TaxGuru:

I am with the IRS Servicewide Penalties office and recently made a presentation on the penalty relief provisions you mention above. We appreciate your efforts to educate the public on this matter, but I need to make a clarification.

The Internal Revenue code and Treasury Regulations provide for relief from the Federal Tax Deposit penalty if it is established that the failure to deposit timely was due to reasonable cause and not willful neglect.

Procedures to follow for requesting penalty relief based on reasonable cause are outlined in the "Removal of Penalties" section of various IRS notices and publications. It is possible that a taxpayer requesting penalty relief due to reasonable cause may instead be granted penalty relief based on an IRS Administrative Waiver rather than reasonable cause. The FTA administrative waiver is granted in situations where the taxpayer has offered a reason for penalty relief consideration and has a history of compliance that meets the criteria specified in the Internal Revenue Manual.