Penalty Abatement: How to Build a Reasonable Cause Request

Introduction

Penalty abatement gives taxpayers a formal way to ask the IRS to remove or reduce penalties when noncompliance was caused by events or circumstances beyond their control. The IRS recognizes two common paths: First-Time Abatement (FTA) for otherwise compliant taxpayers and Reasonable Cause for events that made compliance impossible or impractical (IRS). In my practice helping small businesses and individuals, the strongest requests are short, well-documented, and tied to corrective action taken after the event.

Key IRS standards and options

• First-Time Abatement (FTA): A short-term administrative waiver the IRS may grant if you have a clean penalty history (typically no penalties in the prior three years), filed required returns, and paid or arranged to pay any tax due. (IRS — Penalty Relief)
• Reasonable Cause: You must show you exercised ordinary business care and prudence but were still unable to comply due to circumstances beyond your control (e.g., serious illness, natural disaster, death, unavoidable absence, or reliance on erroneous professional advice). Provide contemporaneous evidence where possible. (IRS; Taxpayer Advocate Service)

Step-by-step: Build a persuasive reasonable cause request

1. Read the notice and follow instructions. The IRS notice you received lists the penalty, the amount, and the address or phone number to respond to. If a notice doesn’t arrive, respond to the IRS office handling the account. Always use the contact or address shown on the notice.

2. Decide which relief applies. Check eligibility for FTA first — it’s faster and often granted when criteria are met. If FTA doesn’t apply, prepare a Reasonable Cause request.

3. Gather supporting documentation. Document everything. Aim for contemporaneous records that connect the event to your missed filing/payment and show you tried to comply:

• Medical records, hospital bills, or physician letters for illness.
• Disaster declarations, FEMA documents, or insurance claims for natural disasters.
• Employer termination letters, payroll records, bank statements for severe financial disruption.
• Proof of mailing, courier tracking, or software error messages showing attempted filing.
• Prior-year tax returns or transcripts demonstrating a history of compliance.

1. Write a focused reasonable cause letter. Keep it concise (one to two pages) and structured:

• Opening: Identify taxpayer name, SSN or EIN, tax year(s), and notice number.
• Facts and timeline: State what happened, when, and how it prevented compliance.
• Actions taken: Show efforts to comply (calls, attempted payments, return preparation) and any corrective steps (filed late return, set up installment agreement).
• Attachments: List documents attached that corroborate your claim.
• Closing: Request abatement of the specific penalty(ies) and include contact info.

Sample sentences you can adapt:

• “Between March 3 and April 20, 2024, I was hospitalized with [condition]. Attached are hospital discharge papers and physician notes showing I was incapacitated and unable to sign or submit the return.”
• “My business lost records in the [Date] flood; attached FEMA incident number and insurance claim. We filed as soon as records were reconstructed.”

1. Include corrective steps and proof of compliance. The IRS prefers that taxpayers show they have since met filing or payment obligations (filed the return, entered an installment agreement, or otherwise remedied the default).

2. Submit the request correctly and promptly. Ways to submit:

• Follow the instructions on your IRS notice (mail address or phone number).
• If you have an online IRS account, some penalty issues can be addressed there — check the notice for options.
• A tax professional can request relief on your behalf via practitioner channels.
  Note: Specific forms (for example, Form 843) are sometimes used for certain penalty or refund claims — check current IRS instructions or consult a tax professional before filing a form-based claim.

1. Track the request and be ready to appeal. Keep copies of everything. If denied, you can appeal the decision through the IRS Office of Appeals or seek help from the Taxpayer Advocate Service when appropriate (Taxpayer Advocate Service).

Evidence checklist (quick reference)

Common mistakes to avoid

• Vague explanations: Don’t say “I had a bad year.” Be specific about dates and effects.
• No documentation: Unsupported claims are commonly denied.
• Waiting too long: Submit as soon as possible after receiving notice; earlier is better.
• Confusing penalties and interest: Abatement can remove penalties but does not always remove interest — interest generally continues to accrue until tax is paid.

Real-world note from practice

In one case I handled, a client faced a large failure-to-file penalty after a sudden hospitalization. By pairing medical records with electronic evidence showing a tax-preparer engagement and the return’s later filing, we obtained substantial abatement. The decisive elements were the timeline and proof of both incapacity and an attempt to comply.

Where to learn more and templates

• For a sample letter and formatting tips, see our Preparing a Reasonable Cause Letter for Penalty Abatement: Sample Template. (https://finhelp.io/glossary/preparing-a-reasonable-cause-letter-for-penalty-abatement-sample-template/)
• For a checklist of evidence that helps win abatement, read How to Get a Penalty Abatement for Reasonable Cause: Evidence Checklist. (https://finhelp.io/glossary/how-to-get-a-penalty-abatement-for-reasonable-cause-evidence-checklist/)
• If your case involves a natural disaster, consult Penalty Abatement for Natural Disasters: Evidence and Process. (https://finhelp.io/glossary/penalty-abatement-for-natural-disasters-evidence-and-process/)

Authority and timing

This guidance follows current IRS penalty relief policies and Taxpayer Advocate Service recommendations as reflected on IRS.gov and TAS resources (IRS; Taxpayer Advocate Service). Rules and form names can change — confirm specific filing instructions on the notice you received or at IRS.gov before sending documents.

Professional disclaimer

This article is educational and does not substitute for individualized tax advice. For complex or high-dollar penalty disputes, consult a licensed tax professional, CPA, or tax attorney to evaluate strategy and represent you with the IRS.

Further reading

• IRS — Penalty Relief (search “IRS penalty relief” on IRS.gov)
• Taxpayer Advocate Service — guidance on reasonable cause and taxpayer rights