penalty abatement - reasonable cause

[zeke]

New client. Country club files 990. In existence for generations. Bookkeeper for 40 years retired 2002. 2002 & 2003 990 not filed until IRS requested same. Upon filing, CC assessed $$$ in late filing fines. New finance officer wrote letter (good job) stating history, no intent to avoid, no revenue to IRS due, ignorance, new procedures, etc. IRS abated penalties. 2004 & 2005 filed on time. New election & new officers, 2006 filed 174 days late. IRS assesses $3480. late filing penalty. CC brings file to me & asks what to do.

I see two (bad) choices.

1) ignore history & just write "standard" request for abatement - & pray that IRS won't notice prior late filing,

and

2) mention prior late filing up front & then request abatement.

I have prior good experience with the "standard" abatement request, but want to consider (2) above before actually responding.

Does anyone have prior experience with multiple assessments for late filing. Does anyone prefer (1) or (2) above, and if (2) - just what the hell do I say that is new???

thanks in advance

Zeke

[Gail in Virginia]

If you want to go with choice two, look at the new officers as being what is new. Are they volunteers? Do they have any experience with non-profit taxes? Can you still plead ignorance because you have a new group of ignorant officers to replace the old group, who learned their lesson but forgot to pass it on? Especially for unpaid officers, I think you might stand a reasonable chance of pleading ignorance, especially if you can come up with some procedure for how you are going to make sure future new officers get schooled earlier.

[jainen]

>>what do I say that is new?<<

I don't think praying is necessarily a bad choice but I believe you have other and stronger options. #2 is not one--I certainly wouldn't specifically remind the IRS about earlier failures. If they don't know, that's not your problem.

Just in case they DO know about the history, you can admit in a general way that the organization has had some continuity problems, but only to emphasize the CHANGES (detailed in an attachment) that now ensure tax compliance is a top priority. It is not lying to say they previously had a good record of timely filing (you don't have to point out that said record was short-lived), and this isolated incident was corrected as soon as possible within the same tax year. In fact, you might even be able to show that the internal reorganization that caused the problem is also what provides the solution! Of course, this approach requires that there actually be some changes that you can detail.

Plus all the "standard" stuff, I suppose, although I've never written a standard letter so I'm curious as to what you think that is and why you think it would convince anyone of anything.

[zeke]

Plus all the "standard" stuff, I suppose, although I've never written a standard letter so I'm curious as to what you think that is and why you think it would convince anyone of anything.

Jainen - thanks for your considered response. You are correct to comment about my "standard" stuff. In 40 years, I have written 3 letters requesting abatement of penalties and the IRS grants all requests or liked all of mine. No - I don't have a form letter, but many of the same comments appear in each letter.

Again, thanks for your time.

Zeke