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KatieJ - 5471 penalty waiver request

Well, the first thing to do ALWAYS is to read the statute and the regulations.

I don't have any sample letters, but this is what the federal regulation says:

Reg. 1.6038-2(k)(3)(ii) To show that reasonable cause existed for failure to furnish information as required by section 6038 and this section, the person required to report such information must make an affirmative showing of all facts alleged as reasonable cause for such failure in a written statement containing a declaration that it is made under the penalties of prejury. The statement must be filed with the district director for the district or the director of the service center where the return is required to be filed. The district director or the director of the service center shall determine whether the failure to furnish information was due to reasonable cause, and if so, the period of time for which such reasonable cause existed. In the case of a return that has been filed as required by this section except for an omission of, or error with respect to, some of the information required, if the person who filed the return establishes to the satisfaction of the district director or the director of the service center that the person has substantially complied with this section, then the omission or error shall not constitute a failure under this section.

So, yes, the client must sign the statement under penalty of perjury. (I copied the reg from RIA so I don't know whether it's the IRS or RIA that can't spell perjury.) As for what to say in the letter: Explain how the error occurred, how the client found out about it, what the client did when he found out, and what he has done to prevent such an error from occurring again. Reliance on erroneous advice from an IRS employee or a previous tax preparer may be a reasonable cause excuse.

And good luck!

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