Comprehensive Tax Relief Options Available in Los Angeles

Comprehensive Tax Relief Options Available in Los Angeles

Tax relief refers to a variety of programs and strategies designed to reduce or eliminate the amount of tax owed by individuals or businesses. These programs can help alleviate financial burdens by lowering the principal tax debt, reducing penalties and interest, and providing manageable payment options. Tax relief can be especially beneficial for those facing financial hardship or those who have accrued significant tax liabilities over time.

Common Tax Issues That May Require Relief

Unpaid Taxes

One of the most prevalent issues is unpaid taxes. Whether due to financial hardship, oversight, or miscalculation, failing to pay taxes on time can result in substantial debt. Unpaid taxes accrue interest and penalties over time, increasing the overall amount owed.

Penalties

Tax penalties can be imposed for various reasons, such as late filing, late payment, underreporting income, or failing to file a return altogether. These penalties can add up quickly, creating a significant financial burden. 

Interest

Interest on unpaid taxes begins to accrue from the due date of the tax return and continues until the tax is paid in full. This interest can compound daily, significantly increasing the total amount owed over time. Interest charges apply to both the unpaid tax and any penalties assessed.

Tax Liens

A tax lien is a legal claim by the government against a taxpayer’s property due to unpaid taxes. This lien can affect your credit score, making it difficult to obtain loans or other forms of credit. It can also lead to more severe enforcement actions, such as levies or property seizures.

Wage Garnishments and Bank Levies

The IRS and state tax authorities have the power to garnish wages or levy bank accounts to collect unpaid taxes. Wage garnishments involve deducting a portion of your paycheck to cover the tax debt, while a bank levy allows the tax authorities to withdraw funds directly from your bank account.

Tax Relief Options Available in Los Angeles

Installment Agreements

Installment agreements are payment plans that allow taxpayers to pay off their tax debt over time through monthly installments. This option is particularly beneficial for individuals and businesses that cannot afford to pay their tax liabilities in full by the due date. By setting up an installment agreement, taxpayers can manage their financial obligations more effectively while staying compliant with tax authorities.

Benefits of Setting Up a Payment Plan with the IRS or California Franchise Tax Board (FTB)

• Avoidance of Immediate Full Payment: Allows taxpayers to spread out payments, making it more manageable to pay off tax debt without severe financial strain.
• Prevention of Enforcement Actions: Setting up an agreement can prevent the IRS or FTB from taking more drastic collection actions, such as wage garnishments or bank levies.
• Reduction in Penalties and Interest: While interest and some penalties continue to accrue, having an installment agreement in place can prevent additional penalties for failure to pay.
• Improved Credit Score: Regular payments under an installment agreement can help improve your credit standing over time by showing consistent efforts to resolve debt.

Eligibility Criteria and Application Process

To qualify for an installment agreement, you must:

• Have filed all required tax returns.
• Provide a complete financial disclosure if the amount owed is significant.

The application process involves:

1. Filing All Required Returns: Ensure all tax returns are filed.
2. Submitting Form 9465 (IRS) or FTB Form 3567: Use these forms to request an installment agreement.
3. Financial Information Submission: If required, submit detailed financial information using IRS Form 433-F or equivalent FTB forms.
4. Setting Up Payments: Determine the monthly payment amount and set up automatic deductions if possible.

Offer in Compromise (OIC)

An Offer in Compromise (OIC) is a tax relief option that allows taxpayers to settle their tax debt for less than the full amount owed. The IRS and FTB may accept an OIC if they believe that the offered amount is the most they can expect to collect within a reasonable period. This option is typically available to taxpayers who cannot pay their full tax liability and meet specific criteria demonstrating financial hardship.

Process of Negotiating an OIC with the IRS or FTB

Negotiating an OIC involves several steps:

1. Eligibility Determination: Assess whether you qualify based on your financial situation.
2. Submitting Form 656 (IRS) or FTB Form 4905-PIT: Complete and submit the required forms along with a detailed financial disclosure (IRS Form 433-A or 433-B for businesses).
3. Offer Calculation: Calculate a realistic offer amount based on your ability to pay, income, expenses, and asset equity.
4. Review and Negotiation: The IRS or FTB reviews the offer and may negotiate the terms before acceptance or rejection.

Qualifications and Requirements for Approval

To qualify for an OIC, you must:

• Be current with all filing and payment requirements.
• Demonstrate an inability to pay the full tax liability.
• Provide complete and accurate financial information.

Currently Not Collectible (CNC) Status

Currently Not Collectible (CNC) status is granted to taxpayers who are unable to pay their tax debt due to financial hardship. When in CNC status, the IRS temporarily suspends collection efforts, including levies and garnishments. However, interest and penalties continue to accrue on the unpaid balance.

Situations Where CNC Status May Be Granted

CNC status may be granted in situations where:

• The taxpayer's income is insufficient to cover basic living expenses.
• The taxpayer has no significant assets that can be liquidated to pay the debt.
• The taxpayer is experiencing a temporary financial hardship, such as a job loss or medical emergency.

Impact on Future Tax Obligations

While CNC status provides temporary relief from collection actions, it does not eliminate the tax debt. The IRS or FTB will periodically review the taxpayer's financial situation to determine if circumstances have improved. If the taxpayer's financial situation improves, the IRS or FTB may resume collection efforts. It is also important for taxpayers in CNC status to stay current with future tax obligations to avoid additional issues.

Penalty Abatement

Types of Penalties That Can Be Abated

The IRS and California Franchise Tax Board (FTB) impose various penalties for non-compliance with tax laws. Common penalties that can be abated include:

• Failure-to-File Penalty: For not filing your tax return by the due date.
• Failure-to-Pay Penalty: For not paying the tax owed by the due date.
• Accuracy-Related Penalty: For substantial understatements of tax due to negligence or disregard of rules.
• Failure to Deposit Penalty: For employers who do not deposit payroll taxes on time.

Criteria for Qualifying for Penalty Abatement

To qualify for penalty abatement, you must demonstrate reasonable cause or meet specific criteria, such as:

• Reasonable Cause: Showing that you exercised ordinary business care and prudence but were still unable to comply (e.g., due to serious illness, natural disasters, or reliance on erroneous advice from a tax professional).
• First-Time Penalty Abatement (FTA): Available if you have a clean compliance history for the past three years and have filed all required returns and paid any taxes due.
• Statutory Exception: Situations where the IRS or FTB made an error, or you received incorrect written advice from the tax authorities.

Steps to Request Penalty Abatement

1. Determine Eligibility: Review the criteria and gather evidence supporting your request.
2. Prepare Documentation: Collect relevant documents, such as medical records, insurance reports, or correspondence with tax professionals.
3. Submit a Written Request: Write a formal letter explaining your circumstances and why you believe you qualify for abatement. Include all supporting documentation.
4. Use IRS Form 843 (Claim for Refund and Request for Abatement): For federal penalties, complete and submit this form. For state penalties, use the appropriate FTB form or process.
5. Follow Up: Monitor the status of your request and provide any additional information if requested by the IRS or FTB.

Innocent Spouse Relief

Innocent spouse relief is designed to protect individuals who were unaware of errors or omissions on a joint tax return made by their spouse or former spouse. This relief allows you to be relieved of responsibility for paying taxes, interest, and penalties if your spouse improperly reported items or omitted items from the tax return.

Eligibility Requirements

To qualify for innocent spouse relief, you must meet the following criteria:

1. Filed a Joint Return: The tax debt must be from a jointly filed tax return.
2. Error or Omission: The understatement of tax is due to erroneous items of your spouse (e.g., unreported income or incorrect deductions).
3. Lack of Knowledge: You did not know and had no reason to know about the error when you signed the return.
4. Equity Considerations: It would be unfair to hold you liable for the unpaid taxes.

Application Process and Necessary Documentation

1. Complete IRS Form 8857 (Request for Innocent Spouse Relief): Provide detailed information about your situation and the reasons you qualify for relief.
2. Attach Supporting Documentation: Include any evidence that supports your claim, such as divorce decrees, bank statements, or communication records.
3. Submit the Form: Send the completed form and documentation to the IRS. For state relief, follow the specific procedures of the FTB.
4. Review and Follow-Up: The IRS or FTB will review your application and may contact you for additional information. Stay in touch and provide any requested documents promptly.

Tax Lien Withdrawal

A tax lien is a legal claim against your property by the government due to unpaid taxes. Tax liens can have severe impacts, including:

• Credit Damage: Liens can significantly lower your credit score, making it difficult to obtain loans or credit.
• Asset Seizure: The government can seize and sell your property to satisfy the tax debt.
• Public Record: Liens are public records, potentially affecting your reputation and business relationships.

Process for Requesting a Lien Withdrawal

1. Eligibility Check: Ensure you meet the criteria for lien withdrawal, such as paying the tax debt in full or entering into a direct debit installment agreement.
2. Complete IRS Form 12277 (Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien): Provide detailed information about your situation and the reasons for requesting a withdrawal.
3. Submit the Form: Send the completed form to the IRS office handling your case. For FTB liens, follow the appropriate state procedures.
4. Monitor the Process: Stay in touch with the IRS or FTB to ensure your application is processed and follow up as necessary.

Benefits of Having a Tax Lien Withdrawn

• Credit Improvement: A withdrawn lien can help improve your credit score by removing the negative mark from your credit report.
• Increased Financial Opportunities: With a lien removed, you may find it easier to obtain loans, mortgages, and other forms of credit.
• Reduced Stress: Removing a lien alleviates the pressure of potential asset seizures and improves your overall financial stability.

How Tax Alliance Can Help

If you are facing tax challenges, don't navigate these complexities alone. Tax Alliance is here to provide the expert assistance you need to secure comprehensive tax relief. Our experienced team specializes in addressing various tax issues, including penalty abatement, innocent spouse relief, and tax lien withdrawals, ensuring you receive the best possible outcome.

Take the first step towards resolving your tax issues by contacting Tax Alliance for a free, no-obligation consultation. Our professionals will assess your situation, explain the available tax relief options, and develop a personalized strategy to address your specific needs. This initial consultation is an excellent opportunity to understand how we can help you achieve financial stability and peace of mind.

• Address: 2002 E. McFadden Avenue, Suite 110, Santa Ana, CA 92705
• Phone: 1-800-987-3051
• Email: info@taxalliance.com
• Website: Tax Alliance

Contact us now for a free consultation and let Tax Alliance help you resolve your tax issues. Your path to financial stability starts with a single call.