Guide to Reasonable Cause Penalty Relief for Businesses

How Can Your Business Get IRS Penalty Relief Due to Reasonable Cause?

There’s no denying that tax debt is a huge source of stress for today’s hardworking business owners. Many, however, do not realize that a variety of options are available for resolving the situation and relieving their anxiety.

Reasonable cause, for example, can be a compelling opportunity. Unfortunately, many entrepreneurs who qualify have no idea that it’s available.

Keep reading to learn when penalty relief is offered to business owners based on reasonable cause — and what the process for obtaining relief might look like.

How Does the IRS Define Reasonable Cause?

As a form of penalty relief, reasonable cause involves extraordinary situations that prevent taxpayers from meeting deadlines for filing or paying. Natural disasters and fires are top examples, although casualties and many other tragedies may also qualify.

In some situations, reasonable cause relief may be available if you were unable to obtain necessary records on time. The IRS points out, however, that a general lack of funds does not constitute reasonable cause.

How Can Reasonable Cause Be Established?

Before you can be deemed eligible for relief based on reasonable cause, the IRS may need to verify:

  • What, exactly, prevented you from filing or paying taxes — and when this roadblock occurred
  • The specifics of how a particular situation prevented you from abiding by your tax obligations
  • Whether you took action to resolve your tax concerns after the situation in question was resolved

Documentation will likely be needed to prove that your claim is legitimate. Examples might include court records, physician letters, or evidence of natural disasters. Additionally, you may need to prove that you behaved prudently — and that you did not willfully neglect your tax obligations.

If you’re struggling to determine your options for obtaining penalty relief from the IRS, feel free to get in touch with the team at the Highland Tax Group.