How the IRS defines “reasonable cause”

The IRS evaluates reasonable cause on a case-by-case basis: it looks at the taxpayer’s specific circumstances, the reason for the failure to meet a tax obligation, whether the taxpayer made reasonable efforts to comply, and how quickly the taxpayer corrected the error. This standard is explained in IRS Publication 556 and the IRS penalty relief guidance, which emphasize that the agency considers all facts and circumstances when deciding whether to waive penalties (see IRS Publication 556; IRS Penalty Relief page).

In my 15 years helping clients with penalty requests, I’ve learned the IRS focuses on three practical tests: the nature of the problem, what steps the taxpayer took to comply, and how promptly the taxpayer acted once the issue was resolved. Strong documentation and a prior history of compliance materially improve the odds of a favorable outcome.

Sources: IRS Publication 556 (Procedures for Appeals) and IRS penalty relief overview (see https://www.irs.gov/payments/penalty-relief and https://www.irs.gov/pub/irs-pdf/p556.pdf).

Typical penalties that can be abated

The IRS routinely considers waiving or reducing penalties such as:

  • Failure-to-file penalty
  • Failure-to-pay penalty
  • Failure-to-deposit penalties for payroll taxes (in some circumstances)
  • Certain information-return penalties (e.g., late or incorrect 1099 filings) when reasonable cause is shown

Note: Penalty abatement does not always eliminate interest. Interest is statutory and generally continues to accrue on unpaid tax even if penalties are removed. Check Publication 556 for details on interest treatment.

Common, accepted examples that often meet the reasonable-cause standard

Below are examples that frequently persuade the IRS — accompanied by the types of documentation that help prove each claim.

1) Serious medical emergency or hospitalization

  • Why it works: Illness that incapacitates a taxpayer or immediate family member makes timely filing or payment impracticable.
  • Typical evidence: Hospital records, doctor’s letters, medical appointment logs, employer leave records, a timeline showing dates of incapacity.

2) Natural disaster or casualty loss

  • Why it works: Flood, fire, hurricane, or other declared disasters can destroy records and interrupt normal tax processes.
  • Typical evidence: FEMA or state disaster declarations, insurance claim records, photos, police or municipal reports.

3) Death of a close family member

  • Why it works: Grief and estate matters can delay filing or payment.
  • Typical evidence: Death certificate, funeral records, executor correspondence.

4) Erroneous professional advice (reasonable reliance)

  • Why it works: Reasonable reliance on a qualified tax professional can qualify if you can show you provided complete and accurate facts and the advice was incorrect.
  • Typical evidence: Engagement letters, copies of the advice provided, correspondence with the preparer, proof you supplied accurate records.

5) Unreliable or unavailable IRS systems or postal delays

  • Why it works: If you can show you tried to file or pay but IRS e-file systems or postal service failures prevented timely compliance, the IRS may consider relief.
  • Typical evidence: Screenshots of error messages, certified mail receipts, post office delay statements.

6) Theft, loss of records, or identity theft

  • Why it works: Loss of records or identity-theft incidents may make timely filing impossible.
  • Typical evidence: Police reports, identity-theft affidavits, correspondence with financial institutions, IRS identity-theft intake forms.

Real-world examples from practice (anonymized)

  • A client hospitalized for six weeks during tax season missed the payment deadline. We submitted medical documentation and a concise timeline; the IRS abated the failure-to-pay penalty.

  • Another client lost business records in a flood. We supplied state disaster declarations, insurance claims, and a replacement-records timeline; penalty assessments for late filing were removed.

These cases illustrate the consistent theme: credible, dated documentation plus evidence of prior compliance.

How to prepare a strong reasonable-cause request (step-by-step)

  1. Read your IRS notice carefully. Follow any notice-specific instructions for disputing a penalty.

  2. Gather documentation. Create a folder with objective records (medical, legal, insurance, official declarations, employer letters, police reports, screenshots). Include a cover letter that explains the timeline in plain language.

  3. Explain the steps you took to comply. Show you attempted to file or pay when possible, or why you could not.

  4. Show prompt corrective action. If you filed or paid after the event, attach proof of that action and explain why the delay occurred.

  5. Provide a compliance history. If you have a solid record of timely filings and payments for previous years, note this briefly; it strengthens the case.

  6. Submit the request. If you received a penalty notice, respond using the contact method listed on the notice (phone, online account, or written response). Some taxpayers file Form 843 to request abatement or refund of certain civil penalties; others submit a written statement following Publication 556 guidance. When in doubt, respond in writing and keep copies.

  7. Keep records of everything you send. Use certified mail or trackable e-services when possible.

If the IRS denies your request, you can appeal. See the notice for appeal instructions, or consult IRS Publication 5 and Publication 556 for the appeals process.

Where to get help and additional resources

For stepwise guidance on assembling your documentation, see our walkthrough: How to Document Reasonable Cause for Penalty Relief. If you need a sample letter or templates, our resource Templates for Penalty Appeal Letters (Reasonable Cause Examples) includes ready-to-adapt text and checklist items. To build the strongest case structure, review Penalty Abatement Requests: Building a Reasonable Cause Case.

Common pitfalls to avoid

  • Relying on vague explanations without evidence.
  • Waiting too long to respond to a notice or to request relief.
  • Assuming all penalties or interest will be removed (interest usually remains).
  • Failing to provide a clear timeline and documentation demonstrating efforts to comply.

Timeline and expectations

Responses take time. The IRS may take several weeks to several months to process an abatement request depending on the penalty type and complexity. If you filed a written request and don’t hear back within a reasonable period, follow up through the contact listed on your notice or via your IRS online account. Keep a copy of every submission.

Final professional tips

  • Act quickly. The sooner you assemble and submit documentation, the better your chance of convincing the IRS.
  • Be concise and organized. A short cover letter with a clear timeline and labeled exhibits helps the reviewer.
  • Consider professional help. A tax pro can translate complex medical, legal, or business events into the factual narrative the IRS expects.

This article is educational and does not substitute for personalized tax advice. For specific guidance about your situation, consult a licensed tax professional or the Taxpayer Advocate Service. The facts and IRS references here are current to 2025; check the IRS website for updates.