Case Study

WilliamsMarston Clears the Way for Navigating High-Stakes International Tax Challenge

Discover how WM helped a U.S. subsidiary navigate unexpected IRS notices and potential exposure of $1.3M amid high tensions and pressure.

The Challenge

U.S subsidiary found themselves in an international tax dilemma as they failed to remit withholding tax on interest payments made to foreign parent.

In a constant state of attrition among the finance group and having experienced a change in their tax service provider, a U.S. subsidiary was caught by surprise when they began receiving Internal Revenue Service (IRS) notices and collections for failure to remit withholding tax that had been reported to the IRS as paid by the U.S. subsidiary by prior tax service provider.

The company confirmed that large interest payments had been made over the years and reported to the IRS, but the proper 10% tax was never withheld and remitted to the IRS. In a state of frequent attrition, the company acknowledged that they failed to implement a withholding payment system and comply with the tax laws. As a result, the foreign corporate parent was facing a potential U.S. tax exposure of over $1.3M, including interest and penalties for the remittance failures.

Tensions were high, blame was rampant and the IRS was aggressively pursuing the unpaid taxes with frequent notices and collection attempts, even threatening liens and passport deactivation. Worse, the cash to pay the outstanding liability was not on hand.

The Solution

WM conducted in-depth research and fact-checking for the company and prepared a thorough appeal to the IRS, while providing consistent support during the nine-month case review.

WM immediately researched the issues, confirmed the applicable withholding tax rates, prepared the treaty-based documentation and interviewed management and the internal finance team to obtain all the necessary facts going back to 2016.

Based on the historical facts and circumstances, WM prepared a thorough appeal to the IRS based on reasonable cause standards for failure to remit the withholding tax. The team analogized to favorable case law and distinguished unfavorable authority, coordinating with the company’s attorneys and senior-level management at the foreign parent company to finalize a detailed letter to the IRS seeking penalty and interest abatement.

During the nine-month waiting period while the IRS reviewed the case, the team maintained constant communication with the foreign parent and U.S. subsidiary, reassuring them as the subsidiary continued receiving ominous notices and collections attempts from the IRS.

WM diligently drove consistent communication with the appointed IRS agent—via a Power of Attorney (POA)—regarding status updates and meeting information requests promptly to ensure the case’s progression.

The Result

The company successfully resolved the case with no outstanding liability.

After almost two years since the U.S. subsidiary contacted WM, the IRS finally issued a notice of case resolution two weeks before year-end. The IRS closed and resolved all taxes and tax returns for the years 2016 through 2021, concluding that the U.S. subsidiary has no outstanding liability.


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