Misplaced Reliance on Accountant to File Timely Return Extension is NOT Reasonable Cause for IRS Penalty Abatement

The IRS will abate (or forgive) penalties and the interest associated with those penalties, if the taxpayer can show "reasonable cause" for the failure to file and/or pay. I'm often asked, what is reasonable cause? The answer is, anything is reasonable cause. Reasonable cause is whatever you can convince the IRS is reasonable cause. Clear as mud, right? 

It is difficult to pinpoint the exact recipe for reasonable cause. It is easier to define what is NOT reasonable cause. Caselaw and practitioner experience define its perameters.

In the recent case of Tesoriero, TC Memo. 2012-261, a taxpayer banked on his accountant to file a timely extension for his personal returns (Form 4868), as his accountant had done for the previous 25 years. However, something went awry in the year in question, and the accountant failed to file a timely 4868.

The taxpayer argued that penalties should be abated because it was reasonable for him to rely on the accountant to timely file 4868, as it was the accountant's firmly established pattern and practice to do so. The IRS didn't buy it. They looked at the case through blinders and decided that no evidence of sending a timely 4868 extension request by regular or certified mail, private delivery service or electronic filing, no extension. Therefore, the penalties and interest were proper.

Penalty abatement is now an automated computer program, not a human examiner process. The computer algorithms are not released to the general public, and must be gleaned through trial and error and case precedent. Don't leave this important collection alternative to chance. Hire a local, licensed lawyer to draft your penalty abatement request and increase your chance of getting it approved. Call Oklahoma City attorney, Travis Watkins, at 1-800-721-7054 today.

Travis Watkins
Senior Tax Attorney
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