Reasonable Cause Letter

[Janice F]

I have not received an acknowledgement in response to the last 2 reasonable cause letters sent to the IRS. The next thing the client / taxfiler received was a penalty notice. Anyone having similar experiences or know a possible reason that I am not getting responses to my RC letters?

[MSN]

I've had the same issue. I have been able to call in (with POA on file) and get the status from the IRS without issue though and have been assured that the IRS accepted the RCL. I've been told there is a 2-3 week delay after the ruling for printing/mailing the formal response, but I've got a client that had a favorable ruling 2 months ago and still no written response.

[Blinky the 3-eyed Fish]

I have never sought or received a response to a RCL, nor has a client of mine. No news is good news. There haven't been any penalties assessed to date.

I am not sure how many times a family member can die. (Yes, I am joking.)

[PAL]

I am interested in finding out how successful people are at getting the late penalty waived (in part or in all) based on reasonable cause. My experience in dealing with delinquent filings is by submitting through the DFVCP. I am beginning to wonder if that is a waste of money if the IRS routinely waives the penalty when a reasonable cause letter is sent in.

It would be great if others out there who have submitted a reasonable cause letter could reply with what their experience has been. Thanks.

[Janice F]

I am interested in finding out how successful people are at getting the late penalty waived (in part or in all) based on reasonable cause. My experience in dealing with delinquent filings is by submitting through the DFVCP. I am beginning to wonder if that is a waste of money if the IRS routinely waives the penalty when a reasonable cause letter is sent in.

It would be great if others out there who have submitted a reasonable cause letter could reply with what their experience has been. Thanks.

We used to routinely submit reasonable cause letters and had very favorable results (penalty waived in 90% of cases). About 4 or 5 years ago, something changed and we were no longer getting those favorable results (either only partially waived or nothing waived) so we now recommend clients go the DFVCP route. We now submit RCL's occassionally and only when the client feels strongly about not paying the 'penalty' up front because they do feel they have a strong case for reasonable cause . . .but only about 50% are approved.

[Bird]

Some info on this...I have a friend, not a client, who got notices from the IRS that he didn't file not one, but two years of 5500s for a retirement plan. I told him that I wouldn't let my clients do anything but pay the DFVC penalty and move on, but he was adamant that he mailed them (regular mail with no receipt, of course) and that he wanted to fight it. So I gave him some tips on what to say (filed religiously for many years w/no problem, new procedures in place, blah blah) and...a month or two later, he got a letter back with these words: “based on the information you provided, we will not assess the late filing penalty on the account listed above for tax periods 2006 and 2007, form 5500, plan 001”. They even apologized for the hassle!

I'll get a lunch out of it.

I don't know that I'll change my approach with my own clients, but there it is.

[Kevin C]

If they didn't file on time, we recommend DFVC. Outside of DFVC, I thought they were doing penalties of $25 per day, but the DOL website says $50.

We usually have a client or two each year that files on time, but gets a letter saying they didn't file. So far, they have been satisfied with a newly signed copy of the filing and the client stating when the filing was mailed. Although sometimes it takes a letter or two to straighten it out.

[Guest MonicaS]

Our Clients have also had success calling the number on the form and explaining the situation to the IRS. They have then received written correspondence saying the penalties are waived. We advise our clients to call first and if they do not get a favorable response we help them with the DFVC filings. Most of our clients are in Michigan and it seems that, with the economy, the IRS has been more generous in waiving the fees as long as the filer reaches out for help.

That is not to say it will work in every case, but we have seen it happen.