The American Legion Post 56 has struck a payment plan with the Internal Revenue Service regarding the tax debt the club possesses.

Cmdr. Roger Bakken said the deal is good for the club. It allows the American Legion to avoid about $29,000 in penalties.

The Legion owed the IRS $84,878 in unpaid payroll taxes, as of Nov. 6. The deal requires the club to pay $1,000 per month to the IRS until it is paid off, with the payments due on the 20th of each month. Bakken said if a payment is missed, the IRS will demand the full sum of the debt plus penalties.

Bakken said the club and its outside accounting firm were able to forge a payment plan with the IRS because the club has taken steps to be more fiscally responsible and to have more oversight of spending.

“They were happy we made changes and set it up into business units, like a company,” Bakken said.

He said the IRS also liked that the club made good strides on its tax debt to the Minnesota Department of Revenue. He said the club is on track to make its final payment on back taxes to the state in February.

In the Post 56 newsletter, Bakken called the payment plan “a second chance.”

The club has two Sunday morning breakfasts. It plans to use the breakfast from the second Sunday of the month to raise the money necessary to make the IRS payment. The one from the fourth goes to the club’s operating expenses. Bakken is asking his Legionnaires to volunteer to work the breakfasts to save the club, in addition to asking the community to show up and dine.

Post 56 Chaplain David Olson said the Legion members were “very encouraged by the new IRS plan.”

Post 56 still is asking the community for donations to its mortgage and debt reduction appeal, none of which goes toward tax payments. It goes toward paying off the mortgage and debts owed to vendors. However, reducing other debts helps free the club’s revenue to pay its back taxes.

The donations are sent to the Albert Lea-Freeborn County Chamber of Commerce Foundation, which as of Oct. 27 reports a donation total of $32,362 from 189 donations. Olson said the club still needs to raise about $50,000 to battle these debts.

People wishing to donate should send a check to the foundation at 2580 Bridge Ave. with the annotation “Legion Mortgage and Debt Reduction.” The donations are tax-deductible.

The American Legion kicked off a fundraising campaign in February after the severity of its debt problems due to mismanagement shook the leadership of the local veterans organization. With the change in leadership came changes in how the club manages and oversees its income and expenses. The Legion runs an eatery, banquet hall and bar at 142 N. Broadway.