Sec. 250 of the NIRC provides P1K penalty (max P25K for each calendar year) for each failure to file information returns or keep records or supply information. When will a person NOT be liable for this penalty?

Sec. 250 of the NIRC provides P1K penalty (max P25K for each calendar year) for each failure to file information returns or keep records or supply information. When will a person NOT be liable for this penalty?

• A. Failure is due to reasonable cause and not to willful neglect
• B. Failure is due to government error
• C. Failure occurs when the taxpayer is a corporation
• D. Failure is due to lack of knowledge of the law

Answer: (A)

The key idea is that the penalty for failing to file information returns or keep records applies unless the failure is caused by reasonable cause and not by willful neglect. Reasonable cause means a legitimate, non‑willful reason that shows you exercised ordinary business care and prudence. If you can show such a reason and that you did not deliberately ignore your duties, you aren’t liable for the penalty. The other options don’t provide the standard that governs the exemption: being a corporation, lack of knowledge of the law, or government error alone do not automatically shield you unless they amount to reasonable cause and you weren’t acting with willful neglect.

The key idea is that the penalty for failing to file information returns or keep records applies unless the failure is caused by reasonable cause and not by willful neglect. Reasonable cause means a legitimate, non‑willful reason that shows you exercised ordinary business care and prudence. If you can show such a reason and that you did not deliberately ignore your duties, you aren’t liable for the penalty. The other options don’t provide the standard that governs the exemption: being a corporation, lack of knowledge of the law, or government error alone do not automatically shield you unless they amount to reasonable cause and you weren’t acting with willful neglect.