Finding out that you have tax penalties from the IRS might be scary at first, but before you get worried, do your research and remember you have options; reasonable cause being one of them.
Reasonable cause is based on the facts and circumstances of your specific situation. You have to provide proof that the reason you were not in compliance with the tax law was not due to willful neglect. Ordinary business care and prudence have to be used responsibly here in order to be approved this specific relief by the IRS.
Some examples of reasonable cause include:
● Inability to obtain the appropriate tax records
● Natural disasters or certain disturbances that prevented you from completing your taxes
● Following incorrect tax guidance/advice
● Serious illness or death
● Ignorance of the tax law
If you do end up having to pay additional tax to the IRS, you have the option to file a reasonable cause request that should detail your entire situation.
What to include in your reasonable cause request to the IRS:
● Always include your full name as it is spelled on all of your personal/financial documents
● Your social security number
● Any important dates and explanations that are tied to the specific penalties the IRS has highlighted
● Consider writing your request instead of just filling out a form. A written request allows you to present your argument with all of the facts and figures they are looking for, as well as any other relevant documents you’ll need to prove your case. This should also include any and all attempts you’ve made to prove your efforts to fulfill your tax obligations.
It’s important to note, there is a possibility that the IRS will deny your request. If this does happen, you have the option to file an appeal. If your request is complex and has many moving parts, an appeal might be the best way for you to have a more in-depth discussion about your situation.
While this reasonable cause request process may seem simple, it really comes down to the important details you provide to the IRS. Every situation is different, and as long as you can prove you or your business did not purposefully infringe upon the tax laws, you might be able to come to a solution that doesn’t end in fines or potential convictions.
We’re here to help you through the tax preparation process! Let us know if you have any questions and feel free to contact us at 410-224-2600.