Reasonable cause is a summation of all facts and circumstances related to your particular situation. If you use ordinary business care and prudence and are still unable to meet your federal tax obligations you may have reasonable cause.
Some of the reasons IRS will consider as reasonable cause for late filing of a return, late payment of the tax due or late payroll deposits include fire, casualty or natural disaster. In Texas we have had several of these occur in the last year or two. You may also have reasonable cause if you obtained erroneous information from an IRS agent on the phone. In addition if you are unable to obtain records, had a death or serious illness of the taxpayer or the immediate family of the taxpayer or if you had another reason where normal business prudence was followed but you were still unable to meet your tax obligations, you may reasonable cause for penalty abatement.
Some questions to consider include, what happened and when did it happen? What was the situation or cause that prevented you from filing or paying your taxes timely? Did these circumstances affect your other responsibilities or requirements in your day-to-day activities? Once the circumstances that caused the problem changed, what did you do to update your tax situation and when did you make the changes?
Since reasonable cause is based on all the facts and circumstances, the more information you can obtain regarding the situation the better. You may want to obtain hospital or doctor records. If applicable you may want to obtain court records or other legal documents. If there is an opportunity you may try to obtain documentation of natural disasters or other events that prevented your compliance. The more information you have the better case we can prepare for you when the letter is prepared to be sent to the IRS. Call us so we can sit down and discuss your individual situation and options available.
Posted on May 24, 2014