Article Date:
February 2021

Word Count:



Secrets to IRS Penalty Forgiveness Using Reasonable Cause

Uh-oh! In your mailbox, you found that dreaded envelope—the one from the IRS.


Inside the envelope, you find a notice from the IRS informing you that it assessed additional tax, penalties, and interest on your tax return from two years ago!


After you recover from the shock, you review your tax records for that year and realize to your dismay that the IRS is right: you do owe the additional tax.


The additional tax liability is bad enough, but the added penalties and interest are extra sources of aggravation. Is there any way for you to avoid paying them?


The tax code1 requires the IRS to charge interest on unpaid taxes and penalties. The IRS can waive interest only if2



it made an administrative error; or


it caused an unnecessary delay in assessing the tax obligation.


On the other hand, the IRS can waive penalties it assessed against you or your business if there was “reasonable cause”3 for your actions.


Okay, we know what you’re thinking. This should not be too hard. After all, you understand the term “reasonable cause” and often use it in your everyday conversations!


Warning! Contrary to what you might think, the term “reasonable cause” is actually a term of art at the IRS. This seemingly simple phrase has a precise and detailed definition as it relates to penalty abatement.


Moreover, many of the rules and requirements for reasonable cause exceptions to penalties are downright tricky to navigate. ... Log in to view full article.

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