Proving Reasonable Cause
Reasonable cause has been defined as that which would prompt an ordinarily intelligent person to act under similar circumstances as did the taxpayer. The following have been used as grounds for reasonable cause in requesting penalty removal (they may or may not be favorable grounds):
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Reliance on IRS advice or publications;
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Expert tax advice;
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Delegating filing of tax return to attorney or accountant;
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Oversight of the taxpayer or an employee;
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Ignorance or misunderstanding of law by a nonexpert;
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Missing information;
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Unavailability of books and records;
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Essential parties to the situation unavailable;
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Overwork, stress, or health problems of the taxpayer;
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Unresolved dispute with IRS or other litigation;
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Disputes or misunderstandings between spouses;
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Financial hardship;
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Problems with U.S. postal service.
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Normal business practice.
Reasonable Cause Requests
For non-assessment or abatement of penalties:
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The law allows IRS to remove, reduce, or not assess penalties for late filing and/or late payment if the taxpayer is able to show "reasonable cause"., IRS procedures require that in most cases where the penalty is being asserted, reasonable cause criteria should be discussed.,
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Appeals has jurisdiction to hear penalty cases prior to full payment.
Reasonable Cause Not Established
If the taxpayer's request does not establish reasonable cause, the IRS will determine whether additional information is needed to evaluate the request. If the request is then rejected, the IRS will provide written notification to the taxpayer of the denial and of the taxpayer's appeal rights. The notice should include a complete explanation for the denial, instructions on how to submit a written protest and power of attorney information.