Are you facing massive penalties associated with your tax liability? The Internal Revenue Code provides certain limitations on when the IRS may charge penalties and other additions to tax. The policy behind penalties is to encourage voluntary compliance with the tax code. Therefore, many of the provisions of the law that authorize the IRS to assess penalties include an exception when a taxpayer can show a “reasonable cause” for failing to comply with the tax requirements. For instance, IRC § 6651(a)(1) provides for an addition to the tax when a taxpayer fails to file on time. However, that same provision states that there will be an addition to the tax “unless it is shown that such failure is due to reasonable cause and not due to willful neglect.”
The question as to what constitutes “reasonable cause” involves convoluted legal standards and depends on the unique facts of each case. Factors such as financial hardship, reliance on faulty advice, ignorance of the law, coping with a major disaster, and serious medical conditions can all serve as the foundation for a request for the removal of penalties. Additionally, there are certain procedures to appeal unfavorable determinations. When we meet with you, we can help you identify which penalties may be abated and advise you as to the best way to seek a removal of those penalties. If you have been assessed penalties related to your tax liability, call us today to set up an initial consultation.