Why documentation matters

When the IRS assesses penalties (late filing, failure to pay, or late deposit penalties), it presumes a taxpayer’s noncompliance is due to negligence or disregard for rules. Reasonable cause is the exception: it shows that despite reasonable efforts to comply, circumstances prevented you from meeting obligations. The IRS evaluates each case on its facts and may abate penalties when adequate proof is provided (IRS: Penalty Relief).

In my 15 years of client work I’ve found that well‑organized evidence and a short, fact‑based letter often decide the case long before an appeal. The goal is not to persuade emotionally but to document objectively: what happened, why it prevented timely compliance, and what you did to try to comply.

(Authoritative source: IRS — Penalty Relief and How to Ask for Penalty Relief: https://www.irs.gov/individuals/penalty-relief and https://www.irs.gov/individuals/how-to-ask-for-penalty-relief.)

Who can use reasonable cause

Individuals, business owners, estates, and other taxpayers can request reasonable‑cause relief for most penalties. The IRS considers the nature of the event, whether it was beyond the taxpayer’s control, whether the taxpayer exercised ordinary business care and prudence, and whether reasonable steps to comply were taken.

See related guidance on requesting abatement for first‑time penalties and other relief options: How to Request Penalty Abatement for First‑Time Penalty Relief and for disaster situations, review Penalty Relief After Disasters and Hardship: What Evidence the IRS Wants.

What types of events qualify as reasonable cause

Common qualifying events (not exhaustive):

  • Serious illness or hospitalization (taxpayer or immediate family member)
  • Natural disasters or federally declared disasters (use FEMA or federal disaster declarations)
  • Death in the family with accompanying duties (funeral, estate matters)
  • Fire, theft, casualty with supporting police or insurance reports
  • Erroneous written advice from a tax professional on a clearly defined issue
  • Unavoidable absence or long‑term disability that prevented filing or payment

The IRS also considers partial compliance and whether the taxpayer made good‑faith efforts to file or pay after the event.

Evidence checklist: what to gather

Assemble a single packet (physical or electronic) with these items as applicable. Organize chronologically and label every document.

  • Timeline of events (one page): dates and a brief description of what happened and how each item affected your ability to comply.
  • Copy of penalty notice(s) and IRS correspondence (include notice numbers and dates).
  • Proof of identity and tax returns for the year(s) in question.
  • Medical records and hospital discharge summaries (redact irrelevant PHI).
  • Death certificate and obituary for family‑death claims.
  • Police reports, fire department reports, insurance claims, repair estimates, or contractor bills for casualty/theft events.
  • FEMA or federal disaster declarations and insurance denial or payment records for disaster relief claims.
  • Proof of timely attempts to file or pay (screenshot of e‑file attempt, canceled check, bank ACH records, proof of courier delivery, or postmark).
  • Communication records with tax professionals: engagement letters, emails, written advice, appointment logs, and invoices.
  • Business records showing interruption (payroll records, contracts, client cancellations).
  • Bank statements, canceled checks, or other financial documents showing inability to pay.
  • Court records or summons, if a legal action prevented compliance.

Always provide originals when the IRS requests them; otherwise include clear copies. Create a numbered exhibit list for easy reference in your reasonable‑cause letter.

How to write a concise reasonable‑cause letter (structure and sample phrasing)

Keep the letter factual, numbered, and no longer than 1–2 pages when possible. Attach exhibits and reference them.

Suggested structure:

  1. Header: taxpayer name, SSN or EIN (last 4 digits only if sending publicly), tax year(s), notice numbers.
  2. Short opening: one sentence stating you are requesting penalty relief based on reasonable cause.
  3. Chronological facts and timeline: numbered paragraphs (“On MM/DD/YYYY …”).
  4. Explanation of why each fact prevented timely compliance and what you did to try to comply.
  5. List of attached exhibits with short descriptions (Exhibit 1 — hospital discharge, Exhibit 2 — proof of payment).
  6. Closing statement of good faith and request for abatement of specified penalties.
  7. Signature, printed name, daytime phone number, and taxpayer’s mailing address.

Sample phrasing: “On 06/01/20XX I was hospitalized for X (Exhibit 1). Medical records show I was unable to manage my tax matters until 07/15/20XX. I timely engaged an enrolled agent on 07/20/20XX (Exhibit 3) to prepare returns. I respectfully request abatement of the late‑filing penalty for tax year 20XX because these circumstances were beyond my control and I acted reasonably under the circumstances.”

For more detailed examples focused on language and formatting, see our guide on Crafting a Convincing Reasonable Cause Letter for Penalty Relief.

Filing and timing considerations

  • Follow instructions and deadlines on the IRS notice. Some notices provide appeal rights with specific time windows (for example appeals for collection notices). If a notice requires a response within a stated period, respond within that period.
  • There is no universal 60‑day limit for all penalty relief requests. Do not rely on a single timeframe—follow the notice and act promptly. (IRS guidance: How to Ask for Penalty Relief.)
  • Send the packet to the address on the notice or call the notice phone number first if the issue can be resolved by phone. Retain delivery proof (certified mail receipt or tracking number).

Common mistakes to avoid

  • Submitting vague statements without supporting exhibits.
  • Waiting too long to respond or to assemble records.
  • Relying solely on verbal explanations; everything relevant should be documented in writing.
  • Failing to show good‑faith efforts to comply (examples: attempting to file on time, attempting to pay, engaging help promptly).

If the IRS denies your request

  • Request a written explanation of the denial and review it closely.
  • You can appeal denials through the IRS Office of Appeals when appeal rights are provided, or file a Collection Due Process hearing if collections actions follow.
  • Consider hiring a tax attorney, CPA, or enrolled agent experienced in penalty abatement appeals. In my experience, additional documented facts—especially contemporaneous records—strengthen appeals.

Related articles on appeals and alternative relief: Understanding IRS Penalty Relief Programs: Streamlined and Reasonable Cause and Common Penalty Relief Options and How to Request Them.

Practical tips from practice

  • Build the timeline first—this will guide which documents you need.
  • Label exhibits and refer to them in the letter. The IRS reviewer reads many cases; make theirs easy.
  • If relying on a tax professional’s advice, have that person provide a brief signed statement describing the advice and the basis for it.
  • Redact unrelated medical details and maintain privacy when mailing copies.

FAQs (short answers)

  • How do I start? Gather notices, make a one‑page timeline, and list exhibits. Draft a short letter referencing exhibits and send copies to the IRS address shown on your notice.
  • Can I apply for multiple penalties in one packet? Yes—explain each penalty and attach supporting exhibits for each.
  • Will I always get relief if I have good evidence? Not always—the IRS has discretion. Strong contemporaneous records and evidence of good faith raise your chances.

Professional disclaimer

This article is educational and based on general IRS guidance and professional experience. It is not tax advice for your specific situation. Consult a qualified tax professional or attorney for tailored guidance. Authoritative IRS resources: “Penalty Relief” and “How to Ask for Penalty Relief” (https://www.irs.gov/individuals/penalty-relief; https://www.irs.gov/individuals/how-to-ask-for-penalty-relief). Additional professional commentary available from AICPA guidance and state CPA societies.

Final checklist before you send

  • One‑page timeline and concise reasonable‑cause letter.
  • Numbered exhibits with a table of contents.
  • Copies (keep originals unless specifically asked).
  • Proof of delivery.
  • Contact info for your preparer, if any.

Clear organization and objective evidence matter more than persuasive prose. If you prepare a focused packet and make the IRS reviewer’s job easy, your request has a much better chance of success.