Nicholas Frey

An IRS penalty can substantially increase a taxpayer’s balance, even when the underlying tax is correct. However, certain penalties may be reduced or removed when the taxpayer establishes reasonable cause. Form 843, Claim for Refund and Request for Abatement, provides a way to submit a written request explaining why relief is warranted.

Form 843 can be used to request abatement of certain unpaid penalties or a refund of qualifying penalties already paid. It does not amend an income tax return or replace Form 1040-X when changes to an individual income tax return are needed. Taxpayers should first review their IRS notice because it may provide a different procedure for disputing the charge.

What constitutes reasonable cause?

For failure-to-file and failure-to-pay penalties under Internal Revenue Code §6651, reasonable cause generally requires showing that the taxpayer exercised ordinary business care and prudence but nevertheless could not comply on time. The failure must also be free of willful neglect. In United States v. Boyle, 469 U.S. 241 (1985), the Supreme Court explained this standard and emphasized that the taxpayer bears the burden of establishing entitlement to relief.

Reasonable cause depends on the circumstances surrounding the particular failure. A difficult event does not automatically excuse a missed deadline. The explanation must connect that event to the taxpayer’s inability to file, pay, or otherwise satisfy the applicable obligation. The IRS considers the timing of the event, efforts to comply, and how quickly the taxpayer corrected the failure afterward.

Illness, death, disasters, and unavailable records

Serious illness, hospitalization, or the death of an immediate family member may support relief when the circumstances prevented timely compliance. Similarly, a fire, flood, or other casualty may establish reasonable cause if it destroyed necessary records or disrupted the taxpayer’s ability to meet the deadline. The IRS also considers an inability to obtain necessary records despite reasonable efforts.

For example, an illness-based request should explain when the condition began, how it affected the taxpayer’s ability to manage financial affairs, and when the taxpayer became able to address the obligation. A records-based request should identify the missing documents, why they were unavailable, efforts to obtain or reconstruct them, and why the return could not reasonably be completed without them. Medical records, correspondence, insurance reports, and document requests can help substantiate the explanation.

Reliance on a tax professional

Hiring an accountant or attorney does not automatically establish reasonable cause. In Boyle, the Supreme Court held that relying on an agent to meet a filing deadline generally does not excuse late filing. The Court distinguished that situation from reasonable reliance on substantive tax advice, such as advice that a return was not legally required. The nature of the advice therefore matters: a professional’s failure to submit a return is different from an incorrect legal conclusion about whether filing was necessary.

Financial hardship and inability to pay

Financial hardship may support relief from a failure-to-pay penalty, but lack of money alone is insufficient. Treasury Regulation §301.6651-1(c)(1) requires a showing that the taxpayer exercised ordinary business care and prudence in providing for payment but was nevertheless unable to pay or would suffer undue hardship by paying on the due date. The taxpayer’s income, assets, expenditures, and efforts to preserve funds for taxes are relevant. An inability to pay does not, by itself, excuse failing to file a return.

Preparing a persuasive Form 843 request

A request should identify the tax period, penalty, amount at issue, and applicable Internal Revenue Code section. The explanation should present a clear timeline, describe the circumstances preventing compliance, and identify the actions taken to resolve the problem. Supporting documents should match the explanation. Generally, a separate Form 843 is required for each tax period or type of tax, and claims for refunds of paid penalties must satisfy applicable filing deadlines. Follow the current instructions and any directions in the IRS notice when determining where to submit the request.
Reasonable-cause rules differ by penalty. Accuracy-related penalties and information-return penalties have their own standards, while estimated tax penalties generally require a separate statutory waiver analysis. A request should address the actual penalty assessed rather than assume one explanation applies to every charge.

Finally, penalty abatement generally does not eliminate the underlying tax. The IRS adjusts interest attributable to a penalty that is removed, but reasonable cause ordinarily does not provide an independent basis for removing interest on unpaid tax. Interest abatement for qualifying IRS errors or delays involves separate requirements.