Examples of “Reasonable Cause” the IRS Accepts to Grant Penalty Relief

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Even the most responsible people can occasionally get into trouble come tax season. Thankfully, the IRS recognizes this, and more importantly, provides options for relief in select circumstances. Not sure if you qualify? Keep reading for insight into how the IRS establishes reasonable cause — and common examples of situations in which penalty relief may be granted:

How the IRS Establishes Reasonable Cause

To establish reasonable cause, the IRS needs to be notified what, exactly, happened, and when it occurred. Specifics are essential; there should be no question as to the obstacles that prevented you from filing or paying your taxes on time. The IRS also recommends sharing the efforts you went through to file or pay your taxes as soon as your circumstances changed.

Top Examples of Reasonable Cause

The IRS highlights a variety of common situations in which reasonable cause may be applied to grant taxpayers penalty relief. These include:

  • Natural disasters such as hurricanes, flooding, tornados, or fire
  • Serious illness or incapacitation of the taxpayer
  • Serious illness or incapacitation of a close member in the taxpayer’s family
  • Death in the family
  • In select cases: the inability to retrieve records

The IRS will also provide penalty relief on a case-by-case basis to those who can demonstrate clear business care but, due to circumstances beyond their control, were still unable to pay their federal taxes on time. As the IRS points out, a simple lack of funds does not qualify as reasonable cause. However, if one of the situations highlighted above prompts a lack of funds, penalty relief may be available.

If you suspect you may be eligible for penalty relief due to reasonable cause, it is imperative that you get in touch with a tax expert as soon as possible. The team at Highland Tax Resolution can assist you in your effort to obtain relief from the IRS.