Penalty Relief After a Hospitalization: Building a Reasonable Cause Argument

Overview

A hospitalization can be a valid basis for asking the IRS to remove penalties if you missed a tax filing or payment deadline. The IRS evaluates “reasonable cause” on a case‑by‑case basis and looks for documentation that your medical condition directly prevented you from meeting tax obligations. This article walks through the evidence to gather, how to structure your argument, what to expect from the IRS, and practical tips I use when helping clients build these requests.

In my practice working with taxpayers after serious medical events, the key difference between a denied and an approved request is documentation plus a clear timeline showing how the health event disrupted tax tasks.

Why the IRS may consider hospitalization a reasonable cause

The IRS recognizes that unforeseen events—like serious illness, incapacitation, or extended hospital stays—can make it impractical or impossible to meet tax deadlines. The agency’s penalty relief guidance explains that reasonable cause exists when a taxpayer exercised ordinary business care and prudence but was still unable to comply (see IRS: Penalty Relief and First‑Time Penalty Abatement pages) (https://www.irs.gov/individuals/penalty-relief; https://www.irs.gov/individuals/first-time-penalty-abatement).

Two common paths for relief are:

• A reasonable cause waiver based on the specifics of the medical event; and
• First‑Time Penalty Abatement (FTPA) if you otherwise meet the eligibility criteria for a single penalty waiver.

If your case is medical‑related and you have a pattern of compliance, either route may be appropriate. For background on general penalty abatement steps and evidence expectations, see our related guide: Penalty Abatement: When and How to Request Relief.

Evidence checklist: what to collect

The IRS does not require a specific form for a reasonable cause request, but it will expect credible documentation. Gather the following items where applicable:

• Hospital and discharge records that show admission and release dates.
• Physician notes or letters describing the diagnosis, treatment, and functional limitations during the tax deadline window.
• Medical bills or insurance claim statements corroborating dates and services.
• A clear timeline mapping the hospitalization or incapacitation to the tax deadline(s) missed. Include dates when you were physically or mentally unable to prepare paperwork.
• Proof of attempts to comply, if any (e.g., partial payments, drafts, emails to tax preparers, missing documents you were waiting on).
• Power of attorney or evidence that a caregiver attempted to act on your behalf but was unable to complete filing or payment.
• Any official documentation showing you were unreachable (e.g., inpatient phone records, family statements).

Tip from practice: a succinct physician letter that states you were incapacitated for the relevant dates and unable to manage finances carries weight. It doesn’t need clinical detail beyond what supports incapacity.

How to prepare the reasonable cause letter

Write a one‑page letter addressed to the IRS that explains, plainly and chronologically, why the hospitalization prevented timely filing or payment. Key elements to include:

1. Taxpayer identifying information (name, SSN/ITIN, tax year, IRS notice number if applicable).
2. Exact deadlines you missed (e.g., tax return due April 15, 20XX; payment due April 15, 20XX).
3. A short, factual narrative of the medical event (dates of admission, surgery, recovery; who provided care).
4. The specific ways the event prevented compliance (e.g., incapacitation, lack of access to records, caregiver duties).
5. List of enclosed evidence (hospital records, physician letter, bills, proof of partial payment).
6. A short closing statement requesting penalty relief under reasonable cause and offering to provide additional documentation.

Example opening lines (concise):

I am requesting abatement of penalties assessed for Tax Year 20XX. I was admitted to [Hospital Name] on [date] for [general description: e.g., major surgery] and was discharged on [date]. During the period of [dates], I was physically unable to prepare my return or authorize payment.

Avoid over‑sharing sensitive clinical detail—describe incapacity only to the degree needed to support your claim.

Filing the request: steps and tips

1. Respond to the IRS notice: If you received a penalty notice, follow the instructions and include your reasonable cause letter and documents. Use the notice return address or fax number provided.
2. If no notice, send a written request (include tax year and SSN/ITIN) to the IRS address where you file returns or the address shown on other IRS correspondence.
3. If you have a representative, file Form 2848 (Power of Attorney) so the IRS can discuss your case with them.
4. Keep copies of everything sent and use certified mail or a trackable delivery method.

If your case involves an assessed penalty shown in your IRS online account, the IRS may allow an online response in some cases—but mailed supporting documentation is still common.

For detailed, step‑by‑step instructions on evidence and timing, see our companion piece: How to Request Penalty Abatement: Evidence, Forms, and Timing.

What the IRS will consider when reviewing reasonable cause

The IRS typically looks for:

• A clear causal link between the medical event and the failure to comply.
• Documentation that you exercised due diligence both before and after the event (for example, attempting to file or to pay as soon as reasonably possible).
• Whether the taxpayer had previously established a pattern of compliance.

The IRS will not grant relief simply because you were sick—your evidence must show the illness made compliance impracticable.

If your request is denied: appeals and next steps

If denied, you can appeal the decision. The IRS denial letter will explain your appeal rights and timelines. Typical next steps:

• File an appeal with the IRS Office of Appeals as described in the denial notice.
• Provide additional supporting documentation or clarifications that address the denial reasons.
• Consider seeking help from a tax professional or an enrolled agent experienced in penalty abatements.

Keep in mind that appeals can take weeks to months. Maintain organized records and be responsive to any IRS requests for more information.

Common mistakes to avoid

• Sending incomplete or anecdotal evidence without medical documentation.
• Waiting too long to make the request; file as soon as you are able.
• Providing an emotional narrative without a clear timeline or causal link.
• Assuming all penalties will be waived; the IRS evaluates each penalty separately (failure to file vs. failure to pay).

Privacy and HIPAA considerations

You are not required to submit complete medical charts. A physician’s letter or discharge summary that confirms dates and incapacity is generally sufficient. If you’re concerned about privacy, redact unnecessary medical details while keeping dates and incapacity language intact.

Timelines and expectations

Response times vary. You should generally expect several weeks for an initial review; complex cases or appeals take longer. Keep monitoring your IRS account and any mailed correspondence. If penalties are abated, the IRS will notify you and adjust your account balance.

Practical examples (short)

• Major surgery two weeks before filing deadline: Approved when the taxpayer supplied hospital admission/discharge records and a physician letter showing recovery prevented tax preparation.
• Caregiving for hospitalized spouse: Approved when nurse/physician notes and caregiver statements showed incapacity to manage finances for the household during the deadline window.

These examples reflect typical outcomes I’ve seen when documentation is clear and the timeline is persuasive.

When to get professional help

Hire a tax professional if you:

• Face multiple tax years with penalties.
• Receive a denial and plan to appeal.
• Are unsure how to redact medical records while preserving necessary facts.

A licensed tax pro or enrolled agent can draft the reasonable cause letter and package the supporting evidence to maximize clarity and compliance with IRS expectations.

Sources and further reading

• IRS — Penalty Relief (includes reasonable cause and administrative relief): https://www.irs.gov/individuals/penalty-relief
• IRS — First‑Time Penalty Abatement (FTPA): https://www.irs.gov/individuals/first-time-penalty-abatement

For related guidance on reasonable‑cause standards at FinHelp, see: Reasonable Cause for Penalty Relief and Penalty Abatement: When and How to Request Relief.

Professional disclaimer: This article is educational and reflects general practices as of 2025. It is not tax advice for specific situations. Consult a licensed tax professional or attorney for guidance tailored to your case.