A Reasonable Cause argument may be asserted in defense of penalty assessments. It is a delicate and precise argument however and it takes knowledge of the Regulations, the Internal Revenue Manual (IRM) and relevant caselaw discussing Reasonable Cause. Within the IRM, Reasonable Cause is generally defined as: “reasonable cause is based on all the facts and circumstances in each situation and allows the IRS to provide relief from a penalty that would otherwise apply. Reasonable cause relief is generally granted when the taxpayer exercised ordinary business care and prudence in determining his or her tax obligations but was nevertheless unable to comply with those obligations.” Crafting a viable and thorough Reasonable Cause argument is a taxpayer’s best defense against foreign bank account reporting penalties. It is advisable to seek professional help when preparing a Reasonable Cause defense.