Frequently Asked Questions

An Offer in Compromise (OIC) is a formal IRS program that may allow qualifying taxpayers to settle their tax debt for less than the full balance. Eligibility is based on your income, expenses, assets, and ability to pay. Not every taxpayer qualifies, and the IRS does not accept every offer. We provide a free eligibility review to assess whether an OIC may be right for you.

The IRS uses a formula called Reasonable Collection Potential (RCP): your future income (monthly disposable income × 12 or 24 months, depending on payment method) plus your net realizable equity in assets. If your RCP is less than what you owe, you may qualify to settle for that lower amount. The calculation is detailed and follows IRS Collection Financial Standards for allowable living expenses.

A lump-sum OIC requires payment in five or fewer installments after acceptance. The IRS calculates RCP using 12 months of future income in this case. A periodic payment OIC allows payment over 6-24 months, and the IRS uses 24 months of future income — resulting in a higher offer amount. You choose the method when submitting.

The review process typically takes 6 to 12 months, sometimes longer. During the review, the IRS generally suspends collection actions like levies and garnishments as long as you stay current on filing and make required periodic payments.

If rejected, you have appeal rights and may submit a revised offer or pursue an alternative such as an installment agreement or currently not collectible status. Many rejected offers are due to errors or insufficient documentation that can be corrected on appeal.

The IRS charges a $205 application fee and requires a partial payment with lump-sum offers. Some low-income taxpayers may qualify for a fee waiver. Professional preparation fees are separate from the IRS filing fee.

The IRS accepts roughly 30-40% of OIC applications. Many rejections are due to incomplete documentation, arithmetic errors, or applicants who clearly do not qualify. A professionally prepared OIC with accurate RCP calculations has significantly higher odds of acceptance because it presents a complete, defensible case that matches the IRS's own calculation methods.

Yes, but the equity in your home is included in your RCP calculation. The IRS uses a quick-sale value (typically 80% of fair market value) minus any mortgage balance to calculate your net realizable equity. Even with significant home equity, you may still qualify if your overall RCP is less than your tax debt.

Federal tax liens were removed from credit reports by the three major bureaus as of April 2018. An OIC itself does not directly impact credit scores. However, the Notice of Federal Tax Lien filed during the collection period may still appear in public records searches used by some lenders.

You must comply with all tax filing and payment obligations for the next five years (the probationary period). If you fail to file or pay on time, the IRS can revoke the OIC and reinstate the original debt. After five years of compliance, the settled amount is final.

Yes. If your first OIC is rejected, you can submit a revised offer. If your OIC was accepted but later defaulted, you may submit a new offer for the reinstated debt. Each OIC requires a new application fee and full financial disclosure.

Yes. Alternatives include installment agreements, partial-pay installment agreements (PPIAs), Currently Not Collectible status, penalty abatement, and — in limited cases — bankruptcy. We evaluate all options and recommend the best path.

Yes. A bank levy is a legal seizure of funds in your account. The IRS can issue a levy after sending a final notice and giving you a chance to pay or appeal. Acting quickly after a levy notice is critical.

The timeline depends on your circumstances. A levy may be released if you demonstrate financial hardship, file missing returns, or set up a payment arrangement. Acting quickly after receiving a levy notice preserves your options.

Yes. An IRS wage garnishment allows your employer to send a portion of your paycheck directly to the IRS. The amount that can be garnished depends on your filing status and number of dependents.

Some funds may be exempt, including certain Social Security benefits (subject to limitations), unemployment compensation, and specific income types. The rules are complex, and exemptions often require prompt action and documentation.

No. The IRS must send a final notice of intent to levy at least 30 days before the levy takes effect. This gives you a window to pay, appeal, or take other action.

Under IRC Section 6332(c), when the IRS issues a bank levy, the bank must hold the levied funds for 21 days before sending them to the IRS. This waiting period exists to give the taxpayer time to resolve the issue — either by paying the debt, entering a resolution, or proving the funds are exempt. Once the 21 days pass, the money is gone.

Yes, but with limitations. Under the Federal Payment Levy Program (FPLP), the IRS can levy up to 15% of certain federal payments, including Social Security benefits. However, a manual levy can take more. Hardship relief is available if the levy prevents you from meeting basic living expenses.

A wage levy is a continuous levy — it stays in effect until the debt is paid, the levy is released, or the collection statute expires. Unlike a one-time bank levy (which only reaches funds in the account at the moment the levy is served), a wage levy reaches every future paycheck until resolved.

Yes, the IRS can levy retirement accounts including IRAs and 401(k)s. However, the IRS generally considers retirement accounts as a last resort, particularly for taxpayers nearing retirement age. Hardship relief may be available if the levy would cause significant financial harm.

The fastest paths to levy release are: pay the debt in full (release is mandatory), enter an approved installment agreement, prove economic hardship with documentation, or request a Collection Due Process hearing within the 30-day appeal window. Professional help may help expedite this process, though the timeline depends on your specific circumstances.

Yes. There are several ways to request penalty relief, including First Time Abatement (FTA) for taxpayers with a clean compliance history, and Reasonable Cause for taxpayers who had circumstances beyond their control.

FTA is a discretionary waiver that allows the IRS to remove certain penalties for taxpayers who haven't been assessed significant penalties in the prior three years and have filed all required returns.

Reasonable cause is based on circumstances that prevented you from meeting your tax obligations despite exercising ordinary business care and prudence. Examples include serious illness, natural disaster, death in the family, or inability to obtain records.

Penalties can be substantial — failure-to-file is 5% per month (up to 25%) and failure-to-pay is 0.5% per month. Removing these can significantly reduce your total balance.

Most civil penalties can be abated: failure-to-file (FTF), failure-to-pay (FTP), failure-to-deposit (FTD), accuracy-related penalties, and estimated tax penalties. Fraud penalties and certain other penalties are generally not eligible. Each penalty type has specific abatement criteria.

Penalty abatement can be requested by phone (for FTA on smaller amounts), in writing via Form 843 or a penalty abatement letter, or as part of a broader resolution strategy. Professional representation ensures the request is properly documented and argued.

Yes — reliance on a tax professional can be a basis for reasonable cause penalty abatement, but the reliance must have been reasonable. You must show you provided accurate information to the preparer and the error was theirs, not yours. The standard is higher for business taxpayers than individuals.

Abatement removes the penalty entirely. Reduction may lower the penalty amount but not eliminate it. Some penalties have statutory caps (e.g., FTP caps at 25% of the unpaid tax), and further reduction beyond the cap is not possible, but abatement of the remaining penalty may still be pursued through FTA or reasonable cause.

CP14 is the IRS's first notice and demand for payment. It means the IRS has assessed a tax balance against you and is requesting payment. It includes the amount due, the tax year, and instructions. This is your cue to act — ignoring it starts the collection timeline.

CP504 is a Notice of Intent to Levy. It means the IRS plans to seize your state tax refund and may levy other assets if the debt is not resolved. It arrives after earlier notices have been ignored. This is urgent — the IRS is now threatening enforcement action.

The LT11 or Letter 1058 is the Final Notice of Intent to Levy and Your Right to a Hearing. This is the most serious pre-levy notice. You have 30 days from the date of this letter to request a Collection Due Process (CDP) hearing, which halts collection activity while your appeal is heard. After 30 days without action, the IRS can levy your bank account, wages, and assets.

A CP2000 is not a bill — it's a proposal. The IRS is proposing changes to your tax return based on information they received from third parties (employers, banks, brokers) that doesn't match what you reported. You have the right to agree or dispute. Responding on time preserves your appeal rights.

First: don't panic, but don't ignore it. Second: read the notice carefully — it tells you what the IRS is proposing, what tax year it covers, and what your response deadline is. Third: contact us for a free review. We can explain what the notice means, whether the IRS's numbers are correct, and what you should do next.

Response deadlines vary by notice type. CP2000 typically gives 30 days. CP504 and the Final Notice of Intent to Levy (LT11/Letter 1058) give 30 days for CDP hearing requests. Some notices have 60- or 90-day response windows. The deadline is stated on the notice — missing it can mean losing valuable appeal rights.

Missing a deadline does not mean all is lost — but it does narrow your options. For CDP hearings, you have 30 days from the LT11/Letter 1058 date. After that, you may still request an Equivalent Hearing within one year, but it has fewer protections. Contact us even if you've missed a deadline — there are often still avenues to pursue.

No. IRS notices can contain errors — miscalculated balances, missing payments, misapplied credits, incorrect penalty assessments, or even the wrong tax year. Never assume an IRS notice is correct without reviewing your IRS transcripts and underlying records. A significant percentage of IRS account balances contain at least one error.

CNC status means the IRS agrees you cannot afford to pay your tax debt and your basic living expenses. The IRS temporarily halts all collection activity — no levies, no garnishments, no seizure of assets. The debt still exists, and interest and penalties still accrue, but you get breathing room.

You must demonstrate that your monthly income minus allowable living expenses (under IRS Collection Financial Standards) leaves nothing to pay toward your tax debt. This requires detailed financial disclosure: Form 433-A (individuals) or 433-B (businesses), along with pay stubs, bank statements, and proof of expenses.

CNC status is reviewed periodically — typically annually. The IRS may request updated financial information to confirm you still cannot pay. CNC continues as long as your financial situation justifies it, or until the Collection Statute Expiration Date (CSED) expires and the debt is extinguished.

No. CNC suspends collection — it does not forgive the debt. Interest and penalties continue to accrue. The IRS may file a Notice of Federal Tax Lien to protect its interest. However, if the CSED passes while you are in CNC status, the debt expires and can no longer be collected.

Yes. The IRS may file a Notice of Federal Tax Lien even during CNC status to protect its interest in your assets while collection is suspended. The lien is a security measure, not an active collection action.

CNC is temporary by design. If your income rises above the allowable expense threshold, the IRS can and will reactivate collection. If you expect income to increase, it may be better to pursue an installment agreement or partial-pay installment agreement rather than CNC — we help you evaluate which path makes more sense.

Yes. Divorce often creates tax complications: joint liability for returns filed during marriage, innocent spouse relief for taxpayers whose spouse hid income or claimed improper deductions, and changes in filing status and dependents. We help clients untangle these issues.

Innocent Spouse Relief protects a taxpayer from liability for their spouse's (or former spouse's) erroneous items on a joint return. To qualify, you must show: you filed jointly, there was an understatement of tax due to your spouse's error, you did not know (and had no reason to know) about the error, and it would be unfair to hold you liable.

Yes. Seniors living primarily on Social Security may have limited ability to pay IRS debt. Currently Not Collectible status is a common option, and the IRS has limitations on levying Social Security benefits. We help older taxpayers navigate these protections.

Yes. Veterans have access to the same IRS resolution programs as all taxpayers, plus certain veteran-specific benefits that may affect their financial analysis. We help veterans resolve tax issues while accounting for their unique financial circumstances.

Yes. U.S. citizens and resident aliens living abroad still have U.S. tax obligations. The IRS can and does pursue collection abroad. We can represent expatriates remotely and help resolve their U.S. tax issues from anywhere in the world.

The IRS can pursue either spouse for 100% of a joint liability. If your spouse is uncooperative, you can still pursue resolution options on your own behalf. In some cases, you may separate your liability from your spouse's — innocent spouse relief or separation of liability are potential paths.

The IRS collection process typically follows this sequence: (1) tax return is filed or IRS files a substitute return; (2) tax is assessed; (3) IRS sends notice and demand for payment (CP14); (4) if unpaid, IRS sends reminder notices (CP501, CP503); (5) IRS sends Notice of Intent to Levy (CP504); (6) IRS files Notice of Federal Tax Lien; (7) IRS sends Final Notice of Intent to Levy (LT11/Letter 1058) with 30-day CDP hearing rights; (8) after 30 days, IRS begins levies and garnishments. The entire process from first notice to active levy can take 3-6 months — sometimes less if prior notices were ignored.

A revenue officer (RO) is an IRS employee assigned to collect unpaid taxes in person. Unlike the Automated Collection System (ACS) which works by mail and phone, an RO can visit your home or business, conduct in-depth financial interviews, and has the authority to file liens, issue levies, and seize assets. Being assigned to an RO means the IRS considers your case serious enough for personal attention.

ACS is the IRS's computerized collection system that handles most tax debt cases by mail and phone. ACS sends notices, takes phone calls, and can process installment agreements and levy actions. Cases typically start in ACS and may be escalated to a revenue officer if the debt is large, complex, or unresponsive to ACS efforts.

The CSED is the date — typically 10 years from the date the tax was assessed — after which the IRS can no longer legally collect the debt. Once the CSED passes, the balance expires and the IRS must release any lien. Some actions (OIC submissions, CDP hearings, bankruptcy) can suspend or extend the CSED clock.

Yes, the IRS can seize and sell tangible assets through a process called seizure and sale. This is generally a last resort — the IRS prefers levying liquid assets (bank accounts, wages) over seizing physical property. However, asset seizure does happen, particularly for high-dollar cases, uncooperative taxpayers, or cases assigned to revenue officers.

An IRS summons is a legal order requiring you to appear, provide documents, or give testimony about your tax liability or someone else's. Ignoring a summons can lead to court enforcement and contempt proceedings. If you receive a summons, contact us immediately — you may have rights to challenge the summons and professional representation can protect your interests during the process.

We focus on federal IRS tax relief. State tax agencies (California FTB, New York DTF, etc.) have their own rules, programs, and procedures that differ from the IRS. We can coordinate federal and state resolution strategies and, in some cases, refer you to a qualified state tax specialist for the state portion.

Yes. Federal and state tax issues are handled separately. However, because your financial disclosure for an IRS resolution will show state tax debt as a liability, it's often strategic to address both simultaneously. We can coordinate the federal resolution while you address state obligations.

Yes. The IRS can offset your state tax refund against your federal tax debt through the Treasury Offset Program (TOP). Conversely, some states can take your federal refund for state tax debt. If you expect a refund but owe taxes, filing your return still triggers the offset mechanism.

When the IRS issues a bank levy, your bank must freeze all available funds in your account on the day the levy is received. The bank holds those funds for 21 days (the mandatory waiting period under IRC 6332(c)), after which the money is sent to the IRS. You cannot access the frozen funds during this period. If the levy takes funds you need for basic living expenses, you may be able to get it released for hardship.

Certain funds are statutorily exempt from IRS levy, including: Social Security benefits (with limits), Supplemental Security Income (SSI), unemployment benefits, workers' compensation, certain pension and annuity payments, and child support payments. However, the burden is on YOU to prove the funds are exempt — the bank does not make this determination. You must act quickly to document exempt funds before the 21-day period expires.

Yes, the IRS can levy a joint bank account even if only one account holder owes the tax. The non-liable joint owner can file a wrongful levy claim (Form 843) or request return of their portion of the funds under IRC 6343(b). This process requires prompt action and documentation proving which portion of the funds belongs to the non-liable owner.

No. Banks typically do not notify you before an IRS levy. You discover it when you try to access your account and find the funds frozen. This is why acting on IRS notices before the levy stage is so critical — by the time the bank levy hits, you've already passed through multiple warning notices.

Yes, and business bank account levies are particularly destructive because they can freeze the business's operating capital, preventing payroll, vendor payments, and day-to-day operations. The IRS can levy both personal and business accounts for the same tax debt, including against separate business entities when the owner is the responsible party.

You should file an amended return (Form 1040-X) when you discover a significant error on a previously filed return — missed deductions or credits, incorrect filing status, unreported or misreported income, or incorrect dependent claims. The amendment can result in a refund (if you overpaid) or a balance due reduction (if the error overstated your liability).

Generally, you have three years from the date you filed the original return, or two years from the date you paid the tax (whichever is later), to file an amended return claiming a refund or credit. Returns filed before the due date are treated as filed on the due date for this calculation.

Not necessarily. Amended returns are processed by a separate IRS unit and are reviewed for completeness and accuracy. While an amended return can attract some scrutiny — particularly if it claims a large refund or significant changes — it does not automatically trigger a full audit. The increased risk is generally modest for well-documented, legitimate amendments.

Yes. You can amend any tax year still within the statute of limitations (generally the last three years). If you discover errors spanning multiple years, you should amend each year separately on its own Form 1040-X. Each year is evaluated independently.

The IRS Office of Appeals is an independent organization within the IRS that resolves disputes between taxpayers and the IRS without litigation. Appeals officers are separate from the IRS Examination and Collection divisions and are expected to consider the hazards of litigation — meaning they should settle cases where the IRS might lose in court rather than force litigation. Appeals is available for audit results, collection actions (CDP), OIC rejections, and penalty abatement denials.

CDP is a formal hearing right created by the IRS Restructuring and Reform Act of 1998. When the IRS sends a Final Notice of Intent to Levy (LT11 or Letter 1058) or files a NFTL, you have 30 days to request a CDP hearing. The hearing is before an independent Appeals officer, and you can raise: the appropriateness of collection, collection alternatives (installment agreement, OIC, CNC), spousal defenses, and — in some cases — the underlying liability. If you disagree with the Appeals decision, you can petition the U.S. Tax Court.

The Tax Court is a specialized federal court that hears disputes between taxpayers and the IRS before the tax is paid. You do not need to pay the disputed tax first (unlike U.S. District Court or the Court of Federal Claims). Tax Court petitions must be filed within 90 days of a Notice of Deficiency (90-day letter). The Tax Court primarily hears cases involving disputed tax assessments, not collection matters (except in CDP appeals).

The Tax Court allows self-representation (pro se), but tax litigation is procedurally complex, and the IRS is represented by experienced attorneys from the IRS Office of Chief Counsel. Professional representation substantially improves your chances of a favorable outcome or settlement before trial.

If you miss the 30-day CDP deadline, you can request an Equivalent Hearing within one year of the levy notice date. The Equivalent Hearing provides similar review by Appeals, but with one critical difference: you cannot petition the Tax Court if you disagree with the Appeals decision. Because of this limitation, CDP is always preferred when timely requested.

Look for: CPAs, enrolled agents, or tax attorneys on staff (not just salespeople); transparent fee structures with flat fees, not percentage-based fees; willingness to tell you if you don't qualify for a program rather than promising miracles; detailed engagement letters that specify what services are included; and verifiable client reviews on independent platforms. Beware of companies that guarantee specific outcomes, rush you to sign, or quote fees as a percentage of tax debt without analyzing your case.

The three primary credentials for IRS representation are: Enrolled Agent (EA) — federally licensed by the IRS, unlimited representation rights; Certified Public Accountant (CPA) — state-licensed, can represent before IRS; and Tax Attorney — licensed to practice law, can represent before IRS and in court. Any professional you hire should hold at least one of these credentials and be in good standing.

Red flags include: unsolicited calls or mailers claiming to be from the 'IRS' or 'Tax Relief Center'; guarantees of specific outcomes ('We guarantee we'll settle your debt for pennies on the dollar'); high-pressure sales tactics demanding immediate payment; fees quoted before reviewing your case; companies that refuse to provide their credentials or physical address; and promises to eliminate tax debt through obscure loopholes. Legitimate tax relief is based on well-established IRS programs with specific eligibility criteria.

The IRS Fresh Start Program is a real set of IRS policy changes from 2011-2012 that made OICs and installment agreements more accessible. However, many companies use 'Fresh Start' as a marketing term implying virtually anyone can settle tax debt for pennies on the dollar — which is false. Be cautious of companies that lead with 'Fresh Start' without explaining the specific IRS programs available and their eligibility criteria.

A nominee lien is when the IRS files a lien against property held in someone else's name but that the IRS determines the taxpayer actually controls or benefits from — essentially, property held by a nominee or alter ego. This can happen when a taxpayer transfers assets to a spouse, family member, or entity to shield them from collection. The IRS can pursue these assets through the nominee lien doctrine.

Transferee liability holds a person who received assets from a taxpayer liable for the transferor's tax debt, up to the value of the assets received. This typically arises when a taxpayer transfers assets for less than fair market value to avoid IRS collection — such as giving property to a family member while owing taxes. The IRS can pursue the recipient for the unpaid tax.

Audit reconsideration is a process where the IRS re-examines an audit assessment — typically when the taxpayer did not participate in the original audit (default assessment) or has new documentation that was not previously considered. It can result in a reduced balance and is often used in conjunction with an OIC or payment plan to ensure the underlying liability is correct.

A PLR is a written determination from the IRS Office of Chief Counsel issued to a specific taxpayer about how tax law applies to their specific proposed transaction. PLRs are binding on the IRS (with respect to that taxpayer only) and are typically sought for complex, unusual, or high-dollar transactions where the tax treatment is uncertain. PLRs involve significant user fees and are outside the scope of standard tax relief services.

IRS Examination (Exam) determines whether the tax reported on your return is correct. Their job is to verify income, deductions, and credits. IRS Collections pursues payment of tax debts that have already been assessed. Exam audits returns; Collections collects assessed balances. These are separate IRS divisions with different procedures and personnel.

Yes, you always have the right to handle your own IRS matters. However, the key consideration is whether you have the time, knowledge, and emotional distance to do so effectively. A professional understands IRS procedures, knows allowable expense standards, can calculate reasonable collection potential accurately, and can negotiate without the emotional stress that many taxpayers feel when interacting directly with the IRS. Many taxpayers who start on their own eventually hire professionals after encountering procedural obstacles.

The Fixing America's Surface Transportation (FAST) Act, passed in 2015, contains a provision allowing the IRS to certify seriously delinquent tax debt to the State Department for passport denial, revocation, or non-renewal. If your assessed tax debt exceeds the statutory threshold and a NFTL has been filed, your passport may be at risk. Resolving your tax debt through any approved method reverses the certification.

The IRS Collection Financial Standards are published guidelines for allowable living expenses used in financial analysis for OICs, installment agreements, and CNC determinations. They include: national standards (food, clothing, household supplies, personal care, misc.), local standards (housing and transportation, varying by county), and other expenses (health care, taxes, court-ordered payments). The standards are used to calculate your disposable income — the amount available to pay the IRS.