Tax Controversy
IRS Tax Matters
Receiving correspondence from the IRS can evoke anxiety. However, it’s crucial not to disregard these matters.
Unopened letters may contain vital information related to tax issues, appeal rights, or critical deadlines. Ignoring the IRS could exacerbate problems rather than resolve them. Seeking professional IRS tax assistance is advisable, allowing you to collaboratively address the issues and work toward a favorable resolution.
Our team analyzes federal tax matters and recommends appropriate courses of action, considering your rights and available remedies. Our aim is to achieve positive outcomes while minimizing the stress typically associated with tax-related challenges.
Assistance for Non-Filers
Failing to submit timely tax returns exposes taxpayers to severe penalties, interest accrual, and potential criminal prosecution.
Substitute for Return: Non-filers face the risk of the IRS preparing a tax return for them, known as a “substitute for return.”
Implications of Substitute for Return: A substitute for return is generated based on third-party information (e.g., Form W-2, Form 1099-B). Taxpayers may miss out on deductions, credits, or basis in securities sales. Owed balances could exceed the proper tax due, and the IRS may initiate collection actions.
Collection Due Process Hearings
Taxpayers can request a Collection Due Process (CDP) hearing upon receiving collection notices, such as the Notice of Federal Tax Lien Filing or the Final Notice of Intent to Levy.
Purpose of CDP Hearing: The CDP hearing allows taxpayers to discuss the appropriateness of the lien or levy and explore alternative collection methods. It ensures a level playing field and curtails aggressive IRS collection tactics.
Timely Request and Statute of Limitations: A properly filed CDP hearing request provides temporary relief from IRS collection efforts. However, missing the 30-day deadline may lead to alternatives like an Equivalent Hearing, which lacks appeal rights to Tax Court.
Note: Making a Collection Due Process hearing request also extends the ten-year Statute of Limitations the IRS has to collect the tax so it may not be the best course of action for all taxpayers.
Federal Tax Liens
The IRS can place a lien (FTL) on your property if you don’t pay taxes owed. This public notice affects your credit score and makes it harder to sell assets or get loans. It applies to all your belongings, including businesses. Even after paying the debt, the FTL stays on your credit report for seven years unless you take steps to remove it. We can help you prevent or remove an FTL.
Lien Release:
- A lien release occurs when the taxpayer fully pays the corresponding tax liability.
- It also happens if the lien is no longer enforceable due to the Statute of Limitations on collection expiring or when the IRS accepts an Offer in Compromise that the taxpayer pays in full.
Selling, Refinancing, or Collateral Use:
- In such cases, taxpayers can apply for a “lien discharge” (removing the lien from specific property) or “lien subordination” (allowing other creditors to move ahead of the IRS).
- Discharge facilitates property transfer free of the lien, while subordination eases loan or mortgage acquisition.
Lien Withdrawal:
Some taxpayers may qualify for “lien withdrawal” in the following circumstances:
- If liabilities are fully paid.
- If the lien was filed in error.
- If the lien is unenforceable.
Innocent Spouse Relief Claims
Filing joint tax returns makes spouses equally responsible for any tax issues. This means each is on the hook for 100% of the tax, interest, and penalties owed, even if one spouse caused the problem.
However, there’s relief available! The Innocent Spouse Relief program can shield a qualifying spouse from some or all of the tax burden. To qualify, you must generally show the tax mistake was solely your spouse’s fault, you didn’t know (and shouldn’t have known) about it, and it would be unfair to hold you responsible.
The IRS considers various factors, and the rules differ slightly for separated or divorced couples. Importantly, there’s a deadline to request relief, so act fast if you believe you qualify. We can help you navigate the process, from the initial request through any appeals or legal actions needed.
Installment Agreements
When paying the full balance at once isn’t feasible, Installment Agreements allow gradual payment over time.
Interest and penalties continue to accrue, making it suitable for taxpayers with adequate income but no immediate lump sum.
Partial Pay Installment Agreement (PPIA):
- PPIA lets taxpayers pay only a portion of the total balance due.
- IRS accepts PPIA under specific circumstances:
- No assets or equity.
- Inability to sell or borrow against equity assets.
- Enforcement deemed inappropriate.
- Inability to pay in full by the Collection Statute Expiration Date (CSED).
PPIA Review:
- Unlike regular Installment Agreements, PPIA undergoes IRS review every two years.
- Payments may adjust based on the taxpayer’s financial condition.
IRS Individual and Business Tax Audits
Facing an IRS audit? Don’t panic! We help individuals and businesses navigate audits for income tax, withholding, and more. While audits are uncommon, a prompt and professional response is key.
Audits can be stressful and time-consuming, often requiring extensive documentation like receipts, bank statements, and past returns. An experienced tax representative can be invaluable. We fight to minimize your tax burden and reach a swift, favorable resolution, protecting you from IRS collection action such as liens and wage garnishments. Let us guide you through the audit process.
IRS Offer in Compromise
Taxpayers unable to pay their full tax bill may qualify for an Offer in Compromise, allowing them to settle their tax liability with the IRS for less than the full amount owed.
Grounds for Offer in Compromise:
- Doubt as to liability: When a genuine dispute exists regarding the correct tax debt.
- Doubt as to collectability: If assets and income are insufficient to cover the full tax liability.
- Effective tax administration: When full payment would cause economic hardship or for compelling policy reasons.
IRS Review and Acceptance:
- The IRS assesses the taxpayer’s financial information, including net equity in assets (real property, automobiles, bank accounts) and future income potential.
- We submit Offers in Compromise when financial data supports it, avoiding wasting time and money.
Payment Options:
- Accepted offers can be paid in a lump sum or through installment payments.
Levies and Wage Garnishments
When a taxpayer has an outstanding balance, the IRS initiates collection steps, usually in the form of a levy. A levy is a legal seizure of the taxpayer’s property to satisfy tax debt. Examples include bank levies, third-party levies (employers, customers), and property seizures.
Application of Levy Funds:
- Funds obtained via levy are used to pay off the oldest tax, penalties, and interest.
- Voluntary payments can be strategically directed by the taxpayer.
Exemptions and Challenges:
- Some properties and income sources are exempt from levy. For example, in the case of wage garnishment, a small part of the taxpayer’s wages may be exempt from the levy.
- Taxpayers can challenge levies based on statutory rights.
Hardship and Resolution:
- Levies may be released for hardship, but the tax debt remains.
- Options: Installment agreements, offers in compromise, and other solutions.
Penalty Abatement Requests
The IRS assesses millions of penalties annually to encourage tax compliance. However, qualified taxpayers can seek relief from penalties upon request.
Grounds for Penalty Abatement:
- Reasonable Cause: Taxpayers may qualify for abatement if they had reasonable cause for non-compliance.
- Factors considered: General compliance history, ordinary business care, and prudence.
Sound Reasons for Non-Compliance:
- Valid reasons include:
- Death, serious illness, or unavoidable absence.
- Fire, casualty, natural disaster, or other disturbances.
- Inability to obtain necessary records.
- Exercising ordinary business care but still unable to meet tax obligations.
First-Time Abatement Penalty Waiver
- Available to taxpayers who haven’t received significant penalties on the same type of tax return in the past three years.
- Compliance with all filing requirements is necessary.
Trust Fund Recovery Penalties
Trust Fund Recovery Penalty holds an individual personally responsible for a business’s outstanding IRS liabilities.
Personal Responsibility
- Responsible persons include officers, employees, corporate directors, shareholders, and members of partnerships or nonprofit boards.
- If held personally liable, an individual’s personal assets may be pursued by the IRS, via liens and levies.
- The TFRP is nondischargeable in bankruptcy.
Tests for Liability:
- The IRS applies two tests:
- Did the person have a duty to collect, account for, and pay over trust fund taxes?
- Did the person willfully fail to perform this duty?
Willfulness Defined:
- Willfulness involves voluntary, deliberate, and intentional actions.
- The IRS must demonstrate that the responsible person was aware of outstanding taxes and either intentionally disregarded the law or was plainly indifferent.
- Failure to address mismanagement after notification of unpaid withholding taxes satisfies the willfulness requirement.
Our representation assists taxpayers who encounter a proposed Trust Fund Recovery Penalty or have already been assessed the penalty. We work to reduce or eliminate these penalties.
