True Confessions, Case #22487: “Snatching Victory from the Jaws of Defeat”

We totally love getting to share the good news of a favorable result in an IRS case. But some cases allow us the privilege of confirming that we are doing what we were meant to do.

Such was this case, a fairly recent one.

This involved a trucking company here in the Atlanta area that owed over a million dollars to the IRS in taxes, penalties, and interest.

This had been a fairly profitable company, running about 20 trucks and grossing about $2.5 million a year for a few years. They were happy just to have survived the recession, but their balance owed to the IRS for unpaid payroll taxes was more than this family-owned business could withstand.

This was and still is a dear, dear family, and I will cherish the friendship we have developed.

We put our very best efforts into every IRS case that we agree to take. But we knew early on that this family had already gone to the mat for years on end to take care of their employees, drivers, and customers.

So we wanted to show them the same courtesy.

The company had gotten extremely under water with the IRS, to the point where they owed literally a million bucks to Uncle, including penalties and interest.

With this huge balance, it was no surprise that their case had already been assigned to a Revenue Officer.

In the IRS system, the Revenue Officer has very far-reaching authority and power. But this can be very much a double-edged sword, as you will see shortly.

In a separate case about two years ago, we took a case representing a trucking company owner and his wife in Louisiana that owed over $100,000 in taxes. The Revenue Officer in that case was entirely overbearing, and was doing everything possible to put our client out of business.

Fortunately, we were able to get the case transferred away from the “Wicked Witch of the West”, along with a very pleasant settlement to boot!

Getting back to this case, as it turns out we had had other cases with this Revenue Officer. We recalled that he placed a premium on regular communication with his office.

So we make it a rule to go overboard in calling or faxing him almost every time we sneezed.

But part of what we began communicating was the severe health issues that the husband and wife owners were facing, along with their son, who had previously been one of the company’s back-up drivers.

Early on in this case, I asked the owner wife what amount of monthly payment to the IRS would be manageable for her, at least for the moment, as nothing more than a gesture of good faith. She could live with $1,500 a month.

Now, mind you, settling a delinquent tax balance with the IRS is definitely not the kind of thing where they ask you, “What would you like to pay each month?”

Especially not with a balance of over a million bucks, and most definitely not when the balance is for delinquent payroll taxes.

The IRS takes an extremely dim view of unpaid payroll taxes.

If a business already owes, say, $150,000 or more in payroll taxes, and is still not paying—or not able to pay—the current payroll taxes, thus the balance is continuing to grow, this practice is known within the IRS as pyramiding.

The IRS will shut down a business faster than you can say, “Danger, Will Robinson!” for continuing this practice.

Withheld payroll taxes are, in effect, the IRS’ money, because all of the employees from whom it was withheld will be receiving a W-2 showing the amount of Federal Withholding, along with, of course, Social Security and Medicare.

So our very first order of business was to get them current for at least a couple of quarters, even if they could pay nothing towards the arrearage of a million dollars and some change.

We created and discussed with the trucking company owners a game plan for getting into compliance for two consecutive quarters, a six month period.

And again, going back to our knowledge of this particular revenue officer, we even called him and told him our plan and told him we would even send him something in writing that would lay out our proposed steps in numerical order.

I even mentioned to him that we would be helping the company with a plan towards their quarterly payroll, which, in time, would help them reduce the quarterly payroll taxes that they had to pay in. In this case, that simply meant that we would help our trucking client to take the appropriate steps towards converting several drivers from being company drivers to owner-operators, compensated on a 1099 rather than a W-2.

So over the next several months, we began giving him updates as to the family’s health issues as well as the effect on the economy of their business.

All while making absolutely certain that the company kept current on their payroll taxes for current quarters.

Over this period of time, we showed a picture that if the company stayed current with their taxes and also paid the current medical bills they would have about $250 a month left over to go towards their million dollar arrearage.

Eventually, I sent updated financial information to the revenue officer that showed the family was “in the red” on an average monthly basis. Even with that information, I requested an Installment Agreement of $150 per month.

We waited…and waited…and waited some more.

After getting no response for almost three weeks, we used a special process for practitioners where we are able to see online what is going on with the business or individual taxpayer account.

The online transcript showed that the revenue officer had declared our clients’ IRS account as “Currently Not Collectible”. This means that the Service will not require payments towards the prior balance for as much as three years.

Eventually, the revenue officer informed us of this action and said he would simply renew the “Not Collectible” deputation whenever it came up for review as long as the business owners stayed current.

This, their million dollar balance will eventually expire—in about six years in this particular case. And the liability will “fall off” entirely.

One of our most successful cases ever, and it couldn’t have come at a better time for a very deserving family.