In the world of tax resolution, attention to detail is crucial, and even the smallest of errors can have significant consequences. However, every now and then, an unlikely and unexpected event occurs that works in favor of a taxpayer. In this fascinating case study, we’ll delve into the story of an “installment agreement typo” that turned out to be a fortunate twist for one particular individual. Join us as we analyze the events surrounding this unusual occurrence, and discuss the lessons CPAs, tax professionals, and enrolled agents can learn from it in order to better serve their clients and navigate the complex landscape of tax resolution with confidence and accuracy.
You don’t often hear of the IRS putting a smile on someone’s face. But there’s a happy taxpayer out there who’s grinning ear to ear, while the IRS deals with an expensive lesson in the value of proofreading. In fact, the oversight cost them tens of thousands of dollars they will never recoup.
The taxpayer was hoping for an extension for an extremely large tax bill. He contacted the IRS with the request and they agreed. Instead of cutting him a little slack, however, a typo on his installment agreement allowed him to walk away free of his debt of $57,000.
Installment agreements are common, especially when hardship issues or large tax bills make it difficult for taxpayers to pay their taxes. In this particular case, the IRS allowed an extension, and upon acceptance by the taxpayer, drew up paperwork detailing the terms of the agreement. The taxpayer signed the document and all should have been well—except for one thing.
There was a typo.
The collection period for a $57,000 tax liability was extended … to a date that didn’t exist. The waiver read “May 8, 20015.”
As expected, the taxpayer received an IRS notice saying that he defaulted on his installment agreement and the IRS proceeded to levy. The taxpayer responded, arguing that the typographical error rendered the waiver invalid.
Why? The waiver was not agreed to in connection with an installment agreement. It gets worse.
Ready for the kicker?
The period of limitation for collection relating to 1998 had expired.
Per IRC §6502(a) The period of limitation for collection may be extended by waiver if the extension is agreed to at the same time an installment agreement is entered into.
The court found that an installment agreement was not agreed to in connection with the waiver. The 10-year period of limitation for collection had expired and the tax debt rendered uncollectible. The IRS did not pass GO and they did not collect $57,000. End of story.
Are you elbows-deep in tax filing? Take a break and mark your calendar for an IRS Solutions webinar introducing our Tax Resolutions Software.
IRS Solutions software can help tax resolution experts free up more daily hours. Learn the 4 Benefits of Streamlining Manual Processes with Tax Resolution Software. Get started in tax resolution today. Learn more about all of the features IRS Solution membership brings.