Penalty relief: How to establish reasonable cause

PENALTY could still be relived even if you fail to file your tax returns and pay taxes owed if you have reasonable cause.

How to establish reasonable cause

• Facts. Provide facts, situations, circumstances that have not allowed you to file your tax return timely and pay taxes owed.

• Ability. How the facts, situations, circumstance did affect you to do your daily activities.

• Actions.  What did you do to file your tax return and pay taxes owed despite the facts, situations, circumstance?

• You have sole authority. Is the filing of the tax return and payment of taxes owed cannot be delegated to someone else but you as the only authority?

Common situations for reasonable cause

• Taxpayer: death, serious illness, inevitable absence

• Inability to obtain records

• Casualty: fire, natural disaster

• Execution of ordinary business care and prudence to meet obligation.

What are considered valid supporting documents for reasonable cause?

• Hospital records and physician letter to establish illness

• Court records

• Specify dates: start and end, if ongoing

• Natural disasters records: police report, fire certificate, declaration of disaster area

• Death certificate if there is death.

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Disclaimer: Any accounting, business or tax advice contained in this communication is neither intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. 

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Al-os & Associates  Accountancy Corporation provides accounting and tax services to individuals, corporations, LLCs and business entities. The Firm has a niche in defending taxpayers audited by the IRS and other governmental agencies.