If you’ve ever tried to get an IRS penalty removed, you’ve likely bumped into this mouth-filling phrase: "Ordinary Business Care and Prudence."
It sounds like something out of a 19th-century law textbook, but it’s actually the most important standard in tax law. It’s the "litmus test" the IRS uses to decide if you’re a victim of circumstance or just someone who forgot to check the mail.
Here is what the IRS actually means when they use that phrase—and how you can prove you meet it.
The Official Definition (The IRS "Rulebook")
According to the Internal Revenue Manual (IRM 20.1.1.3.2.2), ordinary business care and prudence means:
"Making every effort to comply with the law, but being unable to do so due to circumstances beyond your control."
Essentially, the IRS asks: "Would a reasonably responsible person, facing these same challenges, have ended up in the same boat?"
The 4 Factors the IRS Uses to Judge You
When an IRS agent (or their automated AI system) reviews your request for abatement, they look at these four specific pillars:
1. Your Compliance History
If you’ve filed on time for 10 years and suddenly missed one, the IRS is much more likely to believe you exercised "care." If you have a "Failure to File" notice every other year, they’ll assume your "prudence" is lacking.
2. The Length of Time
How long did it take you to fix the mistake?
- Careful: You missed the deadline in April but filed by May.
- Careless: You missed the deadline in April and didn't bother filing until you got a nasty letter in November.
3. Circumstances Beyond Your Control
The IRS acknowledges that life happens. To prove "care," you must show that you had a plan to file, but an "unforeseen event" (like a medical emergency or a natural disaster) crashed into that plan.
4. Correlation of Dates
This is where most people fail. Your "reason" must match your "penalty." If you were hospitalized in January, but your taxes weren't due until April, the IRS will ask why you couldn't file during the three months you were healthy.
"Care" vs. "Careless": Real-World Examples
| Situation |
IRS Likely Sees "Prudence" |
IRS Likely Sees "Negligence" |
| Missing Records |
Your house flooded and destroyed your hard drive. |
You lost your W-2 in a messy desk. |
| Illness |
You were in a coma or major surgery during tax week. |
You had a bad flu for two days in March. |
| Professional Advice |
You gave your CPA all documents, but they filed late. |
You "thought" your brother-in-law filed for you. |
How to Prove You Were Prudent
To win this argument, you shouldn't just tell the IRS you were careful—you have to show them.
- Build a Timeline: Create a "Day-by-Day" log of the hardship event.
- Show Effort: Provide copies of emails to your accountant or logs of calls to the IRS, trying to figure out your balance.
- Document the "Impossible": If you couldn't pay because your bank accounts were frozen or your business was closed by a state mandate, provide the legal notices.
The Bottom Line
The IRS isn't looking for perfection; they are looking for effort. If you can prove that you treated your tax obligations with the same importance as your rent or mortgage, you’ve met the "Ordinary Business Care and Prudence" standard.
Need help framing your story? At Wolf Tax, we speak "IRS." We know how to translate your complex situation into the specific IRM language that agents are trained to understand.
Sources and Legal Authorities
- Primary IRS Guidance: Internal Revenue Manual (IRM) § 20.1.1.3.2.2
- This is the "internal rulebook" used by IRS agents. Section 20.1.1.3.2.2 specifically defines "Ordinary Business Care and Prudence" and outlines the factors agents must consider when evaluating a taxpayer's reason for non-compliance.
- Source: IRM 20.1.1.3.2.2 - Ordinary Business Care and Prudence
- Federal Regulation: 26 CFR § 301.6651-1(c)(1)
- This Treasury Regulation provides the legal foundation for "reasonable cause." It explicitly states that if a taxpayer "exercised ordinary business care and prudence and was nevertheless unable to file the return within the prescribed time," the penalty will not be assessed.
- Source: 26 CFR § 301.6651-1 - Failure to file tax return or to pay tax
- U.S. Supreme Court Case: United States v. Boyle, 469 U.S. 241 (1985)
- This is the landmark case regarding penalty abatement. The Supreme Court established that while "ordinary business care" can excuse a late filing, the duty to file a return is non-delegable (meaning you generally cannot blame your accountant for missing a deadline).
- Source: United States v. Boyle (469 U.S. 241)
