Tax Collection and Bankruptcy Tax Matters
If you are an individual who owes unpaid taxes, the tax authorities have the power to garnish your wages, seize your assets (including bank account funds) and file liens against your property. If you are a business owner, the Internal Revenue Service or California Employment Development Department may come after you personally for any unpaid payroll taxes due from your business.
Our practice focuses on tax collection defenses, including liens, levies, seizures and wage garnishments. We represent individuals and business in California and throughout the United States.
The following are examples of the types of issues we handle:
Liens, levies, seizures and wage garnishments: If you did not file a tax return or do not respond to notices from the Internal Revenue Service (IRS), the IRS will file a tax return for you as a single person with no deductions or credits. This is called a “substitute for return”. This may result in a tax liability far greater than what you actually owe. You may face an unexpected levy against your bank accounts, a lien against your properties, or the embarrassment of a wage garnishment. We have successfully challenged unreasonable assessments and collection actions.
Tax liabilities from foreclosure, loan modification and credit card negotiation: You may incur tax liabilities for debt forgiveness whenever a bank or credit card company forgives debt that you owe. The bank or other entity may issue a Form 1099-C for the cancellation of debt. The forgiven debt may be treated as income by the IRS or FTB. After the wake of the financial crisis in 2008, many taxpayers were able to manage the income from the debt forgiveness, but as the economy has slowly recovered, this phantom income from debt forgiveness has been more difficult to manage outside of bankruptcy. We can defend against these determinations and avoid or minimize the amount of tax due from the cancellation of debt.
Tax Liabilities Dischargeable in Bankruptcy: You may have tax liability that may be dischargeable in whole or in part in either a Chapter 7, 11, or 13 bankruptcy proceeding. We evaluate tax transcripts for individuals and businesses and can advise you on the best course of action in eliminating or reducing your income, sales, and in some cases employment tax liability using the bankruptcy laws.
Innocent or injured spouse: If we can prove that you qualify as an innocent or injured spouse, you may not be held responsible. Taxpayers who fall into the category of an “innocent spouse” may be relieved of jointly and severally liable for the entire tax associated with the return, if that requesting spouse did not have knowledge of the erroneous item resulting in an understatement of tax. Alternatively, a requesting spouse may have expected the other spouse to pay the tax liability in connection with a divorce proceeding and come to realize that the joint and several liability for the underpayment of tax remains and is being enforced against the requesting spouse. In this situation, joint and severable liability could be considered extremely unfair to the spouse unaware of the other spouse’s failure to pay the tax liability and equitable relief may be available to him or her.
Penalty and interest abatement: If you qualify for the first time abatement or can demonstrate “reasonable cause” for your failure to file, failure to pay, or failure to deposit tax payments, you may be able to eliminate the penalties and interest in whole or in part on the tax liability. We have successfully removed penalties ranging from several thousand to millions of dollars for taxpayers throughout the country. We also serve as a trusted resource for accountants seeking to waive small penalties for their clients.
Collection due process: If negotiations with the IRS are not coming to fruition, we can challenge the process administratively through IRS Appeals or in U.S. Tax Court.
Advance payment of deficiency interest: interest continues to accrue on tax debt. We can help you minimize interest through advance payments or penalty abatement. The interest on the penalties will be eliminated once the penalties are removed.
For more information or to schedule a consultation with an attorney at Advocate Solutions, Inc., call 310.734.2677 or fill out the contact form on this site.