California
Tax Attorneys

Offers in Compromise

The Internal Revenue Service (IRS) states that an offer in compromise allows people to settle their tax debts for less than the full amounts they owe. The IRS will consider a person’s ability to pay, income, expenses, and asset equity.

The IRS will generally approve an offer in compromise when the amount a person offers represents the most the agency can expect to collect within a reasonable period of time. A person is eligible to apply for an offer in compromise if they filed all required tax returns and made all required estimated payments, are not actively involved in an open bankruptcy proceeding, have a valid extension for the current year return, and are an employer that made tax deposits for the current and past two quarters before applying.

If a person applies for an offer in compromise and the IRS cannot process the offer, the agency will return the application and offer application fee as well as applying any offer payment included to the balance due. Payment options in these cases generally include lump sum cash payments of 20 percent of the total offer, after which a person pays a remaining balance in five or less payments, or periodic payments under which people pay balances in monthly installments.

If a person meets the low income certification guidelines, they will not have to send the application fee or the initial payment or make monthly installments while the IRS reviews the offer. If an offer is rejected, a person can appeal within 30 days using Request for Appeal of Offer in Compromise, Form 13711PDF and the IRS Independent Office of Appeals also offers additional assistance.

IRS Audit Defense

Both the IRS and the FTB have the power to audit small businesses and individuals throughout California. Audits occur for various reasons, including businesses being cash-heavy, major changes in expenses, or incomplete tax filings.

When a person receives a notice about an audit, a notice about a possible penalty is likely to follow. You will want to make sure you have a lawyer who can fight any penalties.

IRS audits typically go back three years, although the agency can make exceptions in cases of major errors. Tax audits can be a lot of work for any business, so it is always wise for any company to ensure it has legal representation for help securing IRS tax debt relief.

Innocent Spouses

Innocent spouse relief is usually available when joint returns are filed and an affected couple is still married and living together in the same household. Such cases involve an understatement or deficiency in reporting of the full tax amount owed.

Any underreporting of taxes is the responsibility of only one spouse and the attribution of an underreported tax to only one spouse should be reflected in the audit report. A filing spouse must establish that they did not have actual or constructive knowledge of an understatement and it would be unfair to hold that spouse liable for the tax debt.

Filing for innocent spouse relief can be a challenge because relief needs to be sought within two years of any collection action commenced by the IRS. The IRS is often reluctant to grant relief to married couples, so it is always in a person’s best interest to make sure they are working with an experienced lawyer.