IRS Eliminates $1.56 Million in IRS Trust Fund Recovery Penalties and Interest

DeWitt Law successfully resolved a complex IRS collection matter involving more than $1.56 million in Trust Fund Recovery Penalties (TFRPs) and accrued interest, securing the complete elimination of our client’s remaining federal tax liability.

After more than five years of strategic representation, installment agreement negotiations, and collection appeals, the IRS formally wrote off $1,561,204.07. All nine tax periods now reflect a zero balance.

The result was achieved without an accepted Offer in Compromise, bankruptcy, or litigation. Instead, our firm developed and executed a long-term collection defense strategy designed to protect the client from IRS enforcement while preserving his rights under the federal tax collection statute of limitations.

The Problem: More Than $1.5 Million in IRS Payroll Tax Penalties

Our client faced substantial personal liability arising from unpaid business payroll taxes for nine quarterly tax periods between 2005 and 2007.

In 2010, the IRS assessed $923,713.53 in Trust Fund Recovery Penalties against the client under Internal Revenue Code § 6672. With accrued interest, the outstanding liability ultimately exceeded $1.5 million.

Before retaining DeWitt Law in 2020, the client had unsuccessfully pursued multiple Offers in Compromise. Each offer was rejected, and the time those offers remained pending extended the period during which the IRS could legally collect the debt.

By the time our firm became involved, the IRS had already pursued significant collection measures, including federal tax liens and levies. The matter had also been assigned to an IRS Revenue Officer who sought a comprehensive review of the client’s financial circumstances.

With an overwhelming liability and the threat of continued enforcement, the client needed more than another settlement proposal. He needed a legal strategy for resolving the debt.

Our Strategy: Protecting the Client While Preserving the Collection Deadline

After reviewing the client’s financial circumstances, IRS account history, and applicable collection deadlines, DeWitt Law determined that another Offer in Compromise was unlikely to provide the most favorable resolution.

Instead, our firm pursued a Partial Payment Installment Agreement (PPIA) coupled with a carefully managed strategy focused on the IRS’s Collection Statute Expiration Date (CSED).

Under federal law, the IRS generally has ten years from the date of assessment to collect a federal tax liability. Certain events can suspend or extend that period. Once the applicable collection period expires, the IRS generally loses its ability to collect the remaining liability through its ordinary administrative collection procedures.

Our objective was to establish an affordable payment arrangement and protect the client against disruptive collection actions until the remaining liability could no longer be collected.

Negotiating an Affordable Payment Arrangement

In late 2020, our firm worked directly with the assigned IRS Revenue Officer to negotiate a Partial Payment Installment Agreement based on the client’s actual financial ability to pay.

Unlike a traditional installment agreement designed to pay a tax liability in full, a partial payment agreement allows a taxpayer to make payments based on available income and allowable expenses, even when those payments will not satisfy the entire outstanding balance before the collection period expires. Entering into a Partial Pay Installment Agreement does not generally add time to the IRS’ collection statute of limitations.

This arrangement provided the client with a manageable payment obligation while limiting the threat of additional enforced collection.

Defending the Agreement Against Repeated IRS Termination Attempts

Securing the installment agreement was only the beginning.

During 2022, 2023, and 2024, the IRS took steps to terminate the client’s payment arrangement, threatening to expose him to renewed collection activity and additional financial scrutiny.

DeWitt Law challenged those actions through administrative collection appeals and claims with the IRS Taxpayer Advocate Service.

Our firm successfully obtained reinstatement of the installment agreement in 2022 and again in 2023, helping preserve the client’s collection protections during critical periods.

Monitoring the IRS Collection Statute

Throughout the representation, DeWitt Law obtained and reviewed the client’s IRS account transcripts on a monthly basis.

This ongoing monitoring allowed our firm to track the applicable collection deadlines, identify account changes, and respond to developments that could affect the client’s collection status.

Because collection deadlines can differ between assessment periods and can be affected by statutory suspension events, careful transcript analysis was essential to the outcome.

The Result: $1,561,204.07 Written Off by the IRS

Recently, the applicable IRS collection periods expired.

On March 16, 2026, the IRS processed the expiration of the collection statutes and wrote off the remaining balances across all nine tax periods, totaling $1,561,204.07.

The financial result was substantial:

The resolution also eliminated a significant collateral consequence. Approximately one week after the write-off, the IRS reversed its certification of the client’s seriously delinquent tax debt to the U.S. Department of State, removing the federal tax debt certification that had placed his passport privileges at risk.

Our firm’s final review of the client’s IRS account transcripts in October 2026 confirmed that all nine quarters reflected a balance due of $0.00.

After years of uncertainty, collection pressure, and substantial personal financial exposure, the client was no longer facing collection of this $1.56 million federal tax liability.

Why This Case Matters

Many taxpayers facing substantial IRS debt believe their only options are to pay the liability in full, submit an Offer in Compromise, or pursue bankruptcy.

That is not always the case.

Under Internal Revenue Code § 6502, the IRS generally has ten years after assessment to collect a federal tax debt. However, determining the actual expiration date can be complicated by prior Offers in Compromise, installment agreement requests, administrative appeals, bankruptcy proceedings, and other events that suspend or extend the collection period.

For qualifying taxpayers, a Partial Payment Installment Agreement can be an effective collection resolution tool, particularly when the outstanding balance cannot realistically be paid before the applicable collection deadline.

This case illustrates the importance of evaluating the entire IRS collection history, not simply the amount owed.

Through careful financial analysis, effective negotiation, collection appeals, and long-term monitoring, DeWitt Law was able to protect our client’s interests and achieve the complete elimination of his remaining $1.56 million liability.

Facing IRS Collection or Trust Fund Recovery Penalties?

Trust Fund Recovery Penalties can expose business owners, officers, and other responsible individuals to substantial personal liability for unpaid employment taxes.

If you are facing an IRS Revenue Officer, federal tax liens, bank levies, or collection of an older tax liability, understanding your available resolution options and applicable collection deadlines is critical.

DeWitt Law represents taxpayers in complex federal tax collection matters, including Trust Fund Recovery Penalty assessments, installment agreements, collection appeals, and disputes involving IRS enforcement.

Contact DeWitt Law to discuss your situation with an experienced tax controversy attorney.

Past results do not guarantee future outcomes. This case result describes a specific client matter based on its individual facts and circumstances. Client-identifying information has been withheld to preserve confidentiality. This publication is provided for general informational purposes and does not constitute legal advice.