TC 234: Daily Delinquency Penalty Assessed

What the code actually does

TC 234 records a manually-assessed Daily Delinquency Penalty — a per-day charge for the late filing of certain returns, most commonly the Form 990 series (exempt organizations), under IRC §6652(c). The system-generated version of the same penalty posts as TC 238, and TC 235 abates either one.

How the penalty is actually computed

The precise mechanics live in IRM 20.1.8.3.2.1, not in the general penalty-relief chapter most practitioners reach for first: "The penalty is $20 for each day during which a failure to file continues, determined with regard to extensions. The maximum penalty for failures with respect to any one return is $10,000 or five percent of the gross receipts of the organization for the year, whichever is less." For organizations with gross receipts over $1,000,000, the rate rises to $100 per day with a $50,000 cap. Every one of those dollar figures is a base amount, and the IRM says so on its face: “the penalty amounts listed are base amounts and are applicable to returns required to be filed in calendar year 2015 and prior calendar years... The penalty amounts listed are adjusted annually for inflation.” It points to Exhibit 20.1.8-5, which names the governing revenue procedure for every calendar year from 2016 through 2027. IRM 20.1.1’s own penalty transaction code exhibit summarizes the adjusted figures as “generally, $25 times the number of days... not to exceed the lesser of $12,500 or 5% of the gross receipts per return,” both “subject to an annual inflationary adjustment.” That summary is itself stale, and the same exhibit contradicts it: its per-IRC-section row for IRC 6652(c)(1)(A) carries the current amounts. For a return required to be filed in 2026, Rev. Proc. 2024-40 section 2.54 sets the organization-level cap at the lesser of $13,000 or 5% of gross receipts — not $12,500 — on the same $25 daily rate. The larger-organization tier moves the same way, and it moves on every axis — the receipts threshold that selects the tier as well as the two figures inside it. The $100-per-day, $50,000-cap figures quoted above are also 2015 base amounts. For a return required to be filed in 2026, the same section puts the gross-receipts threshold at $1,309,500 — not $1,000,000 — the daily rate at $130, and the cap at $65,000. A practitioner who screens a client against the $1,000,000 base figure will put some organizations in the wrong tier outright. There is a second rule in the same passage that decides which year’s figures apply: “the penalty amounts are applicable for the year the return is required to be filed regardless of the year filed,” so the IRS charges a long-overdue return at the rate for the year it was due, not the year it finally arrived. The penalty amount does not depend on the amount of any tax due — an organization with a $0 tax return can still face a penalty up to the full $13,000 (2026) cap.

A separate, smaller penalty tier under IRC §6652(c)(1)(B)(ii) attaches personally to the individual responsible for filing once the IRS issues a written demand and that demand still goes unmet: $10 per day the failure continues after the demand’s deadline, capped at $5,000 across everyone jointly and severally liable for that return. Those figures are base amounts on the same 2015 footing as the organization-level ones above, and the same revenue procedures adjust them annually. For a return required to be filed in 2026, Rev. Proc. 2024-40 section 2.54 puts that tier at $10 per day with a $6,500 cap — so the statutory $5,000 sits about 23 percent below the real $6,500 cap. That tier is distinct from the organization-level TC 234 assessment above. It runs against "any officer, director, trustee, employee, or other individual who is under a duty to perform the act" the demand required, not against the organization itself. It does not post as TC 234 on the organization’s own account, so a practitioner works it separately from the transcript code this page covers.

The relief limit that trips up practitioners most

IRM 20.1.1.3.3.2.1, First-Time Abate, states directly that the Daily Delinquency Penalty under IRC §6652(c)(2)(A) does not qualify for First-Time Abate relief. The IRM also lists Form 990 among the returns First-Time Abate does not reach. A practitioner reaching for FTA on a TC 234 the way they would for an individual failure-to-file penalty will be pursuing relief that is categorically unavailable for this specific penalty. And unlike the failure-to-file, failure-to-pay, failure-to-deposit, and accuracy-related penalties The Federal Tax Desk’s Penalty Abatement Analyzer models, a practitioner has to work this one by hand — the tool does not cover it. Reasonable-cause relief remains available and is the correct avenue — but FTA itself is not. The one-line version for a client: First-Time Abate doesn’t exist for this penalty — the only way out is proving reasonable cause.

What people mistake TC 234 for

TC 234 is easy to mistake for the standard individual or business failure-to-file penalty most practitioners know by habit — the monthly 5%-of-tax-due penalty under IRC §6651. They are different statutes entirely. IRC §6652(c) is a flat per-day dollar penalty tied to organization type and gross receipts, with no relationship to the amount of any tax due (many exempt organizations owe no tax at all and can still face a substantial TC 234). Applying failure-to-file reasoning built for §6651 — computing a percentage of unpaid tax, for instance — will produce the wrong number and the wrong relief argument for a TC 234.

A late Form 5500 (employee benefit plan) return is a different mistake to avoid: it is not this penalty. Form 5500 late-filing runs under the separate IRC §6652(e) regime — its own $250/day, $150,000-cap structure, tracked as Penalty Reference Number (PRN) 167 under a different transaction code — not IRC §6652(c)'s figures this page walks through.

It is also worth distinguishing TC 234 from the general penalty-relief pathways IRM 20.1.1 documents for other penalties. As noted above, First-Time Abate is unavailable here specifically, which is not true of most of the penalties that chapter otherwise covers — treating IRM 20.1.1 as a uniform relief menu across every penalty type is the exact assumption this page exists to correct.

The practitioner’s actual next step

Confirm the daily computation and the applicable cap. Check the organization’s gross receipts against the tier threshold for the year the return was due — $1,309,500 for a return required to be filed in 2026, not the statutory $1,000,000 — since that determines which rate tier and cap apply. Then take the tier’s actual dollar figures from the revenue procedure for that year, not from the statutory base amounts.

Do not pursue First-Time Abate; build the case for reasonable-cause relief instead, documented with the same rigor as any other reasonable-cause request — what happened, why it prevented timely filing, and what the organization did once it discovered the failure. File it on Form 843, Claim for Refund and Request for Abatement, with the explanation in Line 8 doing the actual work. Mail it to the return address on the penalty notice if the request responds to one, per Form 843’s own instructions, or to the service center where the organization would file its current-year return otherwise. The abatement itself posts as TC 235 once the IRS grants it.

Whether the organization has paid the penalty decides what the Form 843 asks for. If the penalty is unpaid, the form requests abatement under IRC §6404(a). If the organization paid it, the form is a refund claim, and IRC §6511(a) requires the organization to file it within 3 years of filing the return or 2 years of paying the penalty, whichever is later (IRC §6665(a)(2) treats the penalty as tax). Calendar the deadline from the payment date: that date is certain, while the 3-year date depends on which filing counts as the return. A claim filed after the window fails regardless of merit.

Check whether the assessment is TC 234 (manual) or TC 238 (system-generated) — both are the same penalty under the same statute, but a manually-assessed penalty may reflect a specific finding worth reviewing for accuracy before conceding it.

A denied Form 843 is not the end of the road — the organization retains the right to protest the denial to IRS Appeals, and, after paying the penalty, to file a refund claim and ultimately sue for refund in district court or the Court of Federal Claims. Reasonable cause is the only administrative relief avenue for this penalty, but it is not the client’s only avenue, period. §6652(c) is an assessable penalty outside the deficiency procedures, so no notice of deficiency ever issues for it. Full payment followed by a refund suit is the default route to court — one that requires retaining counsel, not just the EA or CPA who worked the administrative claim, because an organization cannot represent itself in federal court.

That full-payment picture has one narrower exception: if the IRS moves to collect the unpaid penalty by lien or levy, the organization gets a Collection Due Process (CDP) hearing, and IRC §6330(c)(2)(B) lets it challenge the liability itself there, since it never received a notice of deficiency or otherwise had a prior opportunity to dispute the liability. Request that hearing within 30 days of the lien or levy notice on Form 12153. Tax Court once treated that 30-day hearing-request deadline as fixed and non-waivable. Kennedy v. Commissioner, 116 T.C. 255 (2001), is the case that set that rule, for a lien notice under §6320(a)(3)(B). In Organic Cannabis Foundation, LLC v. Commissioner, 161 T.C. 13 (2023), the Tax Court overruled Kennedy’s fixed-deadline holding as to that lien-notice deadline under §6320(a)(3)(B), holding that a court can equitably toll that deadline where circumstances warrant it — extending to the hearing-request deadline the same reasoning the Supreme Court had already applied to the CDP process’s next step, the Tax Court-petition deadline, in Boechler, P.C. v. Commissioner, 596 U.S. 199 (2022). A CDP determination is then petitionable to Tax Court within 30 days under §6330(d), without paying first, and that deadline is likewise not jurisdictional — a court can equitably toll it too. Treat both deadlines as firm in practice regardless — tolling is a narrow, fact-intensive exception, and the two deadlines don’t fail the same way: miss the 30-day hearing-request deadline and the practitioner gets an equivalent hearing instead, an administrative review with no path to Tax Court on the merits absent a strong tolling argument; miss the 30-day Tax Court-petition deadline after a determination has already issued, and there is no hearing left to substitute — the determination stands and judicial review of it is simply gone.

If the penalty threatens the organization’s ability to operate while the dispute is pending, the Taxpayer Advocate Service is a parallel option — file Form 911, Request for Taxpayer Advocate Service Assistance, describing the hardship. TAS can act on significant hardship independent of how the underlying reasonable-cause claim eventually resolves.