IRS Tax Questions
Frequently Asked Questions
Answers from our attorneys to common questions about IRS audits, tax debt, offshore accounts, unfiled returns, and working with our firm.
IRS Audits
What should I do if I receive an IRS audit notice?
Do not contact the IRS directly without first consulting a tax attorney. The audit notice will specify the type of audit (correspondence, office, or field), the years under review, and the specific items being questioned. You typically have 30 days to respond. An attorney can review the notice, assess your risk, and take over all communication with the IRS before you inadvertently expand the scope of the examination.
Learn about IRS audit defenseDo I have to attend an IRS audit?
No. If you are represented by a licensed tax attorney, CPA, or enrolled agent, you are generally not required to appear at an audit in person. We strongly recommend you not attend — anything you say beyond what is legally required can be used to expand the scope of the audit into additional issues or years.
How long does an IRS audit take?
Correspondence audits (mail) typically resolve in 3–6 months. Office audits (at an IRS office) take 6–12 months. Field audits (at your home or business) can take 12–24 months or longer for complex cases. Attorney representation generally shortens these timelines by managing the process efficiently.
Can the IRS audit years beyond the current one?
The standard IRS statute of limitations is 3 years from the return due date. If the IRS believes you omitted more than 25% of gross income, the period extends to 6 years. There is no statute of limitations for fraudulent returns or years where no return was filed. When auditing one year, the IRS will often attempt to expand to adjacent years — an experienced representative can limit this scope creep.
Tax Debt & Collection
What are my options if I owe the IRS money I can't pay?
There are four primary resolution options: (1) Installment Agreement — monthly payments over time; (2) Offer in Compromise — settle for less than the full amount if you qualify; (3) Currently Not Collectible — the IRS temporarily suspends collection if paying would create a genuine financial hardship; (4) Penalty Abatement — reduction of penalties, which can significantly reduce the total owed. The right option depends on your income, assets, and future earning capacity.
What is an Offer in Compromise and do I qualify?
An Offer in Compromise (OIC) allows taxpayers to settle IRS debt for less than the full amount when paying in full would create economic hardship or when there is doubt as to liability. The IRS accepts roughly 40% of submitted offers. Qualification depends on your Reasonable Collection Potential (RCP) — the IRS's calculation of what it could realistically collect from you. An attorney can calculate your RCP before deciding whether to submit.
Offer in Compromise detailsCan the IRS garnish my wages or levy my bank account?
Yes. The IRS can levy wages (garnishing up to 70% of disposable income), bank accounts (seizing the full balance on the date of levy), and other assets — generally without a court order. The IRS is required to provide notice and a Collection Due Process (CDP) hearing opportunity before most levies. If you receive a Final Notice of Intent to Levy, you have 30 days to request a CDP hearing, which halts collection while the hearing is pending.
Learn about levy defenseWhat is the 10-year IRS collection statute?
The IRS generally has 10 years from the date of assessment to collect a tax debt. This is called the Collection Statute Expiration Date (CSED). After this date, the IRS legally cannot collect the debt. The CSED is tolled (paused) during certain events — installment agreements, OIC pending, bankruptcy, and more. Understanding the CSED is important when evaluating resolution strategy.
IRS Tax Liens
What is a federal tax lien and how does it affect me?
A Notice of Federal Tax Lien (NFTL) is a public document filed with the county recorder that establishes the IRS's claim against all your current and future assets — real estate, financial accounts, and personal property. It also alerts creditors to the IRS's priority claim, damaging your credit and making refinancing or selling property difficult. A lien can be released (if the debt is paid), discharged from specific property, subordinated (to allow a mortgage), or withdrawn (in limited circumstances).
Tax lien defenseUnfiled Returns
What happens if I have years of unfiled tax returns?
Non-filers accumulate substantial penalty exposure: 5% per month failure-to-file penalty (up to 25%) plus the 0.5% failure-to-pay penalty, plus interest. For years without a return, there is no statute of limitations — the IRS can assess tax at any time. Additionally, if you are owed a refund, refunds expire 3 years after the return due date. Coming forward proactively through an attorney is far safer than waiting for the IRS to act.
Unfiled returnsCan I go to jail for not filing tax returns?
Willful failure to file is a federal crime (misdemeanor under IRC §7203, carrying up to 1 year in prison per year). However, criminal prosecution for simply not filing — without evidence of deliberate tax evasion or fraud — is relatively rare. The IRS typically pursues civil collection first. The risk increases significantly for taxpayers with large balances who take active steps to conceal income or assets.
International Tax & FBAR
What is FBAR and who has to file it?
The Foreign Bank Account Report (FinCEN Form 114) must be filed annually by US persons — citizens, Green Card holders, and certain residents — who have a financial interest in or signature authority over foreign financial accounts with an aggregate value exceeding $10,000 at any point during the year. The filing deadline is April 15, with an automatic extension to October 15. Penalties for willful non-filing can exceed the account balance itself.
FBAR complianceI'm a US citizen living abroad — do I still need to file US taxes?
Yes. The US taxes based on citizenship, not residency. You must file a Form 1040 reporting worldwide income regardless of where you live. The Foreign Earned Income Exclusion (up to $126,500 in 2024) and foreign tax credits can reduce or eliminate double taxation for many expats. But the filing obligation — and the associated FBAR and other foreign information return obligations — exists regardless of income level.
Americans living abroadWhat is the Streamlined Filing Compliance Program?
Streamlined procedures are for eligible individual taxpayers, including estates of individuals, who certify that the relevant failures were non-willful. An IRS civil examination for any tax year, or an IRS criminal investigation, makes a taxpayer ineligible. The domestic track requires previously filed returns for the relevant three years and generally a 5% miscellaneous offshore penalty. Qualifying foreign-track submissions receive specified penalty relief. Tax and interest remain payable, and neither track guarantees immunity from audit or prosecution. A streamlined submission generally covers the three most recent years whose return due dates, including applicable extensions, have passed, plus six years of required FBARs. The domestic track uses amended returns; qualifying foreign-track filers may submit original or amended returns. We prepare the applicable certification and supporting filings. The IRS does not acknowledge receipt under these procedures or issue a closing agreement; we retain delivery records and advise on future compliance.
Streamlined filingWhat is Form 3520 and what are the penalties for not filing it?
A U.S. person generally reports gifts or bequests totaling more than $100,000 during a tax year from a nonresident alien individual or foreign estate on Form 3520. Gifts from related donors must be aggregated where required. Purported gifts from foreign corporations or partnerships have a separate, annually adjusted threshold; check the IRS amount for the year received. Gifts and inheritances are generally excluded from income, but exceptions and separate reporting obligations can apply, including rules for covered expatriates and foreign trusts. For unreported foreign gifts, IRC §6039F generally provides a penalty of 5% per month, up to 25% of the gift. Foreign trust reporting follows different rules under IRC §6677: initial penalties generally equal the greater of $10,000 or 35% of an unreported transfer or distribution; certain ownership-reporting failures use 5% of the relevant trust assets. Additional penalties and statutory limits may apply. The maximum penalty is not an inevitable outcome in every case.
Form 3520 complianceWorking with Our Firm
What does a free consultation involve?
Request a consultation to discuss your situation. Contacting the firm alone does not establish an attorney-client relationship. Please wait for instructions before sending sensitive documents. Attorney-client privilege may protect confidential communications made to obtain legal advice, subject to applicable law and exceptions. It does not automatically protect every document or message sent to the firm.
How much does it cost to hire a tax attorney?
Tax attorney fees vary significantly depending on the complexity and type of matter. Simple correspondence audit responses may start at a few thousand dollars. Complex field audits, Tax Court cases, and international disclosure matters are typically billed at hourly rates. We provide a clear fee estimate at the outset of every engagement and do not proceed without client approval.
Do I need to come to your Beverly Hills office?
Not necessarily. We represent clients in all 50 states and internationally. Most of our work is conducted by phone, email, and secure document transfer. In-person meetings are available and welcome for clients in Southern California, but are not required. We have guided clients through Streamlined disclosures, IRS audits, and OIC negotiations entirely by phone and digital communication.
What if the IRS has already taken action — can you still help?
Yes — in many cases, even after an IRS levy, lien, or garnishment, we can take corrective action quickly. We can request emergency levy releases, file Collection Due Process hearings, and negotiate resolutions even after collection has begun. The sooner we are involved, the better — but it is rarely too late.
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