A tax relief attorney may represent taxpayers with a tax deficiency, which is the excess of the correct tax liability over the tax shown on the taxpayer’s return plus amounts previously assessed (or collected without assessment) as a tax deficiency, and minus any credits made to the taxpayer.
The IRS is mainly authorized to assess taxes to individual and business taxpayers. The tax attorney would usually get involved as the collection process begins when a notice of deficiency is sent to the taxpayer’s last known address by registered or certified mail. In each deficiency notice, the IRS must provide a description of the basis for the assessment, an identification of the amount of tax, interest and penalties assessed and the date determined to be the last day on which the taxpayer may file a petition with the Tax Court. However, the failure by the IRS to specify the last day on which to file a petition will not invalidate an otherwise valid deficiency notice if the taxpayer was not prejudiced by the omission.
Within 90 days after the IRS’ notice of the deficiency is mailed, the taxpayer, or the tax attorney, may file a petition with the Tax Court for a redetermination of the deficiency. Payment of the assessed amount after the deficiency notice is mailed does not deprive the Tax Court of jurisdiction over the deficiency.
If the taxpayer, or the tax attorney, does not file a Tax Court petition within the required time period, the tax may be collected by the IRS. A taxpayer’s property may be seized to enforce collection if there is a failure to pay an assessed tax within 30 days after notice of levy. However, the notice and waiting period does not apply if the IRS finds that the collection of tax is in jeopardy. Notices of levy must provide a description of the levy process in simple and nontechnical terms.
Compromise and settlement of tax and penalty
The IRS may compromise the tax liability in most civil or criminal cases before referral to the Department of Justice for prosecution or defense. The Attorney General or a delegate may compromise any case after the referral. However, the IRS may not compromise certain criminal liabilities arising under internal revenue laws relating to narcotics, opium, or marijuana. Interest and penalties, as well as tax, may be compromised. An offer-in-compromise is submitted on form 656 accompanied by a financial statement on form 433-A for an individual or form 433-B for businesses (if based on inability to pay). A taxpayer who faces severe or unusual economic hardship may also apply for an offer-in-compromise by submitting form 656. If the IRS accepts an offer-in-compromise, the payment is usually allocated among tax, penalties, and interest as stated in the collateral agreement with the IRS. If no allocation is specified in the agreement and the amounts paid exceed the total tax and penalties owed, the payments will be applied to tax, penalties, and interest in that order, beginning with the earliest year. If the IRS agrees to an amount that does not exceed the combined tax and penalties, and there is no agreement regarding allocation of the payment, no amount will be allocated to interest.
Partial payment requirement. Taxpayers are required to make nonrefundable partial payments with the submission of any offer-in-compromise. Taxpayers who submit a lump-sum offer (any offer that will be paid in five or fewer installments) must include a payment of 20 percent of the amount offered. Taxpayers who submit a periodic payment offer must include payment of the first proposed installment with the offer and continue making payments under the terms proposed while the offer is being evaluated. Offers that are submitted to the IRS without the required partial payments will be returned to the taxpayer as non-processible. The required partial payments are applied to the taxpayer’s unpaid liability and are not refundable. However, taxpayers may specify the liability to which they want their payments applied. Any offer that is not rejected within 24 months of the date it is submitted is deemed to be accepted. However, any period during which the tax liability to be compromised is in dispute in any judicial proceeding is not taken into account in determining the expiration of the 24-month period.
Tax Attorney for Tax Court
The primary function of the U.S. Tax Court is to review deficiencies asserted by the IRS for additional income, estate, gift, or self-employment taxes or special excise taxes imposed on taxpayers . The Tax Court is the only judicial body from which relief may be obtained without the payment of tax. The Tax Court also may issue declaratory judgments on the initial or continuing qualification of a retirement plan, a tax-exempt organization, a private foundation, a private operating foundation, or a tax-exempt farmers’ cooperative. However, a revocation of tax-exempt status for failure to file an annual information return or notice is not subject to an action for declaratory judgment relief. The Tax Court also may rule on the tax-exempt interest status of a government bond. Declaratory judgment powers are also provided for (1) estate tax installments, (2) gift tax revaluations, and (3) employment status determinations.
The Tax Court’s offices and trial rooms are located in Washington, D.C., but trials are also conducted in principal cities throughout the country. At the time of filing a petition, the taxpayer, or the tax attorney, should file a request indicating where he prefers the trial to be held. In any Tax Court case, other than small tax cases, the findings of fact and opinion must generally be reported in writing. However, in appropriate cases, a Tax Court judge may state orally, and record in the transcript of the proceedings, the findings of fact or opinion in the case . In such cases, the court must provide to all parties in the case either a copy of the transcript pages, which record the findings or opinion, or a written summary of such findings or opinion.
Also refer to our popular article of Enrolled Agent vs Tax Attorney.
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