Both the Internal Revenue and New York State Tax Authority have the ability or discretion to remove or wipe out penalties  in certain instances.   The standard is that of a “reasonable cause”. Or in other words would the intervening action (sickness, divorce, etc) have prevented an ordinary  taxpayer from either timely filing or paying its taxes.    I have represented taxpayers in many instances where penalties have been removed from the taxpayer’s account. Some examples of cases  where a penalty abatement was allowed include  the following reasons:

  • Physical Illness
  • Mental Illness
  • Drug Addiction
  • Alcoholism
  • Prescription Drug Addiction.
  • Overwork, stress or health problems of tax payer’s immediate family member
  • Fire
  • Flood
  • Divorce
  • Pregnancy
  • 1st Time Business Owner
  • Missing Information

Effects from September 11, 2001

This list is not exhaustive, but just an example of reasonable cause. Each case is unique and presents a unique set of facts.  The stronger the taxpayer is able to document the “event” i.e. doctor’s note, pictures of disaster  insurance claim, proof of rehabilitative treatment (drugs alcohol) the greater the chance of success with the penalty abatement.