Episode 12: In this episode, Timalyn wraps up a 2-part series on getting rid of IRS penalties. This episode focuses on how to remove IRS penalties for a reasonable cause. It might surprise you, but there's a process available, if you qualify. So, do you? Listen to this episode to find out.
Note: To listen to Part 1, check out Episode 11 for the discussion of IRS Penalties: First Time Penalty Abatement.
What is Reasonable Cause?
Timalyn explains it's when the IRS considers the situation and decides to waive the penalty. This process is different than the First Time Penalty Abatement (which gets rid of the penalties and interest). Both are good options to understand and to pursue.
Requirements for Reasonable Cause Abatement
There's more work involved in pursuing this option. However, it may be the only option for which you qualify.
#1: The request must be in writing, not communicated over the phone.
#2: Timing is very important. The cause you're using must apply to the specific tax year.
#3: You must have documentation to back up your request for reasonable cause.
9 Reasons the IRS may Approve Your Reasonable Cause
#1: Death, serious illness or unavoidable absence was involved in your inability to file or pay.
#2: Fire, casualty or natural disaster (as declared by the federal government).
#3: Unable to obtain records. Listen to Timalyn's examples.
#4: A mistake was made. You'll need documentation to prove this claim.
#5: Erroneous advice. A paid professional gave you bad advice, resulting in penalties.
#6: Written or verbal advice from the IRS. Document the individual's name, date and time you spoke with that representative. There may be a recording of the conversation. Always take notes when you interact with the IRS.
#7: Ignorance of the laws. It's going to depend upon whether the IRS thinks you performed your due diligence. Common knowledge issues typically don't work. This may have to be combined with #5: Erroneous advice to be considered a reasonable cause.
#8: Reasonable cause after "ordinary care" was completed. You'll need to convince the IRS that you were trying your best, but a mistake occurred.
#9: Undue financial hardship. The IRS may be willing to negotiate the penalty and interest, but not completely abate it, in this case.
How Do You Submit the Request for Reasonable Cause Penalty Abatement?
You'll need to use IRS Form 843 for Penalty Abatement. This process is more difficult, but it's possible. You'll have to substantiate the reasons you feel you qualify in writing. You'll also need to provide the required documentation. Once you've submitted it, it's a waiting game. But remember, back taxes don't have to ruin your life.
Remember to come back for Episode 11 for the discussion of IRS Penalties: First Time Penalty Abatement.
As we conclude Episode 12, we encourage you to connect with Timalyn on social media. You'll be able to subscribe to this podcast on Google Podcasts, Spotify, and many other podcast platforms.
Remember, Timalyn Bowens is America's Favorite EA and she's here to fill the tax literacy gap, one taxpayer at a time. Thanks for listening to today's episode.
For more information about tax relief options, visit https://www.americasfavoriteea.com/ .
If you have any feedback, or suggestions for an upcoming episode topic, please submit them here: https://www.americasfavoriteea.com/contact.
Disclaimer: This podcast is for informational and educational purposes only. It provides a framework and possible solutions for solving your tax problems, but it is not legally binding. Please consult your tax professional regarding your specific tax situation.
