What Counts as Reasonable Cause? The Test the IRS Applies to Your Reason

By Forrest Baumhover, CFP®, EA · Last verified October 30, 2026

Reasonable cause is not a list of approved excuses. The IRS asks whether you used ordinary care and still could not file or pay on time, then checks your dates against your story.

The Test in Two Parts

Reasonable cause relief can remove a penalty when two things are true. You took the care a sensible person would take, and you still could not meet the deadline. The IRS calls that care "ordinary business care and prudence" (IRM 20.1.1.3.2.2).

The word "business" misleads. The regulation says "a taxpayer," so the test covers individuals too (Treas. Reg. §301.6651-1(c)(1)). The burden of proof generally falls on you, not on the IRS (IRM 20.1.1.3.5).

The most important fact: a good reason does not win alone. You must also show the reason stopped you, and that you acted once it ended. If you do not fix the problem within a reasonable time after the cause ends, the IRM says reasonable cause does not exist (IRM 20.1.1.3.2).

What people mistake reasonable cause for

People treat it as a sympathy test, or as a reward for a clean record. It is neither. The IRM says a first-time failure "does not by itself establish reasonable cause" (IRM 20.1.1.3.2.2).

The obvious reason is often the weak one. "I did not know," "I forgot" and "my preparer handled it" each start behind, and the reasons the IRS tests hard explains why. An event outside your control starts stronger, but it still needs proof.

The Five Questions the IRS Asks

The IRM gives employees five questions to weigh with the rest of the rules (IRM 20.1.1.3.2). Your request should answer each one.

What happened, and when? Give dates, not a general story.

What stopped you? Name the facts that blocked you while you were out of compliance.

How did those facts cause the failure? Connect the event to the missed filing or payment.

How did you handle the rest of your affairs? This question can hurt you. If you ran your business and paid your other bills, the IRS may ask why the tax return alone had to wait.

What did you do once things changed? Show when you filed or paid after the problem ended.

What the IRS Checks Against Your Reason

Four things go on the scale (IRM 20.1.1.3.2.2). The first is your reason: the dates and explanations "should clearly correspond with events on which the penalties are based." The second is your history, because the IRM tells employees to check "the preceding tax years (at least three)."

The third is time: how long passed between the event and the day you complied. The fourth is control: could you have seen the event coming? The IRM also treats your duty as ongoing, so you must keep trying even when you are already late.

Name each penalty you want removed, and tie your reason to it, because each penalty covers a different failure (IRM 20.1.1.3.5). IRS.gov lists hospital or court records, a doctor's letter with start and end dates, disaster records, copies of letters and responses, and receipts as support.

How the Test Works for Late Payment

IRS.gov says lack of funds, by itself, is not reasonable cause. To qualify, you must show you used ordinary care to provide for the tax, and that you could not pay or that paying on the due date would cause undue hardship. The regulation looks at your spending in light of the income you could expect (Treas. Reg. §301.6651-1(c)(1)).

The regulation names two traps: "lavish or extravagant living expenses," and money put into speculative or illiquid assets when what remains will not cover the tax. Withheld payroll taxes face a harder test, because facts that may excuse an income tax payment may not excuse those (Treas. Reg. §301.6651-1(c)(2)).

Check Other Relief First

The IRS generally works in this order: IRS error, statutory and regulatory exceptions, administrative waivers, then reasonable cause (IRM 20.1.1.3). So a reasonable-cause letter can end as First-Time Abate if your history qualifies, and the IRM's sample letter says "This type of penalty removal is only available one time" (IRM 20.1.1.3.3.2.1). Which relief path applies covers those other routes.

Reasonable cause does not reach every penalty. The IRS page names the estimated tax penalty as one it does not cover. Accuracy-related and information return penalties have their own factors, so the test on this page is the one for failure to file, pay or deposit.

How to Ask, and What Happens if the IRS Says No

Plan on a written request. For a late return or late payment, the regulation calls for a written statement of your facts, signed under penalties of perjury (Treas. Reg. §301.6651-1(c)(1)). IRS.gov names Form 843 for a written request.

IRS.gov also says "We may reduce or remove some penalties over the phone," so a call to the number on your notice is another option. The IRM lets employees consider an unsigned or phone request for these penalties only up to a limit the public IRM blacks out, and asks for a signed statement above it (IRM 20.1.1.3.1).

The IRM tells employees to send you written notice of a denial and your appeal rights (IRM 20.1.1.3.5.3). The IRS Penalty appeal page says you "generally have 30 days from the date of the rejection letter," so check the letter for your deadline.

That page also lists a written request among the conditions for an appeal. If a call does not work, send a written request, and if a denial letter gives you appeal rights, follow that letter's deadline.

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