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Showing a reasonable cause could qualify a person for tax penalty relief

Last week on this blog, we talked about First Time Penalty Abatement relief. As one can see in our discussion in that post, that type of Internal Revenue Service tax penalty relief is aimed towards a very particular set of circumstances. The tax penalty relief type that we will be discussing today, reasonable cause relief, can cover a wide range of different types of circumstances.

This type of relief is relief that the IRS may grant when it finds that a reasonable cause was present that resulted in the tax violation the tax penalty is connected to happening despite the taxpayer engaging in proper reasonable efforts to stay in line with their tax obligations. Many different kinds of things could potentially constitute a reasonable cause (such as things involving emergencies, disasters, incapacity, illness, deaths or record access problems). Lack of funds to pay taxes, on its own, does not constitute a reasonable cause, but the underlying circumstances that caused the lack of funds could, depending on the circumstances.

When determining whether a reasonable cause was present that would qualify a person for reasonable cause relief, the IRS looks at all relevant facts and circumstances. So, there might be quite a bit of documentation a person might need to present in their efforts to seek out this type of tax penalty relief, with what specific types of documents they would need depending on the type of reasonable cause they are arguing was present. So, challenging documentation issues can come up in connection to requests for this kind of tax penalty relief.

As this shows, each potential tax penalty relief option can have its own particular set of challenges related to it. Reasonable cause tax penalty relief also illustrates that there are a wide range of different circumstances that can impact what the legal situation is of a person who is facing a tax problem. Tax penalty attorneys can advise individuals on what particular legal options they have and what particular issues are present in regards to a tax problem they are facing, given the unique circumstances of their situation.

Source: Internal Revenue Service, "Penalty Relief Due to Reasonable Cause," Accessed May 13, 2016

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