1. Reasonable cause is based on all the facts and circumstances in each situation and allows the IRS 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 nevertheless is unable to comply with those obligations.

2. In the interest of equitable treatment of the taxpayer and effective tax administration, the non-assertion or abatement of civil penalties based on reasonable cause or other relief provisions provided in the IRM (Internal Revenue Manual) 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 IRM Part 20.1.

3. Reasonable cause relief is not available for all penalties; however, other exceptions may apply.

A. For those penalties where reasonable cause can be considered, any reason which establishes that the taxpayer exercised ordinary business care and prudence, but nevertheless was unable to comply with a prescribed duty within the prescribed time, will be considered.

B. If a reasonable cause provision applies only to a specific Code section, that reasonable cause provision will be discussed in the IRM 20.1 chapter relating to that IRC section. See Exhibit 20.1.1-2. , Penalty Relief-Application Chart.

C. When considering the information provided in the following pages, remember that an acceptable explanation is not limited to those given in IRM 20.1, Penalty Handbook. Penalty relief granted because the taxpayer provided an "other acceptable explanation" is identified by use of PRC 030 (Penalty Reason Code) on either the closing or adjustment document, or on the Master File with a TC 290 .00 (with the related penalty TC for .00, such as TC 180 .00), and RC 062.

4. 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 IRC section.

5. Taxpayers have reasonable cause when their conduct justifies the non-assertion or abatement of a penalty. Each case must be judged individually based on the facts and circumstances at hand. Consider the following in conjunction with specific criteria identified in the remainder of this section, See IRM 20.1.1.3.

-What happened and when did it happen?

-During the period of time the taxpayer was non-compliant, what facts and circumstances prevented the taxpayer from filing a return, paying a tax, and/or otherwise complying with the law?

-How did the facts and circumstances prevent the taxpayer from complying?

-How did the taxpayer handle the remainder of their affairs during this time?

-Once the facts and circumstances changed, what attempt did the taxpayer make to comply?

Reasonable cause does not exist if, after the facts and circumstances that explain the taxpayer’s noncompliant behavior cease to exist, the taxpayer fails to comply with the tax obligation within a reasonable period of time.

Having worked with numerous businesses and individuals, we understand that tax problems are a sensitive issue.

Call us today to find out how you can resolve your unpaid income tax liability problems.

How we can help
Our highest priority is to shield you from further, direct IRS contact. This alone can give you peace of mind regarding a tax issue. The overwhelming burden of financial pressure can be lifted when we work together for your best solution. The steps we take are:

1) Listen and learn about your situation. Initially, we will schedule a complimentary interview to determine the extent of challenges with the IRS.

2) Sign a power of attorney. Allowing a professional to be the authority to represent you before the IRS takes stress off of you and your daily life.

3) Stop the annoying phone calls or notices. Our firm notifies the IRS that we are representing you, which requires the IRS to communicate with and contact us directly. Our focus is to stop any harassment and direct all correspondence through our office.

4) Make a plan. After meeting with you to diagnose the problem, we’ll recommend the best course of action based on our experience and knowledge of the options available. ?