IRS Tax Resolution
We understand the overwhelming fear and anxiety that is often associated with tax issues, often coupled with the frustration of not finding clear answers. Our professionals will give your case the care and attention it deserves by laying out all of your options, making sure you are advised of your rights, and advocating on your behalf. Never let tax issues linger. Even a small tax liability can become a major problem if it is left unresolved. We are here to assist you with any tax issue you are facing, including the following.
Facing an IRS audit is a terrifying experience for most taxpayers. Knowing that an IRS agent plans to thoroughly review your records and put you on the spot with difficult questions can be overwhelming. We have represented both individuals and businesses in IRS audits, fighting to protect our clients’ rights and ensuring that all information has been considered. Don’t risk taking on the IRS yourself. Contact us to speak with an attorney to know your rights in an audit and how we can help.
Facts: Client, a commercial flooring sub-contractor and was audited for a 3-year period. Client’s tax return was prepared by an unenrolled tax preparer that used estimates and unreliable figures when preparing Schedule C of Client’s tax return. Client had limited records so business mileage, supplies, and contract labor expenses had to be re-constructed in accordance with IRS standards based on bank statements, supplier records, and limited receipts. The IRS auditor rejected these records and insisted that Client committed fraud.
Resolution: Case was appealed and the IRS reversed virtually all of the original auditor’s findings, allowing the re-constructed expenses.
If you are unsuccessful in challenging the IRS in an audit, there is still a chance to resolve the issue before taking the case to court through an audit reconsideration. This process allows a taxpayer to re-submit their position challenging an IRS audit decision by providing all relevant evidence, facts, and law, which is reviewed by the IRS.
Challenging Taxes in Court
Sometimes tax issues are forced to be resolved in court. This typically occurs when all administrative appeals with the IRS have been exhausted. It is critical to have the assistance of an experienced tax attorney when challenging the IRS or state taxing authority in court as it requires a deep understanding of tax law and strict procedural requirements.
Facts: Client’s 2009 tax return was audited and a six-figure assessment was proposed, primarily based on the Alternative Minimum Tax (“AMT”). Case was appealed and the IRS denied the appeal.
Resolution: Petition was filed in U.S. Tax Court challenging the assessment on the basis of incorrect application of the complex AMT deduction, particularly with regard to the AMT Net Operating Loss Deduction. Decision entered in favor of Client regarding AMT calculation, resulting in a reduction of assessment.
Unfiled Tax Returns & Complex Tax Return Preparation
The U.S. tax code is a massive body of complex laws and regulations intended to shape economic and social policy. The average American is overwhelmed by this complexity, especially self-employed individuals. Our professionals understand this complexity and understand how to accurately prepare tax returns, ensuring that the letter of the law is being carried out while also looking ahead for future tax savings. One of the first steps in resolving tax issues is ensuring filing compliance. This helps to prevent collection action, a substitute for return filing by the IRS, and sets the stage to begin resolving the liability. We will file any unfiled tax returns required to be filed, whether they are from ten years ago or last year.
Facts: Client owned a multi-million-dollar landscaping company that had not filed several years of tax returns. The IRS filed substitute tax returns that included gross income with virtually no expenses, resulting in massive tax liabilities.
Resolution: All missing tax returns were prepared. Tax returns were also prepared to replace the substitute tax returns filed by the IRS. Taxpayer’s tax liability was reduced by over $100,000 just from these filings.
Criminal Tax & Fraud
Tax fraud investigations, tax preparer investigations, criminal tax investigations, and indictments are very serious matters that require the immediate need for an attorney. If the government believes you have committed fraud, intentionally failed to file your tax returns, underreported your income, overstated your expenses, or otherwise evaded the payment of tax, you could face serious criminal penalties including jail time. Contact an attorney for a phone consultation to discuss your legal options.
Facts: Client was indicted under I.R.C. § 7212(a) for impeding the collection of alleged multi-million-dollar payroll tax liabilities. Client was also indicted for bankruptcy fraud. The tax liabilities at issue were nearly 20 years old and faced significant legal challenges.
Resolution: A plea agreement was entered into and Client was sentenced to significantly reduced jail time.
Discharging Taxes in Bankruptcy
There’s an old saying that all roads in law end in tax or bankruptcy. Our bankruptcy courts provide an opportunity for insolvent and financially struggling taxpayers, including individuals and businesses, to get a fresh start with their tax liabilities. Our firm focuses solely on the tax aspects of bankruptcy and can often re-litigate tax issues in bankruptcy court. If you are considering bankruptcy, please contact an attorney.
The IRS is authorized to hold individual taxpayers liable for the employment/payroll taxes owed by a separate business when certain conditions are met, often referred to as “trust fund penalties“. This is an extremely powerful tool for the IRS as it essentially “pierces the veil” of liability protection provided by LLCs and corporations and allows the IRS to hold individuals responsible, including employees with no ownership interest in the entity. The IRS conducts an initial report to determine if a taxpayer is responsible for these trust fund penalties. It is critical to be advised of your rights and consult a tax attorney.
Facts: Client owned a restaurant operating as a Limited Liability Company (“LLC”) that was struggling financially. Client decided to stop making federal payroll tax deposits for its employees in order to pay critical operating expenses for the company. Client ultimately was forced to file for bankruptcy. Client was under the impression that these taxes could be discharged and would remain solely liable by the entity. The IRS assessed massive penalties and interest for Client’s outstanding payroll tax liabilities. The IRS then assessed the “trust fund” penalty under I.R.C. § 6672 against Client personally. This liability was in excess of $200,000.
Resolution: All required returns were prepared to ensure filing compliance. An Offer in Compromise was prepared and the tax was settled by an approximately 75% reduction.
Innocent Spouse Claims & Tax Issues with Divorce
One of the most commonly rejected claims by the IRS is innocent spouse relief. This relief allows a taxpayer to escape liability when their spouse incurred understated income or overstated expenses, the taxpayer had no knowledge of the under or over reporting and it would be unfair to hold the taxpayer liable. These are extremely high hurdles to overcome and the skill and experience of a tax attorney can quickly narrow down your options. In addition to innocent spouse relief, the IRS provides other equitable remedies for spouses who are not directly responsible for a joint tax liability.
Facts: Client owned home jointly with Spouse and filed taxes separately. Spouse had pre-marital tax debt and tax liens were filed against Spouse only. Client and Spouse divorced and the Marital Dissolution Agreement required Spouse to transfer their interest in the home to Client and for Client to re-finance the home. Spouse did not disclose to Client the existence of the federal tax liens. Spouse issued a quitclaim deed to Client. Client discovered the existence of Spouse’s tax liens after the divorce when trying to re-finance the home. Client was unable to finance and was facing a balloon payment from a home equity line of credit. Client filed an innocent spouse claim without the assistance of counsel.
Resolution: Client retained our firm and a lawsuit was filed in state court for contempt against Spouse. Judgment was entered in excess of $50,000 against Spouse and Client was able to re-finance the home.
Levies, Liens & Garnishments
Levies, liens, and garnishments are some of the most powerful tools used by the IRS and state taxing authorities to collect taxes. Levies are legal instruments issued by the IRS to third parties, requiring them to turn over money owed or belonging to the taxpayer to the IRS. For self-employed individuals and businesses, the IRS can issue levies to vendors and contractors, requiring them to pay money owed to you to the IRS instead. The IRS can also levy taxpayers’ bank accounts, which can be devastating. Garnishments are similar to levies, except they require employers to withhold the wages of a taxpayer with a tax liability. Finally, liens are legal instruments filed with local governments that encumber all taxpayer property, including real estate and personal property.
If you are facing levies, liens, or garnishments, it is critical to contact a tax attorney to ensure your rights are represented and to stop these measures.
Facts: Client was self-employed and owned a restaurant. An IRS Revenue Officer was assigned to collect on back taxes owed in excess of $150,000. The IRS placed a levy on Client, affecting payments to the business.
Resolution: We contacted the Revenue Officer and negotiated a full release of the levy. Client provided a financial statement, which was submitted to the Revenue Officer. Client qualified for an installment payment agreement.
The IRS imposes serious penalties on tax preparers and tax professionals for various offenses, including failure to follow due diligence requirements, failure to keep proper records, and fraud. Preparer penalties can range from $50 per return to over $500/return and potentially result in tens of thousands to hundreds of thousands of dollars in cumulative penalties. An experienced tax attorney can identify the best possible defense for proposed preparer penalties and advocate on your behalf before the IRS or in U.S. Tax Court.
Facts: Client owned and operated a tax preparation company that prepared hundreds of tax returns, including a significant number of returns with Earned Income Tax Credit claims. The IRS conducted an examination of the business to determine whether to assess penalties under I.R.C. § 6695(g) “Failure to be diligent in determining eligibility for earned income credit”. Client provided detailed tax preparation records, including intake sheets, due diligence questionnaires, copies of birth certificates, social security cards, school records, and even video footage of tax preparation clients coming into the office. Despite these records, the IRS assessed a six-figure penalty against the owner of the company.
Resolution: We appealed the IRS’ assessment and revocation of electronic filing privileges. The tax liability was reduced by over 75% and Client’s electronic filing privileges were fully restored.
State Sales Tax Issues
One of the greatest challenges facing businesses is the ever-increasing use of sales, use, and specialty taxes by state governments to collect revenue. These taxes are often confusing and hard to track without proper accounting systems in place. This usually results in additional tax assessments through audits where estimated figures can be used if records and accounting information were not properly kept or recorded. These results can be devastating, leading to massive tax liabilities, including interest and penalties. If the audit assessment is bad enough, a criminal investigation may be recommended. It is critical that you consult with an attorney if your business is facing a state sales tax audit.
Taxation of International Income
The U.S. is one of the few countries that taxes its citizens on all income, even income earned overseas. The U.S. also taxes nonresident and resident aliens who earn U.S.-sourced income. In addition to these income tax reporting requirements, the U.S. government requires taxpayers to file information returns to disclose offshore assets such as bank accounts and real estate. These requirements often cause reporting and compliance issues.
Failure to disclose these assets and report any taxable income generated from them can result in serious civil and even criminal penalties. To enforce these laws, the U.S. government requires foreign banks to disclose the names of its citizens who maintain foreign accounts. Luckily, taxpayers can attain compliance by entering into a voluntary disclosure program where amended tax and information returns are filed along with a penalty. For more information on these voluntary disclosures, please see our Offshore Assets page.
Facts: Clients were married taxpayers with multi-million-dollar foreign investments. Clients did not report the existence of the assets or any interest from them on their tax returns and did not file a Report of Foreign Bank and Financial Accounts (“FBAR”).
Resolution: An Offshore Voluntary Disclosure was prepared and submitted to the IRS. The IRS accepted the Disclosure and Clients were not prosecuted.
Offer in Compromise/Tax Settlements
You have probably heard one of those “1-800” tax resolution companies promise “pennies on the dollar” tax settlements with the IRS. This is a legitimate program authorized by I.R.C. § 7122 and commonly referred to as an Offer in Compromise. These settlement opportunities are typically based on a taxpayer’s inability to fully pay the tax liability owed. The taxpayer’s income, expenses, assets, and liabilities are calculated using an IRS-defined formula, which determines whether a taxpayer qualifies for a settlement. The IRS generally accepts less than 50% of all submitted offers. This emphasizes the need to consult an experienced tax attorney. We have saved taxpayers millions of dollars through tax settlements and stand ready to help you.
Facts: A commercial contractor owed the IRS approximately $300,000. Client had used a CPA to prepare his tax returns. However, the CPA failed to properly report business income for tax purposes. An Offer in Compromise was submitted and the IRS rejected the Offer.
Resolution: The Offer rejection was appealed on the basis that Client’s tax returns were not an accurate source of current/future income. Based on detailed financial prepared by an independent CPA, the IRS appeals agent reversed the rejection and accepted the offer for $25,000.
Tax Whistleblower Claims
The IRS will provide money to individuals who report taxpayers who fail to pay their taxes or intentionally underreport income or overreport expenses. The law provides for two types of awards: (1) if the tax in dispute exceed $2 million, and a few other qualifications are met, the IRS will pay 15 percent to 30 percent of the amount collected; and (2) if the $2 million threshold is not met, the maximum award is 15 percent. The advice and experience of a tax attorney is often the difference between a successful claim and an unsuccessful claim.
Common Tax Issues
+ Audit Reconsideration
+ Challenging Taxes in Court
+ Complex Tax Preparation
+ Criminal Tax Issues
+ Discharging Taxes in Bankruptcy
+ Employment/Payroll Tax
+ Innocent Spouse Claims
+ Levies, Liens & Garnishments
+ State Sales Tax Issues
+ Taxation of International Income
+ Tax Settlements
+ Offer in Compromise
+ Tax Whistleblower Claims