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Personal Tragedy Can be a Defense Against IRS Penalties 

by | Nov 7, 2022 | Firm News, Tax |

Our client owned two successful companies that provided jobs for many and a steady income for our client and his family.  He came to our office after being contacted by a local IRS Revenue Officer attempting to collect past due penalties – in excess of $627,000 – for delinquent W-2s for 2010 through 2014. Notices of Federal Tax Liens had been filed against both companies and our client was distraught, looking for any relief.  

Once hired, we immediately established contact with the Revenue Officer and worked to calm the situation. Because the companies were flourishing, we knew the IRS would require full payment of the balances due, either through a payment plan or asset liquidation. However, from our initial consultation we learned that during the years at issue, our client had suffered a personal tragedy that virtually incapacitated him, severely limiting his ability to perform his duties as CEO of both companies.  As a result, someone else had stepped in to assume the day-to-day management of the businesses, and it was during this time that they had apparently failed to file the required W-2s with the IRS and Social Security Administration.  These extenuating circumstances became the basis for our tax penalty relief defense for “reasonable cause.”   

After our research and investigation, we filed our penalty abatement requests – based on our client’s temporary incapacity – with the Revenue Officer who, without much consideration, denied the requests and wanted to continue collections. We escalated an appeal request to the Revenue Officer’s manager to stay collections and were again denied. Undeterred, we immediately filed a CAP Appeal, asking the Office of Appeals to have collections stayed while we pursued the appeal. Finally, this was successfully granted, allowing us to pursue the penalty appeals.  For various reasons, the appeals took different tracks for each company, leading to conferences with several appeals officers, their managers, and a taxpayer advocate.  We were determined to tell our client’s story which we felt strongly supported a finding of “reasonable cause.” We stayed the course, and after a period of two years, the penalties were fully abated.    

At David Coffin PLLC, we understand that personal tragedies and hardship can cause a taxpayer to slip on their federal tax compliance obligations.  Too many times, a one-time event like this can cause a taxpayer to “get knocked off the tracks.” Their obligations then snowball to a point where they feel it will never be corrected.  If that is you, let us look at your situation.  In many cases, we can help provide a game plan to get you back on the tracks and the IRS problem behind you.