Collection Defense

If you have been assessed a tax deficiency as a result of a completed audit, you may believe that all is lost. This is actually not true. A variety of techniques exist for potentially reducing, or even eliminating, the assessment imposed against you as a result of your audit. The Los Angeles tax specialists at the Ben-Cohen Law Firm can employ the necessary techniques to help you minimize the financial damage of an unfavorable audit result. At our firm, we utilize the knowledge of both an attorney, certified by the State Bar of California Board of Legal Specialization as a Taxation Law Specialist, and a licensed Certified Public Accountant (CPA), to achieve the best possible resolution for you.

Audit Reconsideration

A taxpayer has the right to request a reconsideration of his or her audit. Audit reconsiderations are at the Internal Revenue Service’s (IRS) discretion and generally may be granted if the taxpayer: (1) did not appear for his or her audit, (2) moved and failed to receive correspondence from the IRS as a result, (3) has new information to offer to the IRS that was not provided at the original audit, or (4) disagrees with the IRS’s assessment.

Making sure the IRS’s claim is not time-barred

As a taxpayer, you should make certain that the applicable statute of limitations on assessment was open when the IRS made its underlying assessment, and that the statute of limitations for collection remains open. The Internal Revenue Code establishes two statutes of limitations for taxes. The IRS generally has three years to audit a taxpayer’s return (this period increases to six years in cases of “substantial understatement of income” and forever in cases of fraud). Additionally, the IRS generally has 10 years to collect the tax after an assessment. The IRS cannot assess or collect tax until all procedural and appeal rights have been used or lapsed, or you agree to assessment.

IRS can grant relief to ‘innocent’ spouses

If you and your spouse filed a joint return, then “innocent spouse relief” may provide another avenue for challenging liability. In general, when a husband and wife file a joint income tax return, each spouse is jointly and severally liable for the amount of tax due. Under Section 6015 of the Internal Revenue Code, a spouse may receive innocent spouse relief if: the understatements relating to the assessed taxes were items of the spouse not seeking relief, the spouse seeking relief did not know and had no reason to know about the understatement, and if the interests of fairness favor granting relief.

A number of other favorable resolutions exist

You may make an offer in compromise, which allows you to settle your tax obligation for less than the full amount owed. The IRS considers several facts in deciding whether to accept such an offer, and typically approves an offer if the agency believes that the offered amount is the most the IRS can expect to collect over a reasonable time period.

The law also permits you to file a collection due process appeal. This due process appeal affords you the chance to receive an “independent review” of the proposed action and, typically, this appeal triggers a suspension of collection actions while it is pending.

For taxpayers who do not wish to contest the validity of the obligation, the IRS offers installment payment agreements. Other taxpayers may seek the protection of bankruptcy, which may eliminate some tax debt obligations.

A taxpayer who has received an unfavorable assessment from the IRS is not bereft of options simply because his or her audit is complete. A variety of techniques exist to mitigate the financial damage of a tax obligation. For advice about your tax obligation and your options, contact the Los Angeles tax attorneys at the Ben-Cohen Law Firm.

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