Letter 854-C: Penalty waiver denied, with appeal rights

What Letter 854-C is

The denial letter for a 972CG response or a reconsideration request. Per IRM 4.19.25 it is the only letter in the process that carries appeal rights, and the IRS sends only one per account. An open paragraph states the reason, for example that annual solicitations were made electronically or that only a plain postage receipt was offered as proof of filing.

The deadline

Appeal to the Independent Office of Appeals; the letter states the window. A signed request from the taxpayer or a Form 2848 representative is required; Form 8821 is not accepted.

What to do

Read the stated reason and cure it specifically. Do not resend the same statement; the IRM tells examiners not to request the same information twice.

Reading the stated reason

Letter 854-C is the denial of a 972CG reasonable-cause request, and the useful part of it is the open paragraph where the examiner states why. The reasons are usually one of a small set: no proof that the required solicitations were made, solicitations made in a form the IRS does not recognize (an email with no consent record, a note in the vendor portal), a W-9 received but not until after the return was filed, no evidence of filing on time (a plain postage receipt rather than certified mail or an electronic acknowledgment), a statement that explained what went wrong but not what was done about it, or a failure type that was not addressed at all. The denial is specific to that reason, and so the response has to be. The IRS sends one 854-C per account per notice, and examiners are told not to ask for the same information twice, so a resubmission of the original statement will be closed without a further letter.

Appeal, or reconsider, and the authorization trap

The letter carries appeal rights to the IRS Independent Office of Appeals and states the window. An appeal is the right route when you disagree with the examiner's reading of facts you already supplied; a reconsideration request to the same unit is the right route when the stated reason is something you can now cure with documents you did not send, such as the solicitation log. Either way, write to the stated reason and nothing else first. Two procedural points sink more appeals than the merits do. The request must be signed by the taxpayer or by a representative holding a Form 2848 power of attorney; a Form 8821 tax information authorization lets the IRS talk to your accountant but does not let them sign for you, and a request signed under an 8821 is returned. And the penalty continues to be billed while the appeal is pending, so pay any part you do not dispute and ask for a collection hold on the rest. The response guide covers what each stated reason requires, and the after-the-denial guide covers the appeal mechanics and the pay-and-claim alternative.

Questions about Letter 854-C

Have a different notice? The IRS notice decoder lists all 77 in the order they tend to arrive.