Synergy Staffing, Inc. Fka Personnel Connection, Inc. v. United States Internal Revenue Service

The district court held that the taxpayer’s administrative claim failed to give the IRS adequate notice of one of the bases for its claim of entitlement to abatement of late-payment penalties. We disagree, and hold that the taxpayer’s claim was, indeed, sufficient to put the IRS on notice of the nature of the claim. We reverse that portion of the ruling.

The district court also held that the taxpayer failed to establish “reasonable cause” to avoid the imposition of a late penalty. Although the taxpayer offered evidence that it had financial difficulties, the taxpayer failed to show what cash it did have on hand and how it spent its funds in lieu of paying its taxes. On this point we agree with the district court, and affirm that part of the district court’s order.

I. Background

Synergy Staffing, Inc. is a corporation that provides temporary employee services. Beginning sometime in 1988, Synergy failed to pay its employee payroll taxes on time, resulting in the imposition by the IRS of penalties and interest. In the following ten-year period, whenever Synergy made payroll tax payments, the IRS applied Synergy’s payments to the oldest amounts due. This was despite an…