Case Studies


In June 2013, Jimmy walked in our office distraught. His bookkeeper disappeared. She was handling all payroll functions, including all deposits with tax agencies. Jimmy was oblivious to the fact the taxes were not paid. Fourteen months after the bookkeeper’s disappearance, the IRS begins to send Jimmy notices.

Jimmy signed Power of Attorney’s for all three tax agencies, giving us authority to act on his behalf, , request tax information. We pulled tax records, talked to all tax agencies to place a HOLD on any Enforcement Action.

A detailed spreadsheet showing Jimmy all the taxes he owed, was formulated. This analysis also included the agencies that were owed on his personal side.

In August 2013, Jimmy came in our office to review the spreadsheet. 300-pound men do cry when they are told they owes $530,896. Jimmy had no idea it was this far out of hand.

The spreadsheet outlined a plan to pay all 5 tax agencies at play, (3 business, 2 personal) in 5 years.

By now a Revenue Officer was involved. She was on board with the TDRS Plan.

The Plan included:

  • Paying the IRS off in 6 years (Business); almost $200,000 in penalties were removed
  • Paying the state off in 2 years (Business)
  • Paying Unemployment off in 2 years (Business)
  • Paying part of IRS off in 3 years (personal)
  • Completing an Offer-in-Compromise for 2003-2005 Personal (Refer to B below)

Our firm proceeded as planned. All agencies were paid off. All liens are removed. Jimmy recently moved; he had no issue obtaining a mortgage.


The IRS states that when an Offer-In-Compromise is submitted it cannot be for $0; at least $1 must be Offered.

Beginning in 2007, Jimmy was audited for 2003, 2004 and 2005, due to excessive losses on his Schedule C (Sole Proprietorship) business. The audit concluded he owed over $100,000 more in taxes. During the audit, a CPA and an accountant independently reviewed his books for these years and documented the financial information was correct.

The IRS audit was not properly completed. This was proven in the original submission. However, the IRS rejected our $1 Offer. The IRS office completing the review of the Offer stated they would consider an Offer but it had to be “reasonable. $1 was not enough money. $12,500 was used from Jimmy’s current year refunds to pay down the $100,000.

An In-person Appeal was requested and accepted. Months later, at the Appeal meeting, the important facts were outlined. At the meeting, our firm requested the Appeals officer study the facts and if she did, she would agree with our findings. Such facts were:

  • The IRS Auditor never reviewed Jimmy’s personal bank account, a significant factor in the violation of the Internal Revenue Manual.
  • The IRS changed auditors frequently during the audit. BY mid-2008, the IRS auditor was under pressure to complete the audit. (It dragged on for years.) Jimmy was blamed for the delay, when in, there were no facts to prove this. In the end, the auditor used Jimmy’s 2008 income (verbally spoken) which was grossly inflated.
  • When the auditor calculated the amount owed, she did not consider the fact that Jimmy had W2 wages in 2007 and 2008.

Jimmy NEVER signed that he agreed with the audit findings. Court cases were used to support our position such that even though it states after 30 days the audit findings cannot be changed, duress of the taxpayer can be used as an argument to throw out basically this premise.

The Appeals Officer agreed with our finding and awarded the $1 settlement.


Don took over his brother’s failing business for $1. In doing so, Don assumed all the business’ tax debt. Our firm made him aware of the tax debt.

As our firm was in the process of working with all three tax agencies, the Unemployment Agency levied 100% of the cash in the business’ bank account. This was the money Don was living on-over $11,000.

He called us in a State of Panic. Our firm worked with the Levy Department in the Unemployment Agency and had 100% of the money returned to his bank account – In One Week. A Payment Plan was negotiated with the Unemployment Agency.


Nancy, recently divorced, came in our office in June 2018. She had not filed her 2016 and 2017 1040s because she was afraid she would lose her refunds totaling $5,000 each year. A CPA prepared an Injured Spouse filing for 2015 with the IRS and it was denied for many reasons.

We filed 150 pages of Injured Spouse documentation to justify why the IRS should refund Nancy her 2016 and 2017 refunds and also 2015.

In two weeks, our firm received a letter from the IRS agreeing with our position. Nancy received a deposit in her bank account for over $15,000, which she used to buy her first new home since her divorce.


At 70 years old, Dr. Jones is receiving many notices to pay $64,832 in unpaid taxes for Tax Year 2008 and to file tax returns for 2009 to 2014. The 2008 tax return showing $64,832 owed, was compiled from an IRS SFR (Substitute for Return). This means the IRS took all income reported by companies on financial institutions and prepared Dr. Jones 1040 without his knowledge. AND there were no deductions included in the 2008 IRS 1040.

The main issue in this case is that Dr. Jones had a stroke. He was unable to provide the required records. He also had to quit working. Going back to 2008 to prepare a correct 1040 was impossible.

Communications with the IRS was futile. Their only response was that the tax returns from 2009 to 2014 must be filed.

A 433F (Statement of Collection-Financial Needs) was submitted to the IRS to show that Dr. Jones could not pay the $64,832 in taxes and file returns from 2009 on. Due to this, the IRS marked Dr. Jones case – CNC (Currently Not Collectible) for 2008. The IRS still wanted returns filed for 2009 to 2014.

To stop the constant flow of letters and potential problems with the IRS, our firm contacted the IRS Taxpayer Advocacy Service (TAS). They were able to work with the IRS and flag all tax returns as not required. From 2015 to present, our firm filed Dr. Jones 1040’s to prove his financial situation. He is only living on social security and a small pension of a few hundred dollars a month.

To this day, Dr. Jones calls us his Angels.


In 2006, George’s 21-year-old son, Trevor, was driving intoxicated and killed a woman. Trevor was found guilty of vehicular homicide. George’s son is incarcerated for life.

The stress of this put George in the hospital off and on for years. Not only did George lose a son to imprisonment, but he was forced to sell the family business. Trevor’s family filed a lawsuit for all of Georges assets.

George came to our firm desperate for assistance with the IRS. George had not filed a tax return (1040) since 2005.

The IRS started to send SFR’s (Substitute for Returns) for 2006 and 2007. Our firm immediately contacted the IRS and State and placed a HOLD on his accounts. We completed all years of returns to place George in compliance, both federal and state. Once the returns were posted, interest and penalties ensued, some quite large.

Once the returns were posted, interest and penalties ensued, some large. On our advice, George paid all penalties and interest. We filed Forms 843 (one for each year) for all years where penalties existed; even for one year that was $49.11. The total interest and penalty removal was $6,312 on all submitted #843’s.

Shortly thereafter, George showed up in our office with 5 checks from the IRS in hand. His question was, “Can I cash these?” The cash in hand paid for our fees, gave George money for a well-needed vacation, and the leftover money went into his savings account. Most important, he is in compliance and files his 1040 every year.


A 70-year old Colorado surgeon, Dr. Wilson, was 100% owner and occupant of 3 office locations. He continued to practice and not pay payroll taxes and personal income taxes. His business reported on Schedule C of his 1040; he paid self-employment taxes.

He came to our firm because a Revenue Officer required a 433B, a Statement of the Business Assets, Liabilities and Operations. With 3 locations in play, this would be a timely task.

After Powers of Attorney’s were accepted by the IRS, all transcripts were run and amounts owed were compiled on a spreadsheet. Dr. and Mrs. Wilson owed almost $500,000 to the IRS, Unemployment and State Agencies.

In a long conversation with the Wilson’s, they had no idea that they owed this much. Mrs. Wilson cried; Dr. Wilson was speechless. Over and over they said we were wrong. Their children were in shock.

At the Demand of the IRS Revenue Officer, a 433A was prepared, a Statement of Personal Financial Assets, Liabilities and Cash needs.

This case lasted 2 years before it was closed. The conclusion was:

  • Wilson developed terminal cancer and passed away. Before he died, he signed an Agreement to sell his practice (at a reduced price).
  • Our firm negotiated with creditors looking to be paid by the medical practice. When all was finalized, Dr. Wilson had another $800,000 in debt in his business. Not one creditor was paid-in-full. The IRS let all creditors be partial paid due to the fact that Dr. and Mrs. Wilson had 3 homes.
  • Our firm worked with the Lien Removal Department of the IRS. We worked on the sale of all three homes, one principal residence and two vacation homes. This required special forms and documentation. All homes sold for less than expected. The Wilsons did not have the money to maintain them properly.
  • In the end, the IRS was forced to accept hundreds of thousands less in tax payments.
  • Wilson developed Alzheimer’s and is living on her husband’s social security with family members. The fear the family has is that they will not have money for her to go into a Nursing Home.

You may ask – Why did they not file bankruptcy? In a bankruptcy proceeding, the Wilson’s would still face liquidation. Dr. Wilson had to sell his practice. There was some equity in the 3 homes, but not as much as hoped. Bankruptcy would have only delayed and complicated the inevitable. Once Dr. Wilson developed cancer, this was the best course of action.

Met with Tom and Mary Smith on July 11, 2016

The following resolution plan was developed.

  • Tom and Mary signed Michigan Tax Returns. Now need to send it over for signature. Christy Federspiel will mail all tax returns in hand.
  • 2010 Personal Form 1040 and Business Form 1120 Tax Returns were not posted with the tax agencies. This needs to be discussed with the IRS agent assigned to the Smith case. Levy payments for 2010 and 2012 need to be returned. Discussed with Tom and Mary Smith. Call IRS Agent to see if he can do anything or if I have to file a Form 843, for an Abatement.
  • Tom and Mary Smith and Christy Federspiel signed all the monthly Sales Tax Returns, and the Annual Returns for tax years 2010 to 2014. Tax years 2009 Sales Tax coupons/Annual Returns RIA forms need to be completed by Padgett Business Services.
  • Christy Federspiel needs to do a Lien search ASAP on Tom & Mary Smith along with their company.
  • If there are only the old State Liens, as it was discussed, acquire a new mortgage and do not need to send in the Sales Tax coupons.
  • If there are liens to be dealt with, work on removing them so the mortgage will easily go through.
  • At the “right time,” send in to the state:
  • Letter explaining “plan.”
  • All Sales Tax Returns.
  • “AFTER” Sales Tax Returns and coupons posted, within the State, file the “Offer-In-Compromise”
  • Christy Federspiel explained to the Smith’s the completion of this process may take until the end of 2017. There is 6 years Statute of Limitation on taxes filed on the State books before 2008. Christy contacted the State prior to the Smith meeting and the State said, they are not actively pursuing collection but the liens remain. This may be an issue during the Smith’s loan process.

Mary Smith gave Christy Federspiel the completed Sales Tax coupons for 2006 & 2007 and information on payments. However, when done this restarts the Statue of Limitations from the date filed. Padgett Business Services needs to file “Correct” amounts with the State to replace “Estimated”. Hold also until Mortgage is in place.

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We help you look ahead

Many small business owners think of tax season as a time to look in the rearview mirror at the previous year. At Padgett, we help you also look through the windshield. Not only do we look at last years finances to calculate what you owe, but we help you get a firm understanding of what your next year is going to look like—before the tax season even begins. We want to be more than just a tax service—we want to be the proactive business partner that you deserve. We are motivated by helping your business