Which letter you got, and what it means
IRM 4.19.25.9 to 4.19.25.16, 4.19.25.17.1.3.
"Use Letter 854-C any time the penalty is being assessed for other than an 'agreed' or 'partially agreed' closing" (IRM 4.19.25.12). So a CP15 or CP215 that arrives without an 854-C tells you the IRS never evaluated a reasonable-cause request from you: it was a no-reply assessment (made in bulk during the week 90 days after the notice date), an agreed assessment, or an undeliverable notice. Undeliverable CP15 and CP215 notices are "classified waste," destroyed rather than re-mailed (IRM 4.19.25.14, 4.19.25.15, 4.19.25.23.6.3), so a stale address can mean the first thing you see is a collection notice.
Reconsideration: one submission, no suspense
A reasonable-cause request after assessment uses the same substantive rules as a current-year response, with three procedural differences (IRM 4.19.25.17, 4.19.25.17.1.3):
- Never suspended. An insufficient submission is closed with a Letter 6304-C telling you what was missing. There is no 1948-C and no 30-day window to supplement.
- No second request. Since the August 2025 revision: "If all necessary information has previously been requested from the taxpayer and the taxpayer has not provided the information, do not request the information again." The next step is disallowance with an 854-C.
- One 854-C. "DO NOT send multiple Letter 854-C on the same account." Once you have one, any further relief request is treated as an appeal, not a new reconsideration.
Make the reconsideration complete on the first submission: officer signature, jurat, provision, every failure code, both responsible-manner questions, the factor and its documents, and the solicitation or filing proof. A thin second submission goes straight to appeals territory.
The self-check runs the examiner's list; the template is organized in that order.
Appeal: the signature and the 2848
Any relief request after an 854-C is an appeal. The examiner first re-reviews the case for abatement on the new material; if not abated, the file goes to the Independent Office of Appeals in Fresno with Letter 86-C and a 90-day contact time frame, and collection is held with a transaction code while it is there (IRM 4.19.25.17.3, 17.3.2). Two formalities decide whether it gets that far:
- Signature. The appeal request must be signed by the taxpayer or by a representative under a valid Form 2848. If it is unsigned and a phone number is on the letter, the examiner calls once and allows three business days to fax the signature; otherwise the case is closed with a 6304-C (IRM 4.19.25.17.3.1).
- Form 2848, not 8821. "A Form 8821 ... or Form 2848, Level H (Unenrolled Return Preparer), is not considered an authorized POA." The 2848 must show "Civil Penalty," the form series (for example 1099) and the years (IRM 4.19.25.17.3.1, 20.1.7.4).
A case that Appeals already sustained is routed straight back to Appeals on any further request (IRM 4.19.25.17.3). Appeals of information return penalties are to be processed within 30 days.
The two clocks
Assessment. The IRS must assess an information return penalty within three years of the later of the return's due date or the date it was filed (IRM 4.19.25.17.4.1). For a return never filed there is no limit: "No statute of limitations applies to non-filed information returns and penalties can be assessed at any time" (IRM 20.1.7.12.2.8).
Refund. A claim for refund of a paid penalty must be filed within three years of the return or two years of the payment. The manual's rule for a fully paid account: "Penalties should not be abated on a full paid account if the overpayment created is barred from refunding because the RSED has passed ... This is true even if the taxpayer's claim for penalty abatement is based on reasonable cause" (IRM 4.19.25.17.4.2). Paying to stop interest and fighting later is fine, but the fight has a two-year deadline that reasonable cause does not extend.
The supervisory-approval point
IRC 6751(b) requires written supervisory approval of penalties except those "automatically calculated through electronic means." The initial 972CG is exempt on that basis. But once a payer responds and an examiner evaluates the response, "regardless of whether or not the taxpayer specifically addresses the penalty," any full or partial assessment must carry written managerial approval in the case file, and approval is "always required" for the improper-format and excessively-late penalties (IRM 4.19.25.6). On a reconsideration or appeal, ask whether the approval exists. It is a procedural defense with real teeth in other penalty contexts, and the manual concedes it applies here the moment a human sustained the penalty.
Collection while you wait
A reconsideration request puts a collection hold on the account while the case is worked, reduced to three cycles when it closes (IRM 4.19.25.17.1.5). An appeal holds collection with a transaction code 470 while the case is in Appeals. Neither stops interest. If the account is already in collection status, the penalty unit coordinates rather than overrides; a reconsideration package sent to the campus should say plainly that collection is running and ask for the hold.
Questions people ask
We got a CP215 but never saw a 972CG. Can we still get reasonable cause?
Yes, by reconsideration, and the same statement and exhibits apply. First find out why you did not see the 972CG: if it was undeliverable, fix the address with Form 8822-B before anything else, because the 854-C and the collection notices go to the same place.
Our first response was denied for "insufficient documentation." Can we resend with the solicitation log?
Once, as an appeal. The 854-C reason paragraph tells you what was missing; cure exactly that. Because the IRS will not request the same information twice and sends only one 854-C, the resubmission is your last administrative stop before Appeals.
The examiner never asked for our solicitation letters. Does that help us?
Only if you offered them. The IRM tells the examiner to ask for proof of solicitations when the response is thin and the payer indicates more is available; if the response said nothing about having them, the denial stands on the response as written (IRM 4.19.25.8.3(6) to (8)).