Accord and Satisfaction

 Jeffrey A. Prussin and Judith M. Prussin echo the immortal words of Mick Jagger’s and Keith Richards’ 1965 hit in a small-claimer from Judge Kerrigan, 2014 T. C. Sum. Op. 107, filed 12/8/14.

J&J had a push-and-shove with IRS over excise tax for a couple years (as Judge Holmes would put it, but I wouldn’t) on a pension plan, which they and their attorney settled.

They signed off on the Forms 5330 and 4549-E for those years.

Jeff also had a problem on his personal return for another year, but paid up.

IRS came after J&J for interest. J&J claim IRS implicitly renounced interest when they settled.

No, says Judge Kerrigan: “The settlement of disputed tax liabilities is governed by sections 7121 and 7122, which authorize the Secretary or an authorized delegate to settle any tax disputes and compromise any civil or criminal case arising under the internal revenue laws. The procedures under these provisions and the applicable regulations are the exclusive means by which a compromise or settlement will be binding on both the taxpayer and the Government. Accordingly, ‘no theory founded upon general concepts of accord and satisfaction can be used to impute a compromise settlement’.” 2014 T. C. Sum. Op. 107, at pp 8-9. (Citations omitted).

And the Section 7122 regs require an OIC, with the tender of properly-completed Form 656, the payment and the fee and the supporting documents and all that jazz.

J&J didn’t.

Judge Kerrigan repeats herself: “However, petitioner husband testified that petitioners did not actually sign any agreement with the IRS. The record also does not contain any evidence of a signed Form 656. Since the regulations dictate the exclusive means by which a binding agreement can be reached, and those regulations require the signing of a Form 656, the fact that neither form was signed is fatal to petitioners’ claim. Petitioners and respondent did not enter into a binding agreement as required by the statute.” 2014 T. C. Sum. Op. 107, at p. 10.

Takeaway–when you settle, send in a Form 656 with all the necessary doodads, or get an explicit stipulation signed by someone at IRS with authority, stating you don’t owe anything else, whether interest, penalties or additions.