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The Tax Practice of IIT Chicago-Kent College of Law
The Tax Practice of IIT Chicago-Kent College of Law

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Penalty Relief: Making Your Case for "Reasonable Cause" Abatement

Posted on in IRS

abatement, penalty abatement, Chicago Tax LawyersThe IRS, naturally, does not like to remove a penalty it has assessed. No matter how unfair these penalties may seem, you will still have to put in some work to get a civil penalty abatement to stick. That said, there are a fair number of reasonable causes upon which you can base a compelling argument:

Ordinary Business Care and Prudence

This category of abatement justification simply means "you did your best to pay your taxes, but couldn't for reasons beyond your control." Generally speaking, if you're not already a regular and conscientious taxpayer, you will not get the IRS to agree to this basis for abatement. But if you really did do everything in your power, and you've been compliant with your filing and payments for the past several years, you may be able to convince them that they should eliminate the penalty…this time.

Death, Serious Illness, or Unavoidable Absence

The "medical causes prevented me from paying" argument, if it's provable and true, is probably the most successful form of abatement request. It applies to individuals exactly like you'd expect, but it can also apply to businesses and institutions if there's only one person in charge of taxes, and if the businesses exercised 'ordinary business care and prudence' to try to get the taxes paid anyway and failed.

Ignorance of the Law

This is rarely successfully applied on its own. However, if you've never been penalized before and you have a background that would suggest a good reason to not be aware of the tax law, this could be a strong supplementary argument for IRS penalty abatement.

Forgetfulness

This isn’t going to fly.

Inability to Obtain Necessary Records

In general, this is another excuse you should avoid unless you have an extremely compelling story as to why you weren't able to obtain the records in the requisite timeframe.

Undue Hardship

One of the more successful arguments for penalty abatement is that the penalty will cause you financial hardship that is "more than an inconvenience to the taxpayer." This may apply if and only if the tax penalty will literally keep you from paying your rent, utility bills, food costs, or medical bills.

Bad Tax Advice/Errors by the IRS

These two arguments are essentially the same - they both say "I rightfully relied on an outside source (a tax preparer or the IRS itself) to guide my actions, and I was misinformed." Especially if you can show the IRS that these sources were responsible for your penalized action, the penalty will generally be successfully removred.

Fire, Flood, or Casualty

A.K.A. "I couldn't pay because there was an actual disaster." Generally, any time your area is a recognized disaster area, you'll still have to pay your taxes eventually, but the IRS may be specifically authorized to abate any penalties for late filing.

As with all types of dealings with the IRS, whenever you ask for penalty abatement, it is important to have all your ducks in a row. Make sure you have full and complete documentation to back up any claims you make. At Chicago-Kent Tax Clinic, our skilled Chicago tax attorneys have several decades of experience helping clients with all types of IRS and Illinois state tax controversies. We provide free case evaluations to help determine if it is worthwhile to pursue penalty abatement in your specific circumstance, and low cost assistance if you decide to retain our services. Call our office today at 312-906-5041 to schedule your free consultation.

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