How to Claim Reasonable Cause for Late Form 2290 Penalties

Missed the August 31 IRS Form 2290 deadline? You risk monthly late fees and interest, plus registration holds without a stamped Schedule 1.

If unexpected events caused the delay, you can request IRS penalty relief under Reasonable Cause.

What Penalties Apply?

• Late Filing: 4.5% of total tax per month (caps at 25%).
• Late Payment: 0.5% per month (caps at 25%).
• Interest: Monthly accrual on unpaid tax and penalties.

What Qualifies as Reasonable Cause?

The IRS requires proof of ordinary business care and prudence.

• Accepted: Natural disasters, serious illness or death in the family, unavoidable record destruction (fires, major cyber attacks), or IRS errors.
• Not Accepted: Forgetting the deadline, relying on an agent who dropped the ball, or routine cash shortages.

4 Steps to Claim Relief

• E-File Form 2290 ASAP: File Form 2290 using e-filing option and pay the base tax immediately. This way you will be able to stop penalties from compounding and get your watermarked Schedule 1.
• Receive the Penalty Notice: Once you receive bill from the IRS for penalties (Notice CP161 or CP215), write down the reference number.
• Compose a Reasoning Letter: In which you should include the following:
  • Name of the business, its EIN and period of tax.
  • Dates that would prove the reasons for inability to file.
  • Documentation that proves the claim.
• Required Statement of Perjury: “Under penalties of perjury, I declare that I have examined this statement of facts, and to the best of my knowledge and belief, it is true, correct, and complete.”
• Send to the IRS Address Listed in the Notice.

Backup: First-Time Penalty Abatement (FTA)

If you do not meet Reasonable Cause criteria, check if you qualify for First-Time Abate. If you have a clean filing record with zero penalties for the past 3 tax years, the IRS will frequently waive the penalty over the phone. Call the number on your balance notice to request it.

Note: For more information, visit IRS website