Tax Controversy encompasses all interactions and adversarial proceedings against and involving the IRS and the Arizona Department of Revenue. These interactions and proceedings can be stressful and are often fraught with potential pitfalls for the unwary. Our experience in tax controversy matters allows us to provide our clients valuable advice and effective representation in dealing with the IRS and the Arizona Department of Revenue. Our attorneys are highly experienced tax attorneys, with experience in all areas of tax controversy. The following is a description of the most common areas of tax controversy:
Most individuals first encounter the IRS or the Arizona Department of Revenue when they are notified that they are under audit. The scope and form of these audits can vary from a letter (a correspondence audit) to a full inspection of personal records, business records and bank statements (a field audit). The purpose of an audit is to investigate a taxpayer to find tax discrepancies and to notify individuals and other entities of tax deficiencies, or underpayments of tax, caused by any proposed changes. An audit can be a stressful experience and can potentially open a taxpayer to additional liability when the auditor discovers additional discrepancies. The IRS generally has three years from the date you file your return or the date your return was due, whichever is later, to notify you of additional taxes they believe you owe. Our experienced Arizona tax attorneys can assist you in responding to audits, limiting the scope of audits and challenging the determinations made by the IRS or the Arizona Department of Revenue.
Once a tax liability has been assessed, the IRS can and will begin the collection process. The tools at the IRS’ disposable can often be crippling on an individual’s or business’s finances. The tax lien is a significant tool the IRS can use and can have a severe financial impact on you and your business. A tax lien serves as a security device for the IRS to protect its position relative to other creditors. If filed against your real property, you may not be able to sell the property, modify your mortgage, or otherwise obtain needed financing without removing the cloud on title.
The IRS can also collect tax debts by use of levy. A levy is a legal seizure of property. Unlike a lien, the purpose of a levy is to take your property away. The IRS can levy property, bank accounts and even your paycheck. Generally, the IRS is required to give written notice of its intent to levy at least 30 days before it levies. In the case of levied bank accounts, the bank must wait 21 days after service of levy before turning the funds over to the IRS. This freeze gives you a chance to resolve the matter before you suffer the potentially very harmful effects of a levy. In the case of levied real or personal property, the IRS can reduce it to cash by selling it. Before the IRS can do this they must provide you with notice of the levy and intent to sell. As previously noted, the IRS can also garnish wages, which is a form of administrative levy that does not require a court order. It may be possible, under certain circumstances, to challenge a levy and reduce the amount of the levy to allow for immediate expenses like housing and food. Our tax attorneys can assist you keeping the IRS at bay and limiting the damage caused by collections.
Settling Tax Debts
The IRS is authorized by federal statute to settle or compromise tax liabilities. This is done by submitting a formal Offer-in-Compromise to the IRS. An Offer-in-Compromise may reduce your overall tax liability, but the application process can be complicated. The IRS is also authorized to enter into an installment agreement with taxpayers which is a written agreement is allowing an individual or entity to pay their tax liability in monthly payments over time. It is important to note that interest on the unpaid tax liability will continue to accrue while your application for an Offer-in-Compromise is being processed and while you are making payments under an installment agreement. Our trusted tax attorneys can help you determine what your best option is when dealing with the collection efforts of the IRS or the Arizona Department of Revenue.
Tax Appeals and Tax Litigation
There are multiple methods of appealing the decisions of the IRS. These options include appealing to the auditor’s supervisor, filing for an administrative appeal to the Appeals Office, and filing a petition to the United States Tax Court, The United States Court of Federal Claims or a United States District Court. You have ninety days from the date the IRS mails you a notice of deficiency to file a petition with the Tax Court. In order to file the petition with the District Court or the Court of Federal Claims, you must allow the IRS to assess the deficiency, pre-pay the payment, and then sue for a refund of all or a portion of the tax paid.
Decisions made by the Arizona Department of Revenue may also be appealed, both internally within the agency and formally, in court. To appeal Arizona income tax assessments, a taxpayer must petition the Arizona Tax Court. For Arizona property tax assessments, a taxpayer must petition the Arizona Board of Equalization. For most other types of Arizona tax assessments a taxpayer must petition the Office of Administrative Hearings.
We can appeal all tax decisions and have experience litigating complex tax matters. We can provide needed counsel and advise on all tax issues and can help you in resolving all tax problems.