The standard
IRM 20.1.1.3.2 states the rule in one sentence: “Reasonable cause relief is generally granted when the taxpayer exercised ordinary business care and prudence in determining their tax obligations but was nevertheless unable to comply with those obligations.” Ordinary business care and prudence “includes making provisions for business obligations to be met when reasonably foreseeable events occur” (IRM 20.1.1.3.2.2).
For the failure-to-file and failure-to-pay additions, Treas. Reg. 301.6651-1(c)(1) adds a form requirement: the taxpayer must make “an affirmative showing of all facts alleged as a reasonable cause” in a written statement containing a declaration that it is made under penalties of perjury. The IRM confirms that the list of acceptable explanations is open: relief may rest on an “other acceptable explanation” if the care-and-prudence test is met. And reasonable cause is relief of last resort in the IRS's order: correction of IRS error, statutory exceptions and administrative waivers such as First Time Abate are considered first (IRM 20.1.1.3).
Two limits matter at the outset. Reasonable cause is “not available for all penalties”, and some Code sections add further elements, such as good faith or the absence of willful neglect. And it has an end date: reasonable cause “does not exist if after the facts and circumstances that explain the taxpayer’s noncompliant behavior cease to exist, the taxpayer fails to comply with the tax obligation within a reasonable period of time.”
The five questions the IRS asks
IRM 20.1.1.3.2(8) tells employees to consider these questions. A reasonable cause statement should answer each one with dates.
- What happened and when did it happen?
- During the period of noncompliance, what facts and circumstances prevented the taxpayer from filing, paying or otherwise complying?
- How did those facts and circumstances result in the failure?
- How did the taxpayer handle the remainder of their affairs during this time?
- Once the facts and circumstances changed, what attempt did the taxpayer make to comply?
The fourth question is the one most statements skip. A client who was too ill to file but kept running a business and paying other bills will have a hard time explaining why the return was different.
Factors the reviewer weighs
| Factor | What IRM 20.1.1.3.2.2 says to look at |
|---|---|
| Taxpayer's reason | Whether the reason addresses the penalty imposed, and whether the dates and explanations correspond with the events on which the penalty is based. |
| Compliance history | At least the three preceding years. The same penalty in the history may show a lack of ordinary care. A first failure counts in the client's favor, but “a first-time failure to comply does not by itself establish reasonable cause.” |
| Length of time | The gap between the event and compliance: when the act was due, how long the client could not comply, and when the client did comply. |
| Circumstances beyond control | Whether the client could have anticipated the event. The obligation is ongoing, so the client must keep trying to comply, even though late. |
IRM 20.1.1.3.5 gives two examples of timing that defeats relief: a death several months before the due date with the return filed a year late, and records returned by a third party well before the due date with the return filed months later.
Reasons that can work
| Reason | IRM cite | What the IRS will want |
|---|---|---|
| Death, serious illness or unavoidable absence of the taxpayer, or death or serious illness in the immediate family (spouse, sibling, parents, grandparents, children) | 20.1.1.3.2.2.1 | Relationship, dates of death or illness, duration and severity, how it prevented compliance, whether other obligations were impaired, and prompt compliance afterward. For an entity, whether the person had sole authority to act. |
| Fire, casualty, natural disaster or other disturbance | 20.1.1.3.2.2.2 | Timing, effect on the business, steps taken, compliance when possible. Check first whether the client was an affected taxpayer under a disaster postponement. |
| Unable to obtain records | 20.1.1.3.2.2.3 | Why the records were needed and unavailable, steps taken, why the client did not estimate, whether the IRS was contacted, prompt filing once received, copies of letters. |
| Erroneous advice (IRS or advisor) | 20.1.1.3.2.2.5 | The advice itself and what the client provided. See erroneous IRS advice. |
| Inaccessible notices (disability) | 20.1.1.3.2.2.8 | Description of the impairment, when the notice was received, prior knowledge of the balance, prompt response once an accessible notice arrived. |
| Undue hardship (failure to pay) | 20.1.1.3.3.3 | When the client knew they could not pay, why, other means explored, bank statements, payment when funds became available. |
For disasters, relief often comes systemically through a postponement rather than a reasonable cause request; see penalty relief and disaster postponements.
Reasons that usually fail
Mistake. A claim that a mistake was made “is not in keeping with the ordinary business care and prudence standard and does not provide a basis for reasonable cause”, though the reason for the mistake can support other facts (IRM 20.1.1.3.2.2.4).
Forgetfulness, and reliance on someone else to file or pay. IRM 20.1.1.3.2.2.7 says relying on another person “is generally not sufficient” and that the responsibility to file and pay “cannot be delegated.” The case law behind that rule, and the different treatment of reliance on substantive advice, is set out in the reliance section below.
Ignorance of the law. Works only with other facts: education, prior exposure to the tax, prior penalties, recent changes the client could not be expected to know, and complexity. “Reasonable cause should never be presumed, even in cases where ignorance of the law is claimed” (IRM 20.1.1.3.2.2.6).
Lack of funds. For failure to pay, “Insufficient funds generally is not reasonable cause for failure to pay unless the funds were depleted due to unusual or unforeseen circumstances” (IRM 20.1.2.2.4.1). Treas. Reg. 301.6651-1(c)(1) says lavish or extravagant living expenses, or speculative or illiquid investments made without enough left to pay the tax, show a lack of ordinary care. It does not help on a failure to file, because hardship “generally does not affect a person’s ability to file” (IRM 20.1.1.3.3.3). And undue hardship does not support relief from the trust fund recovery penalty under IRC 6672 (IRM 20.1.1.3.3.3).
Reliance on an advisor: Boyle and Neonatology
Filing and paying deadlines: Boyle. In United States v. Boyle, 469 U.S. 241 (1985), an executor hired an attorney to handle the estate and relied on him to file the estate tax return; the attorney missed the deadline. The Supreme Court held that the failure to file on time is not excused by reliance on an agent and that such reliance is not reasonable cause under IRC 6651(a)(1). The Court's reasoning is the sentence the IRS quotes back to practitioners: it “requires no special training or effort to ascertain a deadline and make sure that it is met.” Boyle also preserved the other side of the line: the Court noted that courts have frequently found reasonable cause where a taxpayer reasonably relied on an accountant's or attorney's advice that it was unnecessary to file a return, even when the advice was wrong. The IRM's own example is an employer that gave an advisor full facts about its workers and was told they were contractors (IRM 20.1.1.3.3.4.3).
Two e-filing cases test whether Boyle still controls when the preparer, not the client, transmits the return. In Haynes v. United States, 760 F. App'x 324 (5th Cir. 2019) (unpublished), the preparer e-filed the return on the last day of the extension, the IRS rejected it over a misplaced Social Security number, and neither the preparer nor the taxpayers learned of the rejection for ten months; the Fifth Circuit vacated summary judgment for the government on a disputed fact question and expressly declined to decide whether Boyle extends to e-filing. In Intress v. United States, No. 3:18-cv-00851 (M.D. Tenn. Aug. 2, 2019), the preparer failed to hit send on an extension; the district court held that Boyle applies to e-filed returns because the taxpayer is never obligated to use a preparer and so the duty to meet the deadline remains the taxpayer's, and dismissed the refund suit. Until an appellate court holds otherwise, a statement that blames the preparer's transmission failure should be built on other facts as well.
Substantive advice: the three-prong test. For the accuracy-related penalty, Treas. Reg. 1.6664-4(c)(1) says all facts and circumstances determine whether reliance on advice was reasonable and in good faith, that the advice must be based on all pertinent facts and the law, and that reliance is not reasonable if the taxpayer knew or should have known the advisor lacked knowledge of the relevant tax law. The Tax Court turned that into a test in Neonatology Associates, P.A. v. Commissioner, 115 T.C. 43 (2000), aff'd 299 F.3d 221 (3d Cir. 2002): to negate the IRC 6662(a) penalty through reliance, the taxpayer must prove “(1) The adviser was a competent professional who had sufficient expertise to justify reliance, (2) the taxpayer provided necessary and accurate information to the adviser, and (3) the taxpayer actually relied in good faith on the adviser’s judgment.” The taxpayers there lost on every prong because their only advisor was the insurance agent selling the arrangement, who was not a tax professional and stood to profit from it. The Third Circuit affirmed, adding that reliance must be objectively reasonable: the taxpayer must have given the professional all the information needed, and the professional must not have a conflict of interest or lack of expertise the taxpayer knew of or should have known about. Build the statement around the three prongs, and document each: the advisor's credentials, exactly what was given to the advisor and when, and the written advice received.
The standard by penalty
| Penalty | Relief standard | Source |
|---|---|---|
| Failure to file, failure to pay (IRC 6651) | Reasonable cause and not due to willful neglect | IRC 6651(a); Treas. Reg. 301.6651-1(c) |
| Accuracy-related (IRC 6662) and civil fraud (IRC 6663) | Reasonable cause and good faith, with exceptions | IRC 6664(c); Treas. Reg. 1.6664-4 |
| Estimated tax, individuals (IRC 6654) | No reasonable cause defense; statutory waivers for casualty or unusual circumstances, and for retirement after 62 or disability plus reasonable cause | IRC 6654(e)(3); IRM 20.1.3.2.7.1 |
| Estimated tax, corporations (IRC 6655) | No reasonable cause defense | IRM 20.1.3.4.2 |
| Failure to deposit (IRC 6656) | Reasonable cause and not willful neglect; separately, IRC 6656(c) lets the IRS waive the penalty for an inadvertent failure in the first quarter a small employer had to deposit, or the first deposit after a required change in deposit frequency, if the return was filed on time | IRC 6656(a), (c); see failure-to-deposit penalty |
| Late or incomplete partnership and S corporation returns (IRC 6698, 6699) | Reasonable cause; for partnerships of 10 or fewer qualifying partners, Rev. Proc. 84-35 presumes reasonable cause if every partner reported their share on a timely return | IRC 6698(a), 6699(a); see Rev. Proc. 84-35 |
| International information returns (Forms 5471, 8938, 3520) | IRC 6038D(g) and 6677(d) excuse a failure shown to be due to reasonable cause and not willful neglect, and both add that a foreign law penalty for disclosing the information is not reasonable cause; IRC 6038(c)(4)(B) treats the filing deadline as not earlier than the last day reasonable cause existed. FTA never applies to these forms | IRC 6038(c)(4)(B), 6038D(g), 6677(d); see international information return penalties |
| Information returns (IRC 6721, 6722) | Reasonable cause and not willful neglect | IRC 6724(a); Treas. Reg. 301.6724-1 |
For failure to file, abatement does not depend on payment: the penalty “can be abated for reasonable cause regardless of payment of tax” (IRM 20.1.2.2.4.1). For failure to pay, the determination is made separately for each assessment (tax shown on the return, math error, amended return, deficiency). For the accuracy-related penalty, the most important factor is the client's effort to report the proper liability; see the accuracy-related penalty. For information return penalties, TIN Comply's reference site covers Treas. Reg. 301.6724-1.
Building the statement
IRM 20.1.1.3.5 says the request must identify the penalty or penalties and address each, “since each penalty is for a different type of failure.” It also says “The burden of proving entitlement to relief is generally upon the taxpayer.” Practical rules that follow from the IRM:
- Write a timeline that runs from before the due date to the date of compliance, with the event and each step dated.
- Answer the five questions above, including how the client handled other affairs.
- Attach evidence that matches the dates: hospital records, death certificate, insurance or fire reports, letters requesting records.
- Include the penalties of perjury declaration Treas. Reg. 301.6651-1(c)(1) requires for failure-to-file and failure-to-pay relief, and have the client sign.
- Where the penalty is small, an oral request may be enough; above the redacted oral statement thresholds in IRM 20.1.1.3.1 the IRS needs a signed written statement, and any penalty other than failure to file, pay or deposit always does.
The reasonable cause letter template follows this structure, and how to write a penalty abatement request covers channels and attachments.
One sequencing consequence: because IRM 20.1.1.3.3.2.1 requires the IRS to apply First Time Abate before reasonable cause whenever the criteria are met, a strong reasonable cause statement on a first failure uses up the one-time waiver rather than preserving it, and the client is told the penalty was removed for compliance history, not for the reasons given.
How and when to request it
IRM 20.1.1.4 says a taxpayer may contest a penalty at any stage: before assessment (for example in an examination or deficiency case), after assessment and before or after payment, or by claim for refund after payment. Three timing rules follow.
- Unpaid penalty. A written request can be sent at any time while the penalty is outstanding, in response to the notice or on Form 843. IRM 20.1.1.4.1.2 says a request for post-assessment abatement must be in writing, and an oral request is answered by asking for a written one; the oral statement thresholds in IRM 20.1.1.3.1 are the exception for small failure-to-file, pay and deposit penalties.
- Paid penalty. Once the penalty is paid, the request is a claim for refund and must meet IRC 6511(a): filed within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever is later. The Form 843 instructions repeat the deadline. A late claim leaves nothing to abate; see refund claims for paid penalties.
- Denied request. IRM 20.1.1.3.5.3 requires a written denial with the basis and the appeal procedures, usually Letter 854C (Letters 852C and 853C when the Reasonable Cause Assistant was used). The IRS's penalty appeal page says the appeal request is generally due 30 days from the date of the rejection letter; use the date on the letter. A paid and denied penalty can also go to court as a refund suit after the claim is disallowed; see refund claims and suits.
The Reasonable Cause Assistant. For individual failure-to-file and failure-to-pay penalties and for employment tax deposit penalties on Forms 941, 940, 943, 944 and 945, IRM 20.1.1.3.6 requires the employee to run the request through the Reasonable Cause Assistant (RCA), a decision-support program reached through the Account Management Services desktop, after normal account research. The IRM is explicit that the software does not make the decision: users “are responsible for making final approval concerning the RCA penalty relief determination and to verify all reasons given by the taxpayer are addressed.” IRM 20.1.1.3.6.10.1 gives the employee an override when the facts are ones RCA cannot consider; the employee must verify every applicable reasonable cause category was selected and the dates were entered correctly, document why the RCA conclusion is wrong, cite the IRM 20.1.1.3.2 provision relied on, and managerial approval “is not required but is recommended.” When a phone denial reads like a form letter, ask the assistor whether each reason in the statement was entered as a category, and ask for a manual review of facts the program cannot score.
After a decision
If relief is granted, the IRS abates the penalty with reason code 062 and a penalty reason code; for failure to pay, the abatement covers the full related penalty, including accruals not yet assessed (IRM 20.1.2.2.4.1). If it is denied, the IRS must give written notice with appeal rights, usually Letter 854C (IRM 20.1.1.3.5.3). A new request with new facts is reconsidered; the same facts again are not, unless the client asks for Appeals (IRM 20.1.1.3.5.1). See appealing a denial.
Transition to Automatic Exemption from Penalty. The IRS First Time Abate page (reviewed October 2026) says FTA “is transitioning to a new relief called Automatic Exemption from Penalty (AEP), starting Summer 2026”. For Forms 1040, 1065 and 1120, Forms 940 through 945 and Form CT-1, beginning with 2025 tax year returns and 2026 quarterly returns, AEP is applied when the original return completes processing: with three prior years (or 12 consecutive quarters) of timely filing and payment, “The IRS won’t assess penalties for failure to file, failure to pay, or failure to make a deposit” and sends a letter saying the relief was applied; “You don’t need to contact the IRS or respond to the notice.” FTA continues to apply to earlier periods and to returns AEP does not cover, and the page says to contact the IRS if a penalty was assessed that should have qualified. See First Time Abate.
Questions practitioners ask
Is a first-time failure enough for reasonable cause?
No. The IRM says a first-time failure does not by itself establish reasonable cause, though it is weighed with the other reasons given. A clean history can qualify the client for First Time Abate, which is a separate administrative waiver.
My client relied on their CPA to file the return. Is that reasonable cause?
Generally not for filing or paying. The IRM says the duty to file and pay cannot be delegated and relying on another person is generally not sufficient. Reliance on substantive advice on a technical issue, given full facts, is treated differently, mainly for the accuracy-related penalty under Treas. Reg. 1.6664-4(c).
Does inability to pay excuse the failure-to-pay penalty?
Only if the client exercised ordinary business care and prudence in providing for payment and either could not pay or would suffer undue hardship, as Treas. Reg. 301.6651-1(c)(1) puts it. The IRM gives medical expenses and forced sales below fair market value as examples of significant hardship.
Can reasonable cause remove an estimated tax penalty?
Not on its own. IRM 20.1.3.2.7.1 says the penalty cannot be removed or waived for reasonable cause alone. Individuals may qualify for the IRC 6654(e)(3) waivers; corporations have no reasonable cause relief under IRC 6655.
How long after the event does the client have to comply?
The IRM does not set a number of days. It says reasonable cause ends if the client fails to comply within a reasonable period after the circumstances end, and it treats long gaps between the event and compliance as cutting against relief.
Does the IRS have to consider a request sent without a power of attorney?
IRM 20.1.1.3 says the IRS will consider requests from third parties, including representatives without an authorized power of attorney, but will not discuss taxpayer information without written authorization and will tell the taxpayer about the request.