IRS Offers Reasonable-Cause Relief for Returns Affected by CCH Software Outage

(Parker Tax Publishing May 2019)

On its website, the IRS said that it has been working closely with CCH to ease the impact on taxpayers caused by CCH's recent software outage. While the IRS encouraged taxpayers to file extensions for returns that could not be filed on time, it said that taxpayers affected by the CCH outage, who did not file an extension and filed a return due on May 15 after the May 15 deadline, may submit a statement requesting a penalty waiver due to reasonable cause. IRS Website (5/15/19).

On May 6, 2019, Wolters Kluwer, the parent company of CCH, experienced network and service interruptions affecting certain platforms and applications. On its Facebook page, Wolters Kluwer said that, out of an abundance of caution, it was proactively taking offline a number of other applications as it continued to investigate the impact.

In a May 16 public statement, Wolters Kluwer said that it had restored service to nearly all customer applications and platforms and that it had found no evidence that customer data or systems were compromised. The statement noted that malware had been detected and that it was a new ("zero-day") strain, for which there was no existing antivirus solution available to detect the presence of the malicious code.

On its website, the IRS said that it has been working closely with CCH to ease the impact on taxpayers caused by CCH's software outage. While the IRS encouraged taxpayers to file extensions for returns that could not be filed on time, it said that taxpayers affected by the CCH outage, who did not file an extension and filed a return due on May 15 after the May 15 deadline, may submit a statement requesting a penalty waiver due to reasonable cause. The IRS issued the following specific instructions for taxpayers and preparers seeking reasonable-cause penalty relief:

(1) For Paper Returns: To clearly identify an impacted paper-filed return, the filer must attach a separate written statement to the signed tax return titled "Reasonable Cause Waiver Request - IRC 6651, Failure to File Penalty" that contains the same text noted below for the e-filed returns. It must be attached to the original signed return.

(2) For E-Filed Returns:

For 990s: In the "ReasonableCauseStatement" element of the electronic file, include the following text: "Late filed return due to CCH Software outage"

For 1120, 1120S, 1065: Complete the Special Condition Description element for the F1120 form family and F1065. In the "SpecialConditionDesc" element of the electronic file, include the following text: "Late filed return due to CCH Software outage".

For a discussion of the reasonable cause exception to penalties assessed on late filed returns, see Parker Tax ¶262,105.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

Parker Tax Pro Library - An Affordable Professional Tax Research Solution. www.parkertaxpublishing.com

We hope you find our professional tax research articles comprehensive and informative. Parker Tax Pro Library gives you unlimited online access all of our past Biweekly Tax Bulletins, 22 volumes of expert analysis, 250 Client Letters, Bob Jennings Practice Aids, time saving election statements and our comprehensive, fully updated primary source library.

Try Our Easy, Powerful Search Engine

A Professional Tax Research Solution that gives you instant access to 22 volumes of expert analysis and 185,000 authoritative source documents. But having access won’t help if you can’t quickly and easily find the materials that answer your questions. That’s where Parker’s search engine – and it’s uncanny knack for finding the right documents – comes into play

Things that take half a dozen steps in other products take two steps in ours. Search results come up instantly and browsing them is a cinch. So is linking from Parker’s analysis to practice aids and cited primary source documents. Parker’s powerful, user-friendly search engine ensures that you quickly find what you need every time you visit Our Tax Research Library.

Dear Tax Professional,

My name is James Levey, and a few years back I founded a company named Kleinrock Publishing. I started Kleinrock out of frustration with the prohibitively high prices and difficult search engines of BNA, CCH, and RIA tax research products ... kind of reminiscent of the situation practitioners face today.

Now that Kleinrock has disappeared into CCH, prices are soaring again and ease-of-use has fallen by the wayside. The needs of smaller firms and sole practitioners are simply not being met.

To address the problem, I’ve partnered with a group of highly talented tax writers to create Parker Tax Publishing ... a company dedicated to the idea that comprehensive, authoritative tax information service can be both easy-to-use and highly affordable.

Our product, the Parker Tax Pro Library, is breathtaking in its scope. Check out the contents listing to the left to get a sense of all the valuable material you'll have access to when you subscribe.

Or better yet, take a minute to sign yourself up for a free trial, so you can experience first-hand just how easy it is to get results with the Pro Library!

Sincerely,

James Levey

Parker Tax Pro Library - An Affordable Professional Tax Research Solution. www.parkertaxpublishing.com