Tax Resolution Services

We offer Tax Resolution Services to Individuals and Corporations in Southern California.

We are committed to be your aggressive advocate. The collection departments of Taxing Authorities are unforgiving and ruthless. Let us stand in between you and them, making sure they treat you fairly and with respect.
Tax Resolution Services

The Tax Resolution Services we provide are:

  • Offer In Compromise
  • Installment Agreements
  • Penalty Abatement
  • Innocent Spouse Relief
  • Removal of Tax Levy's
  • Currently not collectable
  • Payroll Taxes
  • Appeals

Tax Solutions include the following services:

  • The initial filling
  • Financial and tax counseling
  • Monthly financial monitoring
  • Unlimited phone calls

Installment Agreements

Internal Revenue Code [IRC] section 6159 provides the statutory authority for the IRS to enter into installment agreement and IRC sections 6331 and 6159 has requirements to protect the Taxpayer including giving them the right to appeal. If the total tax due is $25,000 or less the IRS will enter into an installment agreement through the streamlined installment agreement program, without giving them financial information. Generally, they just have to give the IRS the name and address of their employer and their bank. For larger debt, the Taxpayer is required to fill out form 433F and in many cases a 433A or 433B. In this case, a strict formula is used and documentation of one’s finances is required.

Offer in Compromise

The U.S. Congress established the Offer In Compromise [OIC] program with IRC code section 7122. This covers all types of taxes [including payroll taxes] penalties and interest and it is the closest thing to “amnesty” that is available. If an OIC is accepted and the negotiated settlement amount is paid, not only back tax liabilities are settled [compromised] all federal tax liens can be released.

It is important to understand the OIC program is a privilege, not a right, like bankruptcy. Consequently, Taxpayers should beware of tax resolution companies that guarantee specific results. There are three types of OICs (1) Offer based on doubt of liability, (2) Offer based on collectability and (3) Effective Tax Administration.

An OIC based on liability is when there is a strong basis that the liability assessed by IRS in incorrect. It is not commonly used.

An OIC based on collectability is more commonly used. The basis is the Taxpayer does not have the income and assets to pay the tax. In other words, the minimum offer amount must generally be equal to (or greater than) the taxpayer's reasonable collection potential. It is a once in a lifetime forgives of a tax debt and the Taxpayer agrees to NEVER have outstanding tax liabilities in the future. If they do, the OIC is rescinded and the Taxpayer is required to pay all of the tax that was previously forgiven with interest. A strict formula s used, more involved than for installment agreements, and is about a 12-month process requiring documentation of 100% of one’s finances. Effective, July 17, 2006, a 20% payment of the tax liability was required before an OIC is accepted for evaluation unless the Taxpayer meets a low-income test. There is Federal legislation to remove this requirement [HR. 2343 – Tax Compromise Improvement Act of 2009]. It is currently going through the first step in the legislative process in the House Ways and Means Committee. This has been tacked on other recent legislation.

An OIC based on Effective Tax Administration is where the IRS considers exceptional circumstances in which the Taxpayer demonstrates that the collection of the tax would create an economic hardship or would be unfair and inequitable like in the case of severe illness or disability.

Many states also have Offer In Compromise programs, some are similar to the Federal program and some are less formal.

Penalty Abatement

Penalties can be disputed based on grounds there was reasonable cause. Some of the reasons can be unexpected illness, hospitalization, natural disaster or fraud / criminal behavior on behalf of the bookkeeper. Not understanding the law, making mistakes or errors in judgment are not reasonable causes.

Innocent Spouse Relief

When married Taxpayers file a joint return, both spouses become JOINTLY AND INDIVIDUALLY responsible, even if only once spouse made income. This is true if the divorce court rules only one spouse is responsible in paying the tax. The IRS does not recognize the divorce court rulings.

To qualify, Federal form 8857 needs to be filed within two years from the date the IRS first tried to collect the tax from the Innocent Spouse and he/she must meet the following conditions:

Must have filed a joint return with an “understatement of tax” due to “erroneous item(s)”. Understatement of tax is the difference between what was shown on the return vs. the actual tax liability. Erroneous items are either underreported income or incorrect deductions, credits or basis claimed
Must establish that at the time the return was filled, he/she did not know nor had a reason to know that there was an understatement of tax.
Must establish that given all of the facts and circumstances it would be unfair or inequitable to hold the Innocent Spouse liable.

Currently Not Collectable Status

By looking at a strict formula, the IRS determines the tax cannot be collected from Taxpayer. The formula used is net income less basic living expenses [generally credit card payments are not allowed as a living expense] plus available credit available and liquid assets like savings, 401Ks or stocks. Uncollectible status does not forgive the tax, but the IRS “shelves” the liability and stops collection activities for a period time. Interest continues to accumulate on the tax debt and the IRS will quietly review the case, generally annually, to determine if the Taxpayers financial condition has changed and will resume collection activity if the IRS feels it is warranted.

(1) How do I know if I am eligible for an Offer in Compromise?

The IRS may legally compromise your tax debt for one of the following reasons:
(a) Doubt as to Liability (DATL) - Doubt exists that the assessed tax is correct. The Offer in Compromise program also allows taxpayers that do not agree that they owe the tax or feel that the tax has been incorrectly calculated, an opportunity to file a DATL Offer in Compromise and have their tax liabilities reconsidered.
(b) Doubt as to Collectability (DATC) – Doubt exists that the taxpayer could ever pay the full amount of tax owed. A DATC Offer in Compromise is negotiated on the basis of a taxpayer’s inability to pay and takes into account the taxpayer's current financial position including the taxpayer’s equity in assets.
(c) Effective Tax Administration (ETA) – If there is no doubt that the tax is correct and there is potential to collect the full amount of the tax owed, the IRS may consider an OIC under exceptional circumstances in which a taxpayer demonstrates that the collection of the tax would create an economic hardship or would be unfair and inequitable. This includes situations where compelling public policy or equity considerations provide sufficient basis for compromise.

In submitting an offer based on Effective Tax Administration, the taxpayer needs to provide extensive narrative of the special and extraordinary circumstances along with the rest of the offer in compromise documentation. Right now, extraordinary circumstances would mean some sort of life and death situation, such as a serious medical condition.

The taxpayer bears the burden of proof to show their Offer In Compromise qualifies for public policy or equity considerations. They must show that their circumstances are compelling enough to justify acceptance of their Offer In Compromise compared to other taxpayers in similar circumstances.

(2) When does a Collection Information Statement need to be completed?

The Collection Information Statement (CIS Form 433-A) is commonly used by the IRS to gather the necessary information to determine the taxpayer’s ability to pay. The CIS is the taxpayer’s financial statement and disclosure of personal information including assets, income and expenses.

The forms used are Form 433-A for individuals and Form 433-B for businesses. Failure to submit these documents will cause
considerable delay in the process.

Collection Information Statement(s) are required for Doubt as to Collectability and Effective Tax Administration Offer In
Compromises, and Doubt as to Liability offers involving Trust Fund Recovery Penalty assessments.

(3) If I qualify for an Installment Agreement, can I still submit an Offer In Compromise?

If a tax liability can be paid in a lump sum or through an installment agreement, taxpayers will not be considered for an Offer In
Compromise.

If an Offer In Compromise is received, it will be rejected with appeal rights. The only exception is if a taxpayer requests an
Offer In Compromise under the Effective Tax Administration provision.

(4) The IRS recently levied my bank account. Will the levy proceeds be returned if I file an Offer In Compromise?

The IRS will keep all payments and credits made, received or applied to the total original tax liability before the Offer In Compromise was submitted.

The IRS may also keep any proceeds from a levy that was served prior to the submission of an Offer In Compromise, but which were not received at the time the Offer In Compromise was submitted.

(5) Can I file an Offer In Compromise to delay collection action?

Once it is determined an Offer In Compromise was filed solely to hinder and/or delay collection actions, the IRS will return the Offer In Compromise without any further consideration.

Taxpayers will not be afforded the right to appeal this decision.

(6) Are partial payments required with Submission of an Offer In Compromise?

Effective, July 17, 2006, the IRS has mandated a requirement that any lump-sum (5 months) offer must be accompanied by the payment of a non-refundable 20% deposit of the offer amount. For this purpose, a lump-sum offer in compromise is any offer of payment made in five or fewer installments. However, there is legislation currently pending before Congress that may do away with the 20% non-refundable deposit requirement.

Any periodic payment offer in compromise (24 month short term deferred) must be accompanied by the payment of the amount of the first installment. The IRS will treat any failure to make an installment due under a periodic payment offer in compromise while the offer is being evaluated by IRS as a withdrawal of the offer. Please note that you may make very small payments for 23 months and then a much large “balloon” payment in the 24th month.

Both the 20% deposit on lump-sum offers and payments on the periodic installment offers are in addition to the $150.00 user application fee.

(7) What happens to my Offer In Compromise application fee if my offer is accepted or declined?

The application fee for submitting an Offer In Compromise is $150. The $150 (and the 20% deposit or the periodic payment) is retained until the IRS determines whether the Offer In Compromise can be accepted for processing. The 20% deposit will be applied against the amount of the offer and not be refunded to the taxpayer. However, you may designate to what tax period you want the 20% applied.

Federal agencies are authorized to establish charges for services provided by the agency, called "user fees". The U.S. Office of Management and Budget encourages agencies to implement these fees to recover the cost of providing special services to some recipients that others do not use.

The IRS has established a user fee that will recover part of the cost of processing and reviewing Offer In Compromise requests. The IRS has chosen to call it an "application fee" because the fee is required when an Offer In Compromise application is submitted for consideration.

If your Offer In Compromise is not accepted, the application fee, the 20% lump sum deposit and the periodic payment amount will be retained by the IRS. This includes situations where:

(a) The taxpayer’s initial Offer In Compromise amount is too low - based on the IRS evaluation of the taxpayer's financial condition - and the taxpayer is given the opportunity to increase it.

b) The taxpayer does not increase the Offer In Compromise amount, or show special circumstances, and the IRS rejects the Offer In Compromise.

(c) The taxpayer fails to submit additional financial documents to assist in the IRS review.

(d) The taxpayer fails to respond, and/or submit the requested information, and the Offer In Compromise is returned without further consideration.

(e) The taxpayer chooses to withdraw the Offer in Compromise.