Employment Tax Case

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  • #42825
    Michael O’Leary
    Participant

    In trying to set up an installment agreement for a business with delinquent payroll tax liabilities, using both the 433-B for the business and the 433-A for the owner, can you use the “one year rule” as you can in income tax cases?

    My client has a large annual alimony payment which ends in a year. If I can get him through the next 12 months, I think he can pay the back taxes and keep his company.

    #42828
    Eric Green
    Keymaster

    Michael, you can propose a payment plan for the company and then one for the individual with the step up when the alimony ends. The one-year rule only applies to individuals, not businesses, but you could use it for the individual here if you wanted to.

    If you set up the payment plan for the company and for the individual now with the alimony factored in, will it full-pay? If so I might go for that and that way the client gets breathing room when the alimony ends. If it wont and the IRS is balking then I would suggest the step-up after the alimony ends.

    #42829
    Michael O’Leary
    Participant

    Thank you Eric. If you look at his client today (with the alimony and my fee factored in) he looks like an OIC candidate. If you look at him next year, he looks like full pay.

    I have two concerns:

    1) I want to use the alimony ($50K a year) as an explanation for why the client got into this situation to head off the (slight?) possibility of a criminal referral – $150K delinquency.

    2) I’m sure the IRS won’t approve an OIC when they realize the client will have an extra $50K a year once the alimony ends in 2021. I plan on being upfront about this with them because I don’t want to be accused of not disclosing material facts.

    Thanks again.

    #42830
    Eric Green
    Keymaster

    Michael they will see the alimony will end, so we have to assume he can full pay. I would not file an OIC but instead an IA that steps up the month after the alimony ends

    #42831
    Michael O’Leary
    Participant

    Thank you very much Eric.

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