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Clearly where you went wrong in instructing these people was using the orange highlighter instead of traditional yellow.

Complete the 203B. The problem we all have with this scenario is that NY (and a few other states) demand that total wages be allocated to NY on the W2. (So if the client made $50k, $1k in NY, the state portion of the W2 will show $50k for NY, $49k for PA, making it look like he made $99k.) Only way out of this is to complete the B. On request, some employers will send a letter, based on expense reports, to break down the state income. Without that, you have to count the days. The reason the states do this is that they want to tax you at your highest marginal tax bracket. In my example, if you only made $1k in NY you wouldn't owe any tax. If you made $50k, however, you'd be in the, say, 8% bracket. They want to make sure that $1k is taxed at 8%.

Yes, that is my understanding as well, they have to call so that IRS can combine the years. (I think the limit may be $50,000). And, yes, in that first agreement, they agreed they'd pay on time in subsequent years. They obviously did not do that. It makes perfect sense to me that they have to call. And be grateful as all get out for the consideration they are going to be given.

If the total owed is under $25K, I think they can get the two years combined. Limits may be higher, but I know someone who did this recently. They filed the second year with a balance due, an existing IA defaulted. They called IRS and got a new IA set up for both years combined. But they didn't do it online - they had to make the call.

Prepare the B.

I have one that had to revise agreements multiple years to keep adding new years (long story, includes a FL rental that fell into a sink hole, lack of NY w/h for hubby, tax preparer disappeared, and more). She made a call each year and asked nicely. It stretched her out until we got their withholding in good shape going forward. She still has a long way to go to pay off the older years; but at $200/month and no more new balances due, they will make it. Tell him to CALL.