990 late filing penalty

[mhcpa1964]

Hello all,

Client is a non-profit high school athletics booster club who filed their 2018 & 2019 tax returns late. The late filing penalties are $2,757 and $2,157 respectively.

I'd like to request a waiver using the reasonable cause relief. The books are typically maintained by a volunteer parent and that's a moving target from year to year as the. Late last year (for the 020 tax year) a school teacher took charge of the books and they've made a much better commitment to staying in compliance with their tax exempt status.

I'm seeking assistance on wording the letter so that the IRS accepts our request. The IRS lists "inability to obtain records" as a sound reason.

If one of you can spare some time I'd appreciate any embellishments you offer. Thank you in advance.

[Lion]

I luckily haven't had to do this! That said, your "books are typically maintained by a volunteer..." is a good start, perhaps cleaned up a bit to incorporate "inability to obtain records" in whatever was truthful re the preparer receiving tax information &/or volunteers interpreting their duties. Then add the new teacher volunteer has taken over,,,won't happen again...blah, blah, blah. And, I've heard that something to the effect of "penalties of $2,757 and $2,157 will severely impact the services the club will be able to provide the students..." is a help re nonprofits getting out of penalties. Hopefully, someone will give you a sample letter.

[mhcpa1964]

Thank you Lion. You're very generous.

[abctax]

Tho rather verbose, I have used this on several occasions - successfully. The wording came from a different list-serve, from years ago.
I add it at the end of the letter, after explaining the volunteer & turn-over issue.

Good luck!


Sustaining the late payment penalty in this case would be inconsistent with the Internal Revenue Service Consolidated Penalty Handbook (“Handbook”). See IRM 120.1. In the Handbook, the IRS lists factors to be considered in determining whether a penalty should be abated for reasonable cause. Two of these factors are whether (1) the Taxpayer made a diligent effort to comply; and (2) imposition of the penalty would support voluntary compliance. Chapter 1.3.1.2(2) d of the Handbook provides that:
The organization’s obligation to meet the tax law requirements is ongoing. Ordinary business care and prudence requires that the taxpayer continue to attempt to meet the requirements, even though late. This language stresses the importance of a diligent effort to comply. In this case, the Organization made a diligent effort to comply by retaining my services to file the June 30, 2019, and all future returns in a timely fashion. The June 30, 2020 return has already been filed.

The penalty assessed here would do nothing to encourage voluntary compliance by the Organization. They have recognized their responsibility and will adhere to it for future filings.

The Service is given broad discretion to abate penalties when mitigating circumstances are present such as in the case of the penalty discussed herein. None of the failures that occurred here were due to any negligent or reckless disregard by the Organization with respect to its Federal filing obligations. The Organization’s ongoing attempt to be timely and fully compliant confirms its careful attention to its Federal filing obligations. There should be no question that any failure to file was due to reasonable cause and was not due to any neglect or indifference on the part of the Organization.

Therefore, the xxxxxxx respectfully requests the abatement of the proposed penalty shown in the attached notice.

Thank you in advance for your assistance

[New York Enrolled Agent]

ABC - Not trying to be critical of your letter but I think you need to firm up those two references.

See IRM 120.1. and Chapter 1.3.1.2(2)

MHCPA - in addition to what ABC has provided, I'd like to offer a few suggestions

1. Keep the request as brief as possible but you need to tell the story - why is there reasonable cause?
2. Any time you use reasonable cause, it is always in bold. Reminds the penalty coordinator what you're asking.
3. I would consider using the appropriate cite of the IRC. In your case of a non-profit, ?6652(c)(5) provides the reasonable cause exception - make use of it.
4. Cite the IRM as ABC suggests but make sure the cite is correct - you can do a paste into your letter.
5. Assert corrective action has been taken (done by ABC)
6. Every case has different facts - modify the letter as needed.

[abctax]

[QUOTE=New York Enrolled Agent;n306490]ABC - Not trying to be critical of your letter but I think you need to firm up those two references.

See IRM 120.1. and Chapter 1.3.1.2(2)

Maybe they've changed? I haven't looked at/used this in 12-15 years.... maybe it was wrong to begin with? - I copied/pasted from another list-serve oh so many yeasrs ago. But, it worked :-). And I did say "splain" the circumstance, then add this info. My letter was two pages long - maybe they just got tired of reading & gave up.

[mhcpa1964]

Thank you all very much. I truly appreciate the help and suggestions.