Making 2026 the Year You Take Control of Your Taxes

As we step into 2026, many taxpayers find themselves carrying the weight of unresolved tax issues from previous years. Whether you have unfiled returns, outstanding tax debt, or looming concerns about potential audits, the new year presents a perfect opportunity to take decisive action and put your tax troubles behind you.

The reality is that tax problems rarely resolve themselves. Interest and penalties continue to accumulate, collection actions can escalate, and the stress of unresolved tax matters can affect every aspect of your life. However, the good news is that there are legitimate pathways to tax relief, and working with an experienced tax professional can help you navigate these options effectively.

This comprehensive guide explores the most common questions taxpayers have about achieving tax resolution in 2026, understanding their options for relief, and learning how to prevent future tax problems. Whether you are dealing with the IRS, California’s Franchise Tax Board (FTB), the Employment Development Department (EDD), or the California Department of Tax and Fee Administration (CDTFA), the information here can help you understand what steps to take next.

Understanding Tax Resolution: Frequently Asked Questions

What exactly is tax resolution, and why is it important?

Tax resolution refers to the process of addressing and settling outstanding tax obligations with taxing authorities. This can include negotiating payment arrangements, applying for penalty abatement, pursuing offers in compromise, or working to have incorrect assessments corrected. The importance of tax resolution cannot be overstated because unresolved tax debt can lead to serious consequences including wage garnishments, bank levies, tax liens on property, and in severe cases, criminal prosecution.

For many taxpayers, the most challenging aspect of tax resolution is simply knowing where to begin. The tax code is complex, and dealing with agencies like the IRS can feel overwhelming. This is where working with a qualified tax professional becomes invaluable. An Enrolled Agent, for example, holds a federal license that authorizes them to represent taxpayers before the IRS and can navigate the resolution process on your behalf.

I have unfiled tax returns from previous years. How serious is this situation?

Unfiled tax returns represent one of the most common yet potentially serious tax problems that individuals and businesses face. The IRS considers failure to file a federal tax return to be a more serious offense than failure to pay, and the penalties reflect this. The failure-to-file penalty is typically 5% of the unpaid taxes for each month the return is late, up to a maximum of 25% of your unpaid taxes.

Beyond penalties, having unfiled returns can prevent you from claiming refunds you may be entitled to (the IRS generally gives you three years from the original due date to claim a refund), and it can also block your ability to obtain financing, as lenders often require tax return transcripts. Perhaps most importantly, the IRS may file a substitute return on your behalf, which typically does not include deductions and credits you might be entitled to, resulting in a higher tax liability than necessary.

The good news is that voluntarily filing past-due returns is viewed favorably by the IRS and is an essential first step toward resolving your tax situation. Working with a tax professional to prepare accurate returns can help ensure you claim all available deductions and credits while demonstrating good faith to the taxing authorities.

What options are available if I owe more in taxes than I can afford to pay?

If you find yourself unable to pay your full tax liability, it is important to understand that you have options. The worst thing you can do is ignore the situation. The IRS and state taxing authorities offer several programs designed to help taxpayers who are genuinely unable to pay their full balance.

Installment agreements allow taxpayers to pay their tax debt over time through monthly payments. The IRS offers several types of installment agreements, including guaranteed installment agreements for smaller balances, streamlined agreements for moderate amounts, and partial payment installment agreements for situations where the taxpayer cannot pay the full amount before the collection statute expires.

Currently not collectible (CNC) status is another option for taxpayers who are experiencing genuine financial hardship. When the IRS places an account in CNC status, they temporarily suspend collection activity, though interest and penalties may continue to accrue.

Offers in compromise allow qualifying taxpayers to settle their tax debt for less than the full amount owed. The IRS considers several factors when evaluating an offer, including your ability to pay, income, expenses, and asset equity. While not everyone qualifies for an offer in compromise, it can provide significant relief for those who do.

Can penalties and interest be reduced or eliminated?

Yes, in many cases penalties can be reduced or eliminated through a process called penalty abatement. The IRS recognizes that sometimes circumstances beyond a taxpayer’s control can prevent them from meeting their tax obligations on time. First-time penalty abatement is available to taxpayers who have a clean compliance history for the prior three years and have filed all required returns or filed an extension.

Reasonable cause penalty abatement is available when a taxpayer can demonstrate that their failure to comply was due to circumstances beyond their control, such as serious illness, natural disasters, death in the family, or reliance on erroneous advice from a tax professional. Documentation is key when requesting reasonable cause abatement.

While interest is generally more difficult to abate than penalties, there are limited circumstances where interest may be reduced, particularly if it was caused by IRS errors or delays. A qualified tax professional can evaluate your specific situation and advise you on the best approach for seeking penalty and interest relief.

Dealing with Tax Audits and Examinations

What should I do if I receive an audit notice from the IRS or state?

Receiving an audit notice can be stressful, but it is important to stay calm and take appropriate action. First, carefully read the notice to understand exactly what the taxing authority is requesting. IRS audits can range from simple correspondence audits that request documentation for specific items to more comprehensive office or field audits.

Do not ignore the notice or miss any deadlines specified in the correspondence. The IRS operates on strict timelines, and failing to respond can result in automatic assessments against you. Gather all relevant documentation that supports the items being questioned, and consider whether professional representation would benefit your situation.

Many taxpayers find that having professional representation during an audit provides peace of mind and often leads to better outcomes. An Enrolled Agent or other qualified representative can communicate with the IRS on your behalf, prepare and present your case, and help ensure your rights as a taxpayer are protected throughout the process.

How can I reduce my chances of being audited in the future?

While there is no guaranteed way to avoid an audit entirely (some returns are selected randomly), there are steps you can take to reduce your audit risk. Accuracy is paramount: ensure all income is reported, including 1099s and other information returns that the IRS also receives. Mathematical errors and discrepancies between your return and third-party reporting are common audit triggers.

Be reasonable with deductions and maintain thorough documentation. Unusually high deductions relative to your income, excessive home office deductions, or large charitable contributions without proper substantiation can attract scrutiny. If you are legitimately entitled to these deductions, having organized records to support them is essential.

Working with a qualified tax professional to prepare your returns can help ensure accuracy and completeness while identifying potential red flags before your return is filed. A professional preparer understands what the IRS looks for and can help present your tax situation in the most favorable yet accurate light.

California State Tax Issues: FTB, EDD, and CDTFA

What are the differences between the FTB, EDD, and CDTFA?

California taxpayers may deal with several different state agencies depending on their tax situation. The Franchise Tax Board (FTB) handles personal and business income taxes in California. If you have state income tax debt, unfiled state returns, or are facing a state audit related to income taxes, the FTB is the agency involved.

The Employment Development Department (EDD) administers unemployment insurance, disability insurance, and paid family leave programs. Businesses that have employees may face EDD audits related to worker classification (employee vs. independent contractor), payroll tax compliance, or unemployment insurance contributions.

The California Department of Tax and Fee Administration (CDTFA) handles sales and use tax, as well as various other taxes and fees. Businesses that sell taxable goods or services must register with the CDTFA and may face audits related to sales tax collection and remittance.

Each agency has its own procedures, deadlines, and resolution options. Working with a tax professional who has experience with all three agencies can be particularly valuable for California business owners who may need to address issues across multiple fronts.

Are state tax problems handled differently than federal tax issues?

While there are similarities in how federal and state tax issues are resolved, important differences exist. California’s taxing agencies have their own rules, procedures, and timelines that do not always mirror federal practices. For example, California’s statute of limitations on collections differs from the federal statute, and the state has its own versions of installment agreements and offers in compromise.

California is known for being particularly aggressive in its collection efforts. The FTB has the authority to levy bank accounts, garnish wages, and place liens on property, sometimes with less notice than the IRS provides. State tax liens can also affect your credit and your ability to sell or refinance property.

Additionally, resolving federal tax issues does not automatically resolve corresponding state issues. If you owe taxes to both the IRS and California, you will need to address each separately. A comprehensive tax resolution strategy should account for both federal and state obligations.

Multi-State and International Tax Considerations

I work or have income in multiple states. What do I need to know?

Multi-state taxation has become increasingly common as remote work expands and people maintain connections across state lines. Generally, you must file a tax return in any state where you have tax nexus, which can be established through physical presence, income sourced to that state, or business activity.

Most states provide credits for taxes paid to other states to help prevent double taxation, but understanding how these credits work and ensuring they are properly claimed requires careful attention. Some states have reciprocal agreements that simplify matters for workers who live in one state and work in another.

The complexity increases significantly for business owners, particularly those with S-corporations or partnerships that operate across state lines. Pass-through entity tax elections, nexus considerations, and varying state treatment of business income all require careful navigation. Errors in multi-state filing can lead to audits and assessments from multiple jurisdictions simultaneously.

I am a US citizen living abroad. What are my tax obligations?

The United States is one of only two countries that taxes its citizens on worldwide income regardless of where they live. This means that as an American living overseas, you are required to file US tax returns reporting your global income, even if you also pay taxes in your country of residence.

Fortunately, several provisions exist to help prevent double taxation. The Foreign Earned Income Exclusion (FEIE) allows qualifying taxpayers to exclude a significant amount of foreign earned income from US taxation. The Foreign Tax Credit provides relief by allowing you to credit foreign taxes paid against your US tax liability. Housing exclusions and deductions may also be available.

Beyond income taxes, Americans abroad have additional reporting requirements including the Foreign Bank Account Report (FBAR) for those with foreign financial accounts exceeding certain thresholds, and Form 8938 for reporting specified foreign financial assets. Penalties for failing to meet these reporting requirements can be severe.

Expatriate tax preparation is a specialized area that requires understanding both US tax law and how it interacts with foreign tax systems. Working with a tax professional who has experience with expat returns can help ensure compliance while minimizing your overall tax burden.

Taking Action in 2026: Your Path to Tax Relief

What is the first step I should take to resolve my tax problems?

The most important first step is to stop avoiding the situation and take action. Tax problems do not improve with time. Interest and penalties continue to accumulate, and the IRS’s collection powers only increase as time passes. Whether you have unfiled returns, outstanding tax debt, or are facing an audit, addressing the issue head-on is essential.

A consultation with a qualified tax professional can help you understand your specific situation and options. During an initial consultation, a tax professional can review your tax history, explain the potential consequences of your current situation, and outline a strategy for resolution. This information empowers you to make informed decisions about how to proceed.

Gathering your documentation is another important early step. This includes copies of previous tax returns, IRS or state notices you have received, income documents such as W-2s and 1099s, and any records related to deductions or credits you may be entitled to claim. Having this information organized will make the resolution process more efficient.

Why should I work with an Enrolled Agent for tax resolution?

Enrolled Agents (EAs) hold a special designation granted by the IRS that authorizes them to represent taxpayers before the IRS at all administrative levels. This federal license is earned through rigorous testing on all aspects of the tax code or through qualifying experience as a former IRS employee. EAs must also meet continuing education requirements to maintain their credentials.

Unlike attorneys who may specialize in various areas of law or CPAs whose expertise may focus on accounting and audit, Enrolled Agents specialize specifically in taxation. This focused expertise can be particularly valuable in tax resolution matters where understanding the nuances of tax law and IRS procedures is essential.

EAs can represent you directly with the IRS and state taxing authorities, handling communications on your behalf and advocating for the best possible resolution. This representation can relieve significant stress while often achieving better outcomes than taxpayers might obtain on their own.

How can I prevent tax problems from occurring in the future?

Prevention is always preferable to resolution. Once you have addressed any outstanding tax issues, implementing good practices can help you stay compliant going forward. This includes filing all required returns on time (or requesting extensions when needed), making estimated tax payments if you have income not subject to withholding, and keeping organized records throughout the year.

For business owners, working with a tax professional throughout the year rather than just at tax time can help identify potential issues before they become problems. Proactive tax planning can also help minimize your tax burden through legitimate strategies while ensuring compliance with all requirements.

Regular reviews of your withholding and estimated payments can help prevent unpleasant surprises at tax time. Life changes such as marriage, divorce, having children, buying or selling property, or starting a business all have tax implications that should be addressed promptly.

How Mike Habib, EA Can Help You Achieve Tax Relief

Mike Habib is a licensed Enrolled Agent based in Whittier, Los Angeles County, California, specializing in federal IRS and state tax matters for individuals and businesses. With extensive experience in tax representation, tax problem resolution, and complex tax preparation, Mike brings a depth of expertise that can make a meaningful difference in your tax situation.

As an Enrolled Agent, Mike is authorized to represent taxpayers nationwide before the IRS and state taxing authorities. This means that whether you are located in California, another state, or living overseas as an American expatriate, Mike can provide the representation and guidance you need.

Mike’s practice focuses on helping taxpayers resolve their most challenging tax situations, including audit representation before the IRS, FTB, EDD, and CDTFA, negotiating installment agreements and offers in compromise, seeking penalty abatement, preparing unfiled returns, and addressing complex multi-state and international tax matters.

The approach at Mike Habib’s tax practice emphasizes personalized service and clear communication. Tax problems can feel overwhelming, but with experienced guidance, manageable solutions often exist. Each client’s situation is unique, and developing a strategy tailored to your specific circumstances is essential for achieving the best possible outcome.

Services Offered

The tax practice of Mike Habib, EA provides comprehensive services to address a wide range of tax needs. Tax resolution services include IRS and state tax debt resolution, installment agreement negotiation, offer in compromise preparation, penalty abatement requests, innocent spouse relief, wage garnishment and bank levy release, and tax lien removal assistance.

Audit representation services cover IRS audits (correspondence, office, and field), California FTB audits, EDD payroll and worker classification audits, and CDTFA sales tax audits. Having professional representation during an audit can help protect your rights and often leads to more favorable outcomes.

Tax preparation services include individual and business returns, multi-state tax preparation, S-corporation and partnership returns, and expatriate tax preparation for Americans living abroad. Complex returns require expertise to ensure accuracy and maximize legitimate tax benefits.

Tax planning services help individuals and businesses minimize their tax burden through legitimate strategies while maintaining full compliance with tax laws. Proactive planning is particularly valuable for business owners, high-income individuals, and those with complex financial situations.

Make 2026 Your Year for Tax Relief

The start of a new year is an ideal time to take control of your tax situation. Whether you are dealing with unresolved issues from the past or want to ensure you stay compliant going forward, taking action now can prevent problems from growing and help you achieve peace of mind.

If you have tax problems that need resolution, unfiled returns that need to be addressed, or simply want expert guidance on your tax matters, consider reaching out to Mike Habib, EA for a consultation. Understanding your options is the first step toward resolution, and professional guidance can make the process significantly less stressful.

Remember that you have rights as a taxpayer, and there are legitimate pathways to resolve even significant tax problems. The key is to take action, seek qualified help, and commit to addressing your tax situation proactively. With the right approach and experienced guidance, 2026 can indeed be the year you put your tax troubles behind you and move forward with confidence.

Contact Information:

1-877-788-2937 [1877-78-TAXES]

Contact Mike Habib, EA ONLINE

Enrolled Agent — Licensed to Practice Before the IRS Nationwide

Whittier, Los Angeles County, California

Serving taxpayers nationwide and Americans living overseas

Specializing in: Tax Resolution, IRS Representation, FTB/EDD/CDTFA Audit Defense, Multi-State Tax Preparation, Expatriate Tax Services, Individual & Business Tax Planning