We know that we can take steps to minimize our taxes. Our tax laws allow for this and, on review, the courts have made this clear. Tax penalties are usually the problem with taking tax positions in situations that are not entirely clear. Taxpayers who find themselves having to make decisions in these gray areas…
Category: Reasonable Cause
Reasonable Cause
Taxpayers may avoid penalties and interest if they can demonstrate reasonable cause for their tax errors or omissions. We assist clients in demonstrating reasonable cause to the IRS. Give us a call to see how we can help, (713) 909-4906.
Failure to Review Tax Return Voids Penalty Defense
The IRS is quick to impose penalties. Many penalties are automatically imposed by the IRS’s computers. Even on audit, the IRS’s lead sheets direct IRS auditors to consider penalties before closing the audits. Most penalties can be abated if the taxpayer can establish reasonable cause. This is a facts and circumstances analysis. The courts have…
Avoiding Tax Penalties for Bookkeeper’s Mistakes
Taxes are computed based on accounting records. Accounting records are often complied by bookkeepers who have no tax training or experience. The bookkeepers may not intend to provide tax advice. Their work product may be used to prepare tax returns, however. The tax return preparer may move the numbers from the bookkeeper’s profit and loss…
What Counts as Tax Advice?
What if a CPA talks to you and tells you about a tax law? You have received tax advice, right? What if a CPA sends you a letter or email saying the same thing he would have said to you in person, had he spoke to you in person? Probably still tax advice, no? What…
Illness as a Defense to Late Filing Penalties
Will the IRS penalize you if you are unable to file your tax return on time due to the burden of caring for a loved one with COVID? The IRS has not provided penalty relief for taxpayers impacted by COVID-19. The existing penalty relief rules may provide a remedy for some taxpayers. These rules do…
Reasonable Cause: Proving Reliance on a Tax Advisor
If you hire a competent tax advisor and end up having a late filed return, you may be able to avoid penalties for the late filing. But this is a defense. It is something that you, the taxpayer, have to prove. So how does a taxpayer prove that they relied on a tax advsior? The…
Is Reliance on a CPA Sufficient for a Late Filed Tax Form?
The IRS often turns a deaf ear to taxpayers who miss a filing deadline due to some action or inaction by their CPA or tax preparer. This is the case for late filing tax penalties. But what about a late filed accounting method change? Is reliance on a CPA or tax preparer sufficient for a…
Penalty Abatement for Reliance on Tax Advisor Who Made Obvious Errors
The IRS often willing to abate or remove tax penalties. To do so, taxpayers usually have to show that they acted with reasonable cause and in good faith. Relying on a competent tax professional can be one way taxpayers can make this showing. But what exactly is a competent tax professional? The court addressed this…
Relying on Tax Attorney for Filing Deadline is Reasonable Cause
It is clear that one cannot rely on a tax attorney to file a tax return for purposes of removing penalties if the return is not filed. But can you rely on an attorney if the attorney provides advice as to the wrong date for filing? The court addresses this in Estate of Hake v.…
No Reasonable Cause Defense for Some Trust Fund Penalties
The IRS is serious about unpaid employment taxes. The trust fund recovery penalty can be used to collect these taxes. This penalty makes a business tax liability a personal liability. With most penalties, the penalty can be abated for reasonable cause. But what about the trust fund penalty? Can it be abated for reasonable cause?…