payment late. If this is theyour word against the IRS.
case, you may qualify for penalty abatement due toYou should have the following documentation to
reasonable cause.support your claim:
Reasonable Cause?32. - Notation of your question to the IRS
By claiming reasonable cause for non-compliant33. - Documentation regarding the advice provided by
behavior (not filing, not paying, etc), you are saying thatthe IRS
there was no willful neglect on your part, i.e. that you34. Postal Service Error
didn't do it on purpose. Reasonable cause is the set of35. - If the United States Postal Service lost your mail
events or circumstances, specific to each individual'sor made an error concerning the delivery of your tax
situation, which acts to explain the noncompliantreturn or tax payment (delivering your mail to another
behavior of an individual. A good layman's definition oftaxing agency for example), you can request that the
Reasonable Cause is that there were circumstancesassociated penalty be removed due to reasonable
outside of your control, or that made it virtuallycause. You should have the following documentation
impossible to, do what you were supposed to do (file,to support your claim:
pay, etc.).36. - Statement from USPS concerning the error
The IRS recognizes the following sixteen arguments,37. Tax Professional Error:
or possible reasons, for reasonable cause:38. - Reliance on a tax professional provides
reasonable cause only when it is associated with a
1. Death:technical or complicated tax issue, such as an
2. - If there was a death in your immediate familyaccuracy related penalty. Failing to file or pay your
(such as spouse, sibling, parent, grandparent, or child)taxes on time cannot be excused because of advice
that prevented you from complying with the IRS, youfrom a tax professional.
may qualify for penalty abatement. You should beYou should have the following documentation to
prepared to explain to the IRS who died, the date thesupport your claim:
death occurred, and exactly how the death prevented39. - Copy of incorrect advice
you from meeting your obligations to the IRS.40. - Copy of document showing the error made
You will need the following to support your claim:41. Lack of Forms:
3. - Copy of death certificate42. - If you did not have the correct forms or
4. Serious Illness:schedules needed to complete your return, the IRS
5. - If either you or an individual in your immediatemay abate your penalties due to reasonable cause.
family had a serious illness which prevented you fromHowever, with the accessibility to forms through the
complying with the IRS, you may qualify for penaltyinternet and through most public libraries, this is not one
abatement. A serious illness is usually one whichof the stronger arguments for reasonable cause. The
requires some type of continual care, either at aIRS will also take into account whether or not you filed
hospital/clinic or personal care at your home.an extension to receive extra time to get the forms.
You should have the following documentation toYou should have the following documentation to
support your claim:support your claim:
6. - Doctor's statement detailing and documenting your43. - Copy of extension filed
illness44. Inability to Obtain Forms:
7. - Medical bills45. - An inability to obtain forms indicates that you tried
8. Unavoidable Absence:to get the forms needed to complete your tax return,
9. - An unavoidable absence means that you were notbut could not, for reasons outside of your control. Most
at your residence and could not comply with the IRS,often, this includes not receiving earning statements
at no fault of your own. Valid examples of this arefrom an employer.
incarceration, detainment in a foreign country, orYou should have the following documentation to
deployment to a Combat Zone.support your claim:
You should have the following documentation to46. - Copy of extension filed
support your claim:47. - Copies of letters written and/or received in effort
10. - Proof of incarcerationto obtain documentation
11. - Copy of passport showing dates you left and48. Fire:
entered the country49. - A fire that destroyed your records may be
12. - Documentary proof that you were detainedreasonable cause for failing to comply with the IRS.
13. - Proof that you were in a Combat ZoneThe IRS will consider the timing of the fire in relation to
14. Bankruptcy:when your return or payment was due and whether
15. - If you were in bankruptcy when a failure to payor not you had any other copies of your records to
penalty was assessed, you can request penaltyfulfill your tax obligation.
abatement for reasonable cause. Bankruptcy will notYou should have the following documentation to
be considered as reasonable cause for a failure to filesupport your claim:
penalty.50. - Copy of insurance claim
You should have the following documentation to51. - Report from fire department
support your claim:52. Theft:
16. - Bankruptcy filing documents53. - If your records were stolen and you consequently
17. Inability to Pay Due to Extreme Financial Hardship:could not comply with the IRS, you have reasonable
18. - In order to qualify for reasonable cause due to ancause for failing to comply with the IRS. If you
inability to pay because of extreme financial hardship,misplaced or lost your documents, however, this is not
you must show the IRS that you would have sufferedthe same as having your records stolen -
a substantial financial loss if you had paid the tax bymisplacement is under your control; having your
the due date. In most cases, this financial hardship isrecords stolen is not.
due to an unexpected event. An inability to pay due toYou should have the following documentation to
extreme financial hardship will not be considered assupport your claim:
reasonable cause for a failure to file penalty.54. - Copy of insurance claim
You should have the following documentation to55. - Copy of police report
support your claim:56. Disaster Area:
19. - Bank statements showing the amount in your57. - If you are located in an Official Disaster Area, the
accounts when payment was dueIRS usually issues special instructions for requesting
20. - Statements/bills showing the unexpected costpenalty abatement.
that was incurredYou should have the following documentation to
21. IRS Error:support your claim:
22. - If the IRS made an error in computing or58. - Copy of insurance claim
assessing tax on your account or crediting your59. Unknown Filing Requirement:
account with a payment, you can request penalty60. - If you did not know that there was a filing or
abatement due to reasonable cause. You will have topayment requirement (and could not reasonably be
show the IRS that you did comply with the law fromexpected to know), you may have reasonable cause
the beginning and the IRS did not recognize that fact.for failing to comply with the IRS. You should be able
You should have the following documentation toto show the IRS that you did make a reasonable
support your claim:effort to comply with any requirements you were
23. - IRS Notice or Letter showing the erroraware of.
24. - IRS Publication showing the errorYou should have the following documentation to
25. - Specific citation of rule or correct application fromsupport your claim:
a law source61. - Documentation showing when the new
26. Incorrect Written Advice from the IRS:requirement went into effect
27. - If an IRS employee issued your erroneous advice62. Tax Law Change:
in writing, the IRS will abate the penalty that resulted63. - A recent tax law change of which you were
from you following the advice.unaware (and could not reasonably be expected to
You should have the following documentation toknow) can provide basis for reasonable cause.
support your claim:You should have the following documentation to
28. - Copy of your request for advicesupport your claim:
29. - Copy of IRS response to your request64.