IRS: CCH Software Outage Is Reasonable Cause for Late Filing

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IRS: CCH Software Outage Is Reasonable Cause for Late Filing

The IRS has announced that the CCH software outage is reasonable cause for late filing.

On Monday, May 6, 2019, customers of tax software provider and tax publisher CCH experienced a software outage. Code Sec. 6651(a)(1), which imposes a penalty on taxpayers for failure to file a return or pay tax, allows for waiver of the penalty if it is shown that failure is due to “reasonable cause and not due to willful neglect”.

The IRS has posted an announcement to its website providing relief to persons affected by the software outage and stated that it has been working closely with CCH.

On its website, the IRS announced that taxpayers who have been affected by the software outage at tax software provider CCH have reasonable cause for late filings of returns with a May 15, 2019 deadline. The IRS has also provided specific instructions for taxpayers and preparers seeking relief for late filing.

IRS encourages taxpayers who cannot file on time as a result of the outage to file for an extension. Taxpayers affected by the CCH outage who do not file an extension and file after the deadline should include the phrase “Late filed return due to CCH Software Outage” as a statement of reasonable cause. Potential tax returns affected by this include Forms 990, 1120, 1120S and 1065 for some calendar year and fiscal year filers.

IRS has provided the following specific instructions for taxpayers and preparers seeking reasonable cause penalty relief:

  • For paper returns: To clearly identify an impacted paper-filed return, attach a separate written statement to the signed tax return that’s titled “Reasonable Cause Waiver Request – IRC 6651, Failure to File Penalty” that contains the same text noted below for e-filed returns. The statement must be attached to the original signed return.
  • For E-Filed returns: For Form 990: In the Reasonable Cause Statement element of the electronic file, include the following text: “Late filed return due to CCH Software outage”.

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

Note that the IRS announcement does not make any mention of the Code Sec. 6651 failure-to-pay penalty which will in all likelihood still be assessed.