Ofstein Law – Tax Resolution for Individuals and Businesses Nationwide

We can help you to understand and better assess your options, design the most advantageous offer, and negotiate your best deal. We can deal with the IRS directly on your behalf, handle meetings and correspondence, negotiate resolution, and resolve the problem to your satisfaction.

Should you decide representation by Ofstein & Associates is in your best interest, you will need to sign a legal services agreement and a power of attorney authorization form:

• Form 2848, Power of Attorney and Declaration of Representation

Or, if you prefer, we can serve only as your consultant and assist you in dealing with the IRS on your own or through your current representative.

If you need assistance, please contact us.

IRS Collection Hold and Negotiation

To stop or suspend further collection action against you, you must act to have a “freeze code” entered into the system. Simply ignoring the IRS does not stop the collection process. Also, do not wait until the IRS has already issued a levy as these stall tactics are not as effective.

We can help you secure a collection hold to determine your best option to resolve your tax issue, and we can also help you negotiate an offer in compromise, installment agreement, hardship deferment, abatement of penalties and/or interest, innocent spouse relief, release of tax lien, release of levy, and expiration of the collection statute.

If you need assistance with a collection hold or negotiations with IRS, please contact us.

Offer in Compromise

You may qualify for an Offer in Compromise if you are unable to pay your taxes in full or if you are facing severe or unusual economic hardship.

An Offer in Compromise is an agreement between a taxpayer and the IRS that resolves the taxpayer's tax liability for less than the full amount due. The IRS has the authority to settle, or compromise, federal tax liabilities by accepting less than full payment under certain circumstances. This applies to all taxes, including any interest, penalties, or additional amounts arising under Internal Revenue laws.

To obtain a successful Offer in Compromise, the IRS must be convinced that the amount being offered by the taxpayer is more than the IRS would be able to collect through the use of their normal collection procedures.

The IRS may legally compromise for one of the following reasons:

• Doubt as to Liability - "I do not believe I owe this amount." Form 656-L must be completed and a detailed explanation of the reason(s) why you believe you do not owe this tax must be provided in item 9.

• Doubt as to Collectibility - "I have insufficient assets and income to pay the full amount." Form 656 and Form 433-A (OIC) and/or Form 433-B (OIC) financial statements must be completed.

• Effective Tax Administration - "I owe this amount and have sufficient assets to pay the full amount, but due to my exceptional circumstances, requiring full payment would cause an economic hardship or would be unfair and inequitable." Form 656 must be completed and a detailed explanation of the reason(s) why you believe you do not owe this tax must be provided in item 9 and Form 433-A (OIC) and/or Form 433-B (OIC) financial statements must be completed.

A taxpayer may submit an Offer in Compromise by completing and submitting:
• Form 656, Offer in Compromise OR
• Form 656-L, Offer in Compromise (Doubt as to Liability)

If the offer is based on doubt as to collectibility or promotion of effective tax administration, one or both of the following forms will also be necessary:
• Form 433-A (OIC), Collection Information Statement for Individuals
• Form 433-B (OIC), Collection Information Statement for Businesses

There is a $150 IRS application fee for submitting an offer in compromise – this fee is payable to the United States Treasury. In addition to the $150 application fee, you must also include with your offer in compromise a non-refundable 20% deposit of what you are proposing to pay if you are proposing a cash or lump-sum offer (an offer you propose to pay in 5 or less payments/months) OR payment equal to your first proposed offer amount and you must pay the remaining proposed payments when they are due if you are proposing a periodic payment offer.

In addition to the application fee and deposit, for your offer in compromise to be considered, (1) you must not be in an open bankruptcy proceeding, (2) you must file all federal tax returns that you were legally required to file prior to submitting your offer and (3) if you are a business with employees, you must have timely made any required tax deposits for the current quarter and the two immediate preceding quarters. Your estimated payments must also be up to date for the current year for IRS to process your offer.

An offer in compromise is hard bargaining, lots of documentation, and often a long and exasperating process that generally takes anywhere from six months to two years, but this is the price you pay when you owe taxes and want a fresh, tax-free start.

If you need assistance filing an offer in compromise, please contact us.

Installment Agreement

Installment agreements allow the full payment of your debt in smaller, more manageable amounts. Installment agreements generally require equal monthly payments.

The amount of your installment agreement will be based on the amount you owe and you ability to pay that amount within the time available to the IRS to collect the tax debt from you.

An installment agreement will not stop interest and penalties from accruing. Before requesting an installment agreement, you should consider less costly alternatives such as a bank loan or an offer in compromise.

Generally, user fees are $105 for non-direct debit agreements, $52 for direct debit agreements and $45 for reinstatements. However, the fee is only $43 for taxpayers with income at or below certain U.S. Department of Health and Human Services poverty guidelines.

You may request an installment agreement by completing and submitting:

• Form 9465, Installment Agreement Request

If you owe $10,000 or less in tax, you should not have to complete a financial statement. If you owe more than $10,000 in tax, you will probably need to complete and submit the following form to receive an installment agreement:

• Form 433-F, Collection Information Statement

If you need assistance requesting an installment agreement, please contact us.

Currently Not Collectible (Hardship Deferment)

If the IRS determines that you cannot pay any of your tax debt, the IRS may temporarily delay collection, by issuing a hardship deferment, until your financial condition improves.

The taxpayer is asking to pay nothing to the IRS for back taxes at the current time and for the IRS to cease any further collection efforts during the taxpayer's financial hardship.

If the IRS does agree to such a hardship deferment, your debt will increase because interest and penalties will be charged until you pay the debt in full or until the statute of limitations for collection expires.

During such a delay, the IRS will continue to review periodically your ability to pay through requests for financial statements. You will probably need to complete and submit the following form:

• Form 433-F, Collection Information Statement

If you need assistance requesting currently not collectible status, please contact us.

Removal of IRS Penalties and/or Interest (Abatement)

The IRS can remove or reduce IRS penalties if you have an acceptable reason (IRC 6651). If you believe you have an acceptable reason, you may send the IRS a signed statement of facts explaining your reason (include specific dates, names, amounts, and locations). Be sure to include your name, social security number or employer identification number, the amount of the penalty, and the type of tax and years for which penalties are owed. The IRS will review your statement and let you know whether they accept your explanation as “reasonable cause” to remove or reduce your penalty. The procedure does not apply to interest and, in some cases, the tax must be paid before the request can be considered. We suggest you pay the principal tax liability (as shown on your tax return) before making your request.

Forgiveness of penalties is decided on a case-by-case basis. You must show that you exercised ordinary business care and prudence (and not willful neglect) and were nevertheless unable to file the return timely and/or pay the tax liability.

Consider providing the IRS with a chronological chain of events that led up to the penalty assessment. You can include business activities, personal activities, and/or personal and business activities of others that may have affected your decision-making process at the time of the penalty. If you are requesting abatement for failure to pay, you must show reasonable efforts to conserve sufficient assets in a marketable form in an attempt to pay the tax due.

You have good reason for abatement if your tax problems were at least partly due to:

• Illness
• Destruction of your records
• Family problems, such as divorce or death in the family
• Incarceration or other significant disruption to your life
• Improper advice from a tax professional
• Erroneous written advice from the IRS (in this case interest may also be abated)

In sum, an abatement may be granted if you were victimized by factors beyond your control that caused your tax delinquency and the penalties.

The IRS has also abated penalties for taxpayers for such reasons as war, hurricanes, dishonest bookkeepers, alcoholism, drug addiction, and bad business decisions. They have even, on occasion, abated penalties for such basic reason as simply forgot to file, never did this before, etc.

There are abatements for acts of non-compliance, including:

• Civil fraud penalties
• Negligence penalties
• Penalty for failure to pay estimated tax
• Failure to pay penalties
• Late filing penalties
• Dishonored check penalties

You should file the request for penalty abatement with the director of the IRS Service Center where the tax return was required to be filed.

Having the IRS abate interest is harder. The IRS will waive interest that is the result of certain errors or delays caused by IRS employees. To request an abatement, complete and submit:

• Form 843, Claim for Refund and Request for Abatement

If you need assistance requesting an abatement, please contact us.

Innocent Spouse Relief

Many married taxpayers file a joint tax return because of certain benefits this filing status allows. If you did so, you may be held responsible for monies due, even if your spouse earned all of the income. And this is true even if a divorce decree states that your spouse will be responsible for any amounts due on previously filed joint returns.

However, if you qualify for Innocent Spouse Relief, you may not have to pay the tax, interest, and penalties related to your spouse (or former spouse).

To file for innocent spouse relief, separation of liability, or equitable relief, complete and submit:
• Form 8857, Request for Innocent Spouse Relief (And Separation of Liability and Equitable Relief)

If you need assistance requesting innocent spouse relief, please contact us.

Release of Levy on Bank Account or Paycheck

The IRS will consider returning levied property if:

• The IRS levied prior to sending the taxpayer the two required notices or before the taxpayer's time for responding to the notices passed.
• It was determined that the IRS did not follow their own procedures.
• The IRS agrees to let the taxpayer pay the tax in installments, but the IRS still levies, and the agreement does not say that the IRS can do so.
• Returning the property will help the taxpayer pay their taxes.
• Returning the property is in the best interest of the taxpayer and the government.

In most cases, the best way to stop an IRS levy is to contact IRS and request an installment agreement or currently not collectible status or perhaps some time to file an offer in compromise. These options will likely require a Form 433-F or Form 433-A Collection Information Statement. But before providing such detailed information about yourself, your assets and your income to the IRS, it is a good idea to speak with a tax professional.

If you need assistance requesting a release of levy, please contact us.

Release of Tax Lien

The IRS will issue a Release of the Notice of Federal Tax Lien within 30 days after you satisfy the tax due by paying the debt or having it adjusted or within 30 days after the IRS accepts a bond that you submit guaranteeing payment. See IRS Publication 1450, Request for Release of Federal Tax Lien.

Usually 10 years after a tax lien is assessed, a lien releases automatically if the IRS does not refile it. If the IRS knowingly or negligently does not release a Notice of Federal Tax Lien when it should be released, a taxpayer may sue the federal government for damages.

The IRS may withdraw a filed notice of tax lien if the notice was filed too soon or not according to IRS procedures, you entered into an installment agreement to pay the debt on the Notice of Lien (unless the agreement provides otherwise), withdrawal will speed collecting the tax, or withdrawal would be in your best interest (as determined by the Taxpayer Advocate) and the best interest of the government.

The IRS may discharge a federal tax lien if you are giving up ownership of the property. See IRS Publication 783, Instructions on How to Apply for a Certificate of Discharge of Property from the Federal Tax Lien.

The IRS may make the lien secondary to another lien. See IRS Publication 784, How to Prepare Application for Certificate of Subordination of Federal Tax Lien.

The taxpayer may appeal the filing of a lien with the IRS Office of Appeals, who will issue a determination. That determination may support the continued existence of the filed Federal tax lien or it may determine that the lien should be released or withdrawn. See IRS Publication 1660, Collection Appeal Rights.

If you need assistance requesting a release of lien, please contact us.

Information Request

Under the I. R. C. Section 6103, a taxpayer or their representative may request the following information:

• Individual Master File (IMF) transcripts.
• Business Master File (BMF) transcripts.
• Income Reporting Documents (W-2 wage income and related withholding and 1099 income reported to the taxpayer).

Additional Information Requests can be made under:

• The Freedom of Information Act

If you need assistance requesting transcripts or documents from IRS, please contact us.

Tax Account Transcript Review

A taxpayer of their representative may request an IRS Account Transcript for most returns. The transcripts contain information on the financial status of a taxpayer account, such as payments made on the account, penalty assessments, and adjustments made by the taxpayer or IRS after the return was filed. Return information is limited to items such as tax liability and estimated tax payments. We can review this information for various tax years to determine whether a balance is owed, what actions have been taken by the IRS, when your liability was assessed, whether the IRS sent your Intent to Levy Collection Due Process notice, whether a Form 900 Waiver was signed and when the statute of limitation for collection will expire. If you are a non-filer, this will tell us whether the IRS filed a Substitute for Return – the IRS version of your unfilled tax return.

If you need assistance requesting and/or reviewing an account transcript, please contact us.

Collection Statute Issues

Under IRC 6502, the IRS has only ten years from the date of tax assessment to collect your delinquent taxes. This was extended retroactively on November 5, 1990 from six years to ten years. This means that each tax assessment has a Collection Statute Expiration Date (CSED) – a date on which the tax liability is no longer legally enforceable. Once the statute of limitations for collection expires, your liability expires - and with it the government’s right to pursue collection of the tax! Prior to the Restructuring and Reform Act of 1998 (RRA 98), the IRS would “request” that the taxpayer “voluntarily” extend the collection statute by agreement – this unfair practice is no longer permissible, and any extension of the collection statute already in effect on December 31, 1999 will expire on the last day of the ten year collection period or December 31, 2002, whichever is later. However, the statute of limitations for collection can still be extended and/or suspended by:

• Installment Agreements with Form 900 Waiver
• Offer in Compromise
• Bankruptcy
• Collection Due Process (CDP) Appeal
• Taxpayer Assistance Order
• Absence from the Country
• IRS Judgment/Litigation
• Relief From Joint and Several Liability / Innocent Spouse
• Accounts of Taxpayers Who Serve in a Combat Zone or Contingency Operation
• Military Deferment
• Wrongful Levy (Seizure)
• Wrongful Lien
• Estate Tax Lien
• Enforcement of the Two-Tier tax Scheme
• Substitute For Return

Generally, the collection period is suspended during periods in which the IRS is legally barred from taking collection action against you, plus an extra 30 to 90 days in most cases.

If more than one case action suspends the running of the collection statute and the suspensions overlap, the CSED is viewed as extended only once for the period the suspensions overlap.

If you need assistance determining when your collection statute should expire, please contact us.

Taxpayer Advocate Utilization

The Taxpayer Advocate Service is an IRS program that provides an independent system to assure that tax problems, which have not been resolved through normal channels, are promptly and fairly handled. Each state and service center has at least one local Taxpayer Advocate, who is independent of the local IRS office and reports directly to the National Taxpayer Advocate.

The Taxpayer Advocate can help if:

• The taxpayer is suffering, or is about to suffer, a significant hardship.
• The taxpayer is facing an immediate threat of adverse action.
• The taxpayer will incur significant cost.
• The taxpayer will suffer irreparable injury or long-term adverse impact.
• The taxpayer has experienced a delay of more than 30 days to resolve the issue.
• The taxpayer has not received a response or resolution by the date promised.
• All established systems or procedures have failed to operate as intended to resolve the problem or dispute.

The taxpayer may apply for Taxpayer Advocate assistance by completing and submitting:
• Form 911, Application for Taxpayer Assistance Order

The taxpayer may also write to the Taxpayer Advocate at the office that last contacted the taxpayer or call the National Taxpayer Advocate Service directly at (877) 777-4778.

If you need assistance in getting your case heard by taxpayer advocate, please contact us.

Resolution of Payroll Tax Issues

To encourage the prompt payment of withheld income and employment taxes, Congress passed a law that provides for the Trust Fund Recovery Penalty. The IRS may assess this penalty against anyone who is responsible for collecting or paying withheld income and employment taxes, or for paying collected excise taxes, and who willfully fails to collect or pay them. For willfulness to exist, the responsible person must have known about the unpaid taxes and have used the funds to keep the business going or allowed available funds to be paid to other creditors. This penalty may be applied whether or not the business is out of business. Once this penalty is assessed against the responsible person or persons, the IRS will proceed with collection efforts against each individual held responsible.

If you need assistance with back payroll taxes, please contact us.

Appeals and Protests

If a taxpayer disagrees with the IRS about the amount of their tax liability or disagrees with the IRS about a certain collection action, the taxpayer has the right to ask the Appeals Office to review their case.

The taxpayer also may ask a court to review their case. For more information on appeal rights and how to prepare a protest if you don't agree, see IRS Publication 5.

For more information on collection appeal rights, see IRS Publication 1660.

If you need assistance with filing an appeal or protest of an IRS decision, please contact us. We can help.

Free Consultation

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