The Karate Kid franchise taught us that “mercy is for the weak.” Unfortunately, the Washington Department of Revenue (the “Department”) takes that lesson to heart when granting (or, more accurately, denying) penalty abatement requests. A recent determination by the Administrative Review and Hearings Division highlights its cutthroat approach.

In that matter, a chiropractic clinic filed its business and occupation tax return two weeks late and without payment of the tax due. Wash. Det. No. 25-0060, 45 WTD 124 (Dep’t of Revenue Admin. Rev. & Hearings Div. 2026). The taxpayer included a statement that she had a baby a few weeks earlier and the taxpayer’s payment processor was subjected to a cyberattack. Therefore, the taxpayer had not been able to process any client payments for almost six weeks. The taxpayer requested abatement of penalties and interest. Nevertheless, the Department assessed a 25-percent assessment penalty and a nine percent delinquent penalty.

Within three months of filing the tax return, the taxpayer paid the tax due and again requested waiver of penalties and interest. While the Department agreed to waive the delinquent penalty, it declined to waive the larger assessment penalty.

In Washington, penalties will not be waived unless the “failure that triggered the penalty was the result of ‘circumstances beyond the control of the taxpayer.’” RCW 82.32.105(1). Such circumstances are generally immediate, unexpected, or in the nature of an emergency. The Department stated that a cyberattack was not a circumstance beyond the taxpayer’s control and financial hardship was an insufficient basis to waive penalties.

In addition, the taxpayer stated that she called the Department, was informed that she should file the tax return without payment, and the Department would contact her regarding a payment plan. Although the Department acknowledged that a phone call took place, there were no notes taken by the Department’s employee regarding the call. Because there was no written evidence of the advice given, the Department refused to waive penalties based on the taxpayer’s “recollection of oral instructions.”

This matter demonstrates a taxpayer trying to get it right, but dealing with challenging factors (a new baby) and circumstances that were outside of her control (a cyberattack on their payment processor). Unfortunately, the Department chose to punish the lack of perfection. Maybe the Department would be better suited taking guidance from Abraham Lincoln, who said “I have always found that mercy bears richer fruit than strict justice.”[1]

This update is one in a series of updates written for the June 2026 edition of The BR State + Local Tax Spotlight.

[1] Abraham Lincoln, quoted in Joseph Gillespie, Recollection, in The Lincoln Memorial: Album-Immortelles 459 (Osborn H. Oldroyd ed., 1882).