(CN) – A founding member of the Isley Brothers may have a chance to make the IRS another offer for his back taxes a judge remanded his challenge to the IRS appeals office.
The Isley Brothers, founded in the early 1960s, had a long and successful career, with hits that included “Twist and Shout” and “It’s Your Thing.”
Ronald Isley filed for bankruptcy twice: in 1984 and 1997. He later was found guilty of tax evasion in California and was sentenced to 37 months in prison.
The IRS issued two notices of federal tax liens and two notices of intent to levy for the years of Isley’s tax evasion.
While in prison in 2007, Isley filed a request for a hearing, claiming the IRS was demanding too much money and that payments he had made were applied to the wrong periods, among other things.
In 2009, Isley submitted an offer in compromise for $1 million, which IRS settlement officer Nathan August accepted after it was amended. August recommended the IRS accept the offer, with a collateral agreement spanning from 2010 to 2014.
IRS chief counsel Ronald Chun then recommended that Isley’s offer be rejected, based on a finding that Isley did not file his 2009 tax return on time, among other things.
Isley appealed to the U.S. Tax Court.
The IRS claimed its appeals office did not have authority to accept Isley’s offer because it would compromise tax liabilities for the years Isley for which was convicted of tax evasion.
Isley argued he had the right to submit the offer and the IRS was required to consider it.
U.S. Tax Court Judge James Halpern found the relevant statutes barred the settlement officer from unilaterally accepting Isley’s offer or his amended offer, because they would have compromised his unpaid taxes.
Halpern also found, however, that it was premature for the appeals office to sustain levies against Isley, because among other things, Isley’s failure to file his 2009 tax return “was due to a mixup between his advisers as to who had that responsibility.”
“The estimated tax payment shortfall was due to the fact that estimated tax payments had been based inadvertently upon [Isley’s] ‘touring income’ but not his ‘royalty income,'” Halpern wrote.
Based on this, Halpern remanded for further consideration of Isley’s financial position, and to see if it warrants the submission of another offer in compromise or a payment installment agreement.
If either is warranted, Halpern said, the appeals office must seek approval from the Justice Department before proceeding.
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