Foundation Tax Services

Doubt as to Collectibility

Under this basis, there is doubt that the amount of tax owed can ever be paid back in full. In order to successfully negotiate this type of offer in compromise, the taxpayer must demonstrate through complete and thorough financial statements and supporting documentation that there are insufficient assets and income to pay the full amount of tax owed.

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Doubt as to Liability

The IRS may also accept an offer in compromise when doubt exists that the amount of tax owed is correct. The taxpayer needs to explain why they believe that they do not owe the tax that they would like to compromise. Financial inability to pay will not be considered under this basis alone.

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Effective Tax Administration

Under the third basis for an offer in compromise, there is no doubt that the tax owed is correct and there are sufficient assets and income to pay the entire liability. However, the taxpayer believes that, due to exceptional circumstances, it would be unfair and inequitable to require full payment of the tax. Such circumstances can include the following:

• 1) the taxpayer is incapable of earning a living because of a long term illness, medical condition, or disability, and their financial resources will likely be exhausted in order to provide for their own care and support;
• 2) although the taxpayer has certain monthly income, that income is exhausted in order to care for dependents that have no other means of support; or
• 3) although the taxpayer has certain assets, they are unable to borrow against the equity in those assets and liquidating assets to pay outstanding tax liabilities would render the taxpayer unable to meet basic living expenses.

If the offer in compromise is accepted, payment can be made via one of three options:

• 1) cash (within up to 90 days of acceptance);
• 2) short-term deferred payment plan (payable within 24 months of acceptance); or
• 3) a long-term deferred payment plan (payable over the remaining time left on the collections statute).

Once the offer in compromise is accepted, the taxpayer must remain in compliance with all filing and payment obligations, including staying current with quarterly estimated tax payments and not incurring any new tax debt, for five years or until the offer amount is paid, whichever is longer. Failure to abide by these terms may result in the default of the offer in compromise and the reinstatement of the original tax liability.

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Contact our tax professionals and we can discuss with you the options of the offer in compromise so you can get back to living your life and stop stressing about the IRS or what collection action they will take next!



Installment Agreement

An Installment Agreement is a payment arrangement whereby the government allows a taxpayer to pay liabilities over time. Once a payment plan is established, the IRS will not take enforced collection action, including the levy of bank accounts or wages, as long as the taxpayer remains current with all filing and payment obligations. However, interest and penalties would continue to accrue until the outstanding balance is satisfied. Additionally, a tax lien may be filed as part of the terms of the installment payment agreement, depending on the amount of the total liability.

Whether the IRS is demanding full payment up-front or a payment plan that is substantially higher than what you can afford to pay, we can negotiate to set up an arrangement for the lowest possible monthly payment and also provide you with various options for making those payments, including via the Electronic Federal Tax Payment System, direct debit, payroll deduction, credit card, and payment by check or money order. Since the government will not agree to an installment agreement until all necessary tax returns are filed, we can also prepare and file any and all returns to bring you into compliance before arranging a payment plan.

If you cannot afford to make monthly payments and do not qualify for another type of tax relief, such as an offer in compromise, we will negotiate to have your account placed in a "currently not collectible" status. By doing so, you will not be required to make any payments and the IRS will not pursue collection action. This option may provide you with an opportunity to wait for the collections statute to run and the liabilities to expire.

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Wage Garnishment/Levy

The government has broad powers to seize assets in order to satisfy unpaid tax debt. The IRS may issue a tax levy against an individual's wages, salary, and other income, including fees, bonuses, and commissions. This is typically called a wage garnishment. The IRS may also attempt to collect an unpaid tax liability by issuing a tax levy against bank accounts. However, there are certain limitations on these powers to seize property. In the case of the taxpayer's personal residence, the IRS may not seize the property without written approval of a federal district court judge or magistrate. Tangible personal property or real property used in the taxpayer's trade or business may not be seized without written approval of an IRS district or assistant director. It is important to note how certain tax levies operate. A levy on wages and salary has a continuous effect as future paychecks are attached until the levy is satisfied or released. A levy against a bank account is a one-time levy that attaches to funds in the account at the time the tax levy is received. Once a banking institution receives a notice of levy, the bank is required to freeze all of the money in the taxpayer's account(s) as of that day. The bank must then wait 21 calendar days after a levy is received before paying the funds over to the IRS. This provides the taxpayer with an opportunity to notify the IRS of any errors in the levy or to negotiate a full or partial release of the funds. The IRS would generally release a tax levy if:

• 1) the underlying tax debt is satisfied or becomes unenforceable due to a lapse of time;
• 2) release of the tax levy would facilitate collection of the tax debt;
• 3) an installment payment agreement has been established;
• 4) the tax levy is creating a financial hardship; or
• 5) the fair market value of the levied property exceeds the liability, and the partial release of the levy would not hinder collection of the tax.
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Tax Lien

A tax lien is a claim on property to satisfy a tax debt, and a public notice is generally filed to protect the government's interest in unpaid taxes that are owed. By federal law, the IRS is given an automatic lien on a taxpayer's property, including real, personal, tangible, intangible, and after-acquired, when the taxpayer is notified of a tax debt and the debt is not paid within ten days.

A "Notice of Federal Tax Lien" is then filed to notify the public and the taxpayer's creditors that the IRS has a claim against the taxpayer's property. The tax lien becomes part of the public record when it is filed with the clerk of the county in which the taxpayer lives, operates a business, and/or owns real property. The IRS must then notify the taxpayer within five days of the tax lien filing of the right to a hearing. At the hearing, the taxpayer can contest the validity of the lien. If unsuccessful, the taxpayer may appeal the determination to the U.S. Tax Court or a federal district court.

A tax lien would be released once the underlying debt is satisfied or it becomes unenforceable due to the lapse of time. The tax lien may also be released once an offer in compromise is accepted and the offer amount satisfied. However, even after it is released, the tax lien may be reflected on the taxpayer's credit report for up to ten years and negatively affect their credit and borrowing ability.

The IRS may withdraw the public notice of tax lien before full payment if:

• 1) the filing of the notice was premature or was not in accordance with administrative procedures;
• 2) the taxpayer entered into an installment agreement to pay the tax debt;
• 3) withdrawal of the notice would facilitate collection of the tax debt; or
• 4) withdrawal of the notice would be in the best interests of the government and the taxpayer.
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Unfiled Tax Returns

We provide tax planning and prepare tax returns for individuals, businesses, and other entities. We especially focus on preparing returns for multiple years, multiple states, and for non-filers. If you are considering whether to prepare the tax returns yourself, there are several challenges that may lie ahead of you. You must keep in mind that the tax laws and forms change every year, and you may find it difficult to research the necessary tax codes and/or obtain the necessary tax forms. Also, you may be missing some or all of your records that will be needed to prepare those returns. Furthermore, you may not need to file tax returns for all of the years that you believe may need filing.

Let us assist you in determining which tax returns need to be filed, and we will work with you to prepare those returns as aggressively and ethically as possible. We will obtain all of your records that are on file with the IRS, and possibly the state tax agencies, and guide you in reconstructing any necessary information or documentation that may be missing.

We have the resources, knowledge, and expertise to prepare any and all types of returns for you, including the following:

• Individual
• Corporate
• Partnership
• LLC
• Employment
• State

Please contact one of our highly trained and skilled tax professionals to discuss your situation and give you their undivided attention.

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Innocent Spouse

If you are married, it is very likely that you will file a joint tax return to minimize your tax liability. However, by filing a joint return, you are agreeing to be held jointly and severally liable for any and all taxes, penalties, and interest due on the joint return. This is true even if a divorce decree or other agreement states that your spouse or former spouse will be responsible for the tax liabilities. However, there are provisions that may protect one spouse from the mistakes of another. If you find that the IRS is attempting to collect on a tax that was incurred jointly with a spouse or former spouse, you may qualify for one or more of the following types of relief:



Innocent spouse relief

This type of relief is available if there is an understatement of tax or a deficiency on a tax return due to erroneous items of the spouse or former spouse of the requesting taxpayer. A deficiency would result when the IRS assesses an additional liability on unreported income or disallowed deductions. The taxpayer must demonstrate that when the tax return was signed, the taxpayer did not know and had no reason to know that the understatement of tax existed. The IRS will take into account all the surrounding facts and circumstances in order to determine whether it would be unfair to hold the requesting taxpayer liable for the understatement of tax.

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Separation of liability

This relief is similarly available if there is an understatement of tax or a deficiency on a tax return. The liability for the understated tax may be separated such that the requesting taxpayer is granted relief from the liability. In order to qualify for this relief, the requesting taxpayer must be divorced, legally separated, or living apart from the spouse or former spouse at all time during the 12 months prior to the filing of the request. Separation of liability applies only to amounts owed that are not paid, and the IRS will not refund amounts that have already been paid.

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Equitable relief

If the taxpayer does not qualify for separation of liability or innocent spouse relief, equitable relief may be requested in which case the IRS may determine that the taxpayer should not be held liable for any understatement or underpayment of tax after taking into account all of the facts and circumstances. This type of relief is primarily requested when the requested taxpayer believed that the spouse or former spouse would pay the tax due on a joint tax return but failed to do so.

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As part of their investigation, the IRS is required to contact the spouse or former spouse of the taxpayer that is requesting relief from liability. The IRS must allow the spouse or former spouse to provide information that may assist in determining the extent of relief from liability. However, the IRS will not provide information to the spouse or former spouse that could infringe on the privacy of the requesting taxpayer. If that taxpayer is a victim of domestic abuse and fears that filing a request for relief will result in retaliation, the IRS can be alerted to the sensitivity of the requesting taxpayer's situation. While this does not result in special consideration, evidence of abuse is one factor that the IRS considers for certain types of relief.

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Penalty Abatement

The IRS has the authority to assess over 140 different types of penalties, which include the following:

• failure to pay
• failure to file
• estimated tax
• failure to deposit
• return related
• preparer/promoter
• information return

The purpose of penalties is to encourage voluntary compliance to fulfill certain obligations, i.e, preparing an accurate return, filing it timely, and paying any tax due. Since the application of these penalties must promote a tax system that is fair and effective, a taxpayer may seek relief from penalties if they have not been administered uniformly, accurately, and impartially. The taxpayer has the opportunity to have their interests heard and may qualify for relief from those penalties under one of the following categories:

• reasonable cause
• statutory exceptions
• administrative waivers
• correction of service error

Under the most common method of abatement, reasonable cause, the IRS will look at all of the facts and circumstances surrounding the situation that led to the assessment of the penalties. Relief will be granted on the basis of reasonable cause if the taxpayer exercised ordinary business care and prudence in determining their tax obligations but was unable to comply with those obligations. The existence of any of the following factors may establish reasonable cause:

• death, serious illness, or unavoidable absence
• unable to obtain records
• incorrect advice from the service
• incorrect advice from a tax advisor
• fire, casualty, natural disaster, or other disturbance
• official disaster area
• service error

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