How to Write a Form 990 Late Filing Penalty Abatement Letter

Most tax-exempt organizations are legally required to file an annual information return with the Internal Revenue Service, most commonly the Form 990. Failing to file this form by the deadline can lead to significant financial penalties from the IRS that accrue daily, which can become a substantial burden.

The IRS has procedures that allow an organization to request a waiver, or abatement, of these late-filing penalties. This process involves formally communicating with the IRS, explaining the circumstances that led to the delay, and asking for the penalties to be removed.

Establishing Grounds for Abatement

The IRS may agree to waive penalties if the organization can demonstrate “Reasonable Cause” for its failure to file on time. This is a legal standard meaning the organization exercised ordinary business care and prudence but was still unable to file the return by the due date. A successful Reasonable Cause argument hinges on providing a specific, credible, and verifiable explanation for the delay.

Common situations that may qualify as Reasonable Cause include:

• The death or serious illness of the individual responsible for filing the return, or a member of their immediate family.
• The destruction of the organization’s records due to a fire, flood, or another natural disaster.
• The unavoidable absence of the person responsible for filing.
• Receiving and relying on incorrect advice from a competent tax professional.
• Errors or delays caused by the IRS itself.

Information and Documents to Assemble

Before drafting a penalty abatement request, it is important to gather all necessary information and supporting documents to build a strong case. Start by collecting basic organizational details, including the full legal name of the organization, its Employer Identification Number (EIN), and the current mailing address on file with the IRS.

Next, compile the specific tax filing information related to the penalty. This includes the form number, such as Form 990, Form 990-EZ, or Form 990-PF, and the exact tax period for which the penalty was assessed. You will also need the IRS notice number, which is found in the top right corner of the correspondence you received, along with the date of that notice.

The most important element to assemble is the supporting documentation that substantiates your claim of Reasonable Cause. For a claim based on illness or death, this would include a copy of a death certificate or a letter from a physician detailing the medical condition and dates of incapacitation. If a natural disaster occurred, gather copies of insurance claims, police or fire department reports, or dated photographs of the damage. If you relied on incorrect advice from a tax advisor, you will need a signed letter from that professional explaining the error and evidence of their credentials. For an unavoidable absence, documents like travel itineraries or military orders would be appropriate.

Writing the Penalty Abatement Letter

The abatement letter must be structured clearly and professionally. At the top, include a header with the organization’s full name, EIN, and mailing address, followed by the date. Below this, include the IRS address exactly as it appears on the penalty notice you received.

The opening paragraph should be direct and state the letter’s purpose. Clearly identify that you are requesting an abatement of penalties for the late filing of a specific form for a particular tax year. For instance, you might write, “This letter is a formal request for the abatement of the late filing penalty assessed against [Organization Name], EIN [Your EIN], for the tax year ending [Date].” Be sure to reference the specific notice number you received from the IRS.

The body of the letter is where you present your case for Reasonable Cause. Construct a chronological narrative that explains the facts and circumstances that led to the late filing. Be factual and avoid emotional language. Directly connect your situation to the supporting documents you have assembled, referencing them within the text (e.g., “As documented in the enclosed letter from Dr. Evans…”).

In the closing paragraph, you should affirm that the issue causing the delay has been resolved. Briefly describe the steps the organization has taken to ensure future compliance with all filing deadlines. The letter must be signed by an authorized officer of the organization, such as the President, Treasurer, or Executive Director. Below the signature, include the printed name and title of the individual who signed the letter.

Submitting Your Request and Next Steps

After you have written the letter and gathered all supporting documents, assemble the complete package for submission. Before sending the original documents, make a complete copy of the signed letter and all attachments for your organization’s records.

It is recommended that you mail the abatement request using a service that provides tracking, such as USPS Certified Mail with a return receipt requested. This method provides you with proof that the IRS received your package and the date on which it was delivered. This documentation can be invaluable if there are any questions about your request. The mailing address you should use is the one provided on the IRS penalty notice.

Once the request is submitted, be prepared to wait, as the IRS review process can take several months. You will receive a letter in the mail with their decision. The two primary outcomes are an approval, in which case the penalty is abated, or a denial. If your request is denied, the IRS letter will explain the reasons for the decision and provide information on your organization’s right to appeal the determination.