Tax Relief Glossary

Professional representation by a licensed attorney or enrolled agent during an IRS examination. Your representative communicates with the IRS on your behalf and you are not required to attend or answer IRS questions directly.

A process allowing taxpayers to dispute an IRS audit assessment they believe is incorrect, typically by submitting new information or documentation that was not available during the original examination.

Taxes owed from prior years that remain unpaid. Back taxes accumulate interest and penalties over time and can trigger IRS enforcement actions including liens, levies, and garnishments.

An IRS seizure of funds directly from a bank account to satisfy a tax debt. Once a bank levy is issued, the bank holds the funds for 21 days before remitting them to the IRS — allowing a window for a levy release.

A legal right allowing taxpayers to request a hearing before the IRS Office of Appeals before or after the IRS levies property. CDP hearings can challenge the appropriateness of collection actions.

The date on which the IRS's 10-year right to collect a tax debt expires. After this date, the IRS can no longer legally collect the debt. Certain actions (bankruptcy, OIC) can pause and extend this statute.

An IRS hardship status that suspends all collection activity when a taxpayer's allowable living expenses equal or exceed their income. Interest and penalties continue to accrue, but no levies or garnishments can be issued.

An IRS agreement to remove a federal tax lien from a specific piece of property — typically to allow a sale to proceed — while the lien remains on other property.

One of the three grounds for an Offer in Compromise. DATC applies when the taxpayer cannot pay the full amount owed within the collection statute period.

An Offer in Compromise basis used when there is genuine dispute about whether the assessed tax is correct — for example, due to a legal question or missing records.

The third ground for an Offer in Compromise, available when full payment would create economic hardship or be fundamentally unfair based on exceptional circumstances, even if the taxpayer could technically pay.

A federally authorized tax practitioner licensed by the IRS to represent taxpayers. Enrolled agents can represent taxpayers in audits, collections, and appeals before the IRS.

A legal claim by the government against all of a taxpayer's property when they fail to pay a tax debt. Liens are publicly filed and damage credit scores. They can be withdrawn, released, discharged, or subordinated.

The Foreign Investment in Real Property Tax Act. Requires buyers to withhold a percentage of the sale price (typically 10–15%) when purchasing U.S. real property from a foreign seller and remit it to the IRS.

An IRS administrative waiver that removes penalties for taxpayers with no prior penalties in the preceding three years who are otherwise current on filing and payment obligations.

Collection Information Statement for Wage Earners and Self-Employed Individuals. Required financial disclosure submitted to the IRS for Offers in Compromise and certain installment agreements.

The IRS Offer in Compromise application form submitted along with Form 433-A or 433-B. It includes the proposed settlement amount and payment terms.

IRS Power of Attorney form authorizing a representative (attorney, CPA, or enrolled agent) to represent a taxpayer before the IRS. Once filed, all IRS communications go through the representative.

IRS relief available to spouses who were unaware of an understated tax on a jointly filed return and would be unfairly held responsible for the resulting liability.

A formal IRS payment plan allowing taxpayers to pay their tax debt in monthly installments. Streamlined agreements (balances under $50,000) require minimal documentation. Larger balances require full financial disclosure.

The law enforcement division of the IRS responsible for investigating potential criminal violations of tax law. CI has a conviction rate exceeding 90%. Immediate legal representation is essential upon any CI contact.

A Final Notice of Right to Request a Hearing Before Levy — the last notice before the IRS can legally levy wages, bank accounts, or property. Taxpayers have 30 days to respond.

A notice of intent to levy state tax refunds. Often the final warning before more aggressive collection action. Receiving this notice requires immediate action.

The actual seizure of a taxpayer's property or rights to property by the IRS. Unlike a lien (a legal claim), a levy is the physical taking of assets including bank funds, wages, Social Security, and retirement accounts.

An IRS agreement to allow another creditor (such as a mortgage lender) to take priority over the federal tax lien, typically to allow a refinance or sale to proceed.

Removal of a Notice of Federal Tax Lien from public records, as if the lien never existed. Withdrawal has a much more positive credit impact than a lien release and is available in certain qualifying situations.

IRS-established allowances for basic living expenses (food, clothing, personal care) used when evaluating a taxpayer's ability to pay. These standards limit how much the IRS must allow for living expenses when calculating a payment amount.

A public document filed by the IRS in county records that establishes the government's legal claim against a taxpayer's property. Appears on credit reports and complicates property transactions.

An IRS program allowing qualifying taxpayers to settle their tax debt for less than the full amount owed. The IRS accepts an OIC when it equals the taxpayer's Reasonable Collection Potential.

An independent division within the IRS that reviews disputed tax determinations and collection actions. The Appeals Office resolves the majority of cases without Tax Court litigation, often at significantly reduced amounts.

A payment plan where monthly payments are set at what the taxpayer can afford — even if those payments will not fully pay the balance before the collection statute expires. The remaining balance becomes uncollectable.

Federal taxes employers are required to withhold from employees' wages (income tax, Social Security, Medicare) and remit to the IRS. Failure to remit these "trust fund" taxes can result in personal liability through the Trust Fund Recovery Penalty.

Reduction or elimination of IRS penalties through First Time Abatement, reasonable cause (illness, natural disaster, bad advice), or statutory exception. Does not eliminate underlying tax or interest.

Legal authorization (IRS Form 2848) allowing a tax representative to act on a taxpayer's behalf before the IRS. Eliminates direct IRS contact for the taxpayer.

The IRS's calculation of the maximum amount it could collect from a taxpayer through all available means. The RCP determines the minimum acceptable Offer in Compromise amount.

An IRS field agent assigned to collect tax debts. Revenue Officers have significant enforcement authority including the ability to issue levies, file liens, and seize property.

The time limit during which the IRS can assess or collect a tax. The assessment statute is generally 3 years from filing; the collection statute is 10 years from assessment. Certain events pause these clocks.

A return prepared by the IRS on behalf of a taxpayer who failed to file. SFRs use the least favorable filing status and allow no deductions, resulting in the highest possible tax liability.

The state of meeting all tax filing and payment obligations — filing required returns, making estimated tax payments, and paying withholding taxes. Compliance is required before the IRS will approve most resolution options.

A federal crime involving intentional failure to pay taxes owed, concealment of income, or falsification of records. Punishable by up to 5 years in prison and $250,000 in fines under 26 U.S.C. § 7201.

Personal liability assessed against responsible individuals for a business's unpaid payroll taxes. Equals 100% of unpaid trust fund taxes and cannot be discharged in bankruptcy.

Tax returns that were required but never submitted to the IRS. The IRS may prepare a Substitute for Return and can assess a failure-to-file penalty of 5% per month up to 25% of unpaid tax.

An IRS continuous levy on wages and salary that requires the employer to withhold and remit a portion of every paycheck to the IRS. Can take 60–80% of take-home pay. Remains in effect until released or the debt is paid.

One of two elements the IRS must prove to assess the Trust Fund Recovery Penalty. Willfulness means the responsible person knew about the unpaid payroll taxes and consciously chose to pay other creditors instead.