The IRS will place a taxpayer in Partial Pay Installment Agreement when it determines that the taxpayer has no ability to make monthly payments that will fully satisfy the debt within the Collection Statutes. In this case, our client was able to settle with the IRS and agree to a monthly payment that was a fraction of what was initially owed.
Background
A pest services corporation became delinquent on IRS payroll taxes for several years and had three years worth of missing tax returns. With the help of Omni Tax Solutions, the company was able to get current with its payroll tax deposits. A Revenue Officer was assigned to the tax liability and the corporation had an outstanding tax debt of $256,000.
Challenge
The missing tax returns exposed the corporation to a levy action. Finding a tax return preparer who could prepare 3 years worth of forms 941, 940, and 1120 within 30 days, per the IRS deadline, was a challenge. The corporation had previously defaulted four Installment Agreements with the IRS, which made it more difficult to be approved for a new one given this history.
Solution
We immediately connected the owner with a tax return preparer from our referral network to file all the missing tax returns. This first step was crucial to preventing immediate collection action. The corporation’s financial statement indicated a small profit. It was important for the corporation to show viability to qualify for an Installment Agreement. We proposed a Partial Pay Installment Agreement of $342 per month based on the corporation’s financial situation, even though this amount will not fully pay the tax liability within the applicable collection statute.
Result
The IRS approved the proposed Partial Pay Installment Agreement for $342 per month with a 24-hour turnaround. The corporation was able to operate and continued to focus on increasing profitability.
