Abatement of Penalties
An abatement of penalties is a request to the IRS to remove certain penalties that were added to the taxpayers account for a particular year or multiple years. Generally, in order for the IRS to grant an abatement of penalties, the reason  you give for not filing your taxes or paying them must be sad enough to make the IRS examiner cry.

 
     Back Taxes
Taxes that have not been paid on the due date or were underreported either by accident or by intention on a past tax return. The tax authorities (IRS) can demand payment of back taxes plus the imposing of penalties and or interest.

     Centralized Authorization File (CAF)
Located at three of the ten IRS Service Centers, it contains all Forms 2848, Powers of Attorney, and Forms 8821, Tax Information Authorizations. Each individual authorized by these forms will be given a CAF number.

     Collection Division
This IRS division collects delinquent taxes and secures delinquent tax returns for individuals, businesses, corporations, trusts, or any other entity that owes IRS money. The Service Center Collection Function, the Automated Collection Site, or the Field Collection Function are all part of the Collection Division.

     Collection Information Statement (CIS)
IRS standard financial statements required from individuals and/or self-employed individuals (Form 433-A) and businesses (Form 433-B) who owe IRS taxes and have indicated an inability to pay the liability. IRS uses these forms to determine the taxpayers ability to pay in full by installment agreement or a hardship situation.

     Collection Statute of Limitation
IRC Section 6503 places an express limit on the time in which the IRS may collect a tax. Normally, the Collection Statute is 10 years from the date of assessment, but can be extended under certain situations.

     Community Property
A state law that creates a community upon marriage and all property acquired during the marriage is held as community property, with both the husband and the wife having a one-half interest in the community assets. Hence, the IRS can serve a Notice of Levy for of the wife's salary for the husband's separate liability.  Community property states include: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

     Compliance
All taxes are paid up to date and all returns required to file are filed to date. Therefore, if submitting an OIC, IA or status 53 for individuals request, the taxpayer must have all estimated tax payments paid to date and returns filed. If submitting an OIC or IA for a business, the taxpayer must have paid all taxes for the past two quarters and filed all returns.

     Currently Non-Collectible
Status 53 is also referred to as Currently Non-Collectible, Currently Uncollectible, or CNC.  Status 53 allows taxpayers to make no monthly payments to their delinquent tax debt due to minimal income to provide for themselves and their family., such as for state and local taxes paid, charitable gifts, and certain types of interest payments or business expenses.

     Discharge of Federal Lien
Authorized under the IRS Code. The process whereby the taxpayer or interested third party applies to have the federal tax lien removed from a specific piece of property or other asset.

     Equitable Relief
If a spouse does not qualify for innocent spouse relief or separation of liability, they may qualify for equitable relief. The taxpayer must show, under all facts and circumstances, that it would be unfair to be held liable for the understatement or underpayment of taxes.

     Estimated Tax (ES) Payments
Tax payments made to IRS for the current tax year. Those taxpayers that do not have withholding taken out of their paycheck OR owed more than $1000 on the previous years tax return is required to pay estimated tax payments to the IRS for the current year. Taxpayers are supposed to estimate their income at the beginning of the year to determine their estimated tax liability. If they owe taxes when they file a return even though they have withholding, the IRS will penalize them if they do not pay estimates. Estimated payments allow taxpayers to remain in compliance with the payment demands of the IRS. ES payments are due the 15th day of April, June, and September of the current year and January of the following year.

     Federal Tax Deposit (FTD)
An employer must deposit employment taxes withheld (income tax withholding and FICA taxes) including the employers share of the FICA, either monthly or semi-weekly (depending on the amount of tax withheld) with an authorized commercial bank or Federal Reserve Bank.

     Garnishment
The process by which the IRS seizes of a portion of a  taxpayer's  assets such as wages, bank account, etc.

     Innocent Spouse
A spouse who unknowingly filed a joint return with their spouse who had reported an understatement of tax due to erroneous items. The innocent spouse must prove that at the time the tax return was signed he/she did not know, or have reason to know, there was an understatement of tax. The fact and circumstances must show that it would be unfair to hold the unknowing (innocent) spouse liable for the understatement of tax.

     Installment Agreement (IA)
An agreement between the IRS and a taxpayer to allow the taxpayer to pay their delinquent debt over a specified period of time.

     Levy
Garnishment attached to taxpayers wages, bank account, account receivable, social security income, etc.

     Lien
Whether a taxpayer does or does not own any property, IRS will issue a lien against their SSN to hinder them from purchasing, selling or transferring any property. A lien will affect their credit report. If the taxpayer is preparing an OIC and it is accepted, the lien will be released once the OIC payment terms have been satisfied. If not preparing an OIC, the lien will be released when the tax debt is either paid in full or the statute to collect the tax has expired. 

     Lien Discharge
Removal of a lien on a specific piece of property to allow for its sale or disposal.

     Lien Release
Issued by IRS when a tax debt is fully paid or if the taxpayer can prove they are suffering from a financial hardship and are unable to provide for their family's health and wellbeing.

     Lien Subordination
To set aside a lien temporarily to allow for a sale or refinance.

     Master File
An IRS File which consists of a series of runs, data records and files that are in production with links to many of the other IRS systems.  All businesses and individuals have an IRS Master File.

     Monthly Disposable Income
Any positive amount remaining after the taxpayers necessary monthly living expenses are subtracted from their monthly income. MDI is used to help calculate the taxpayers RCP (reasonable collection potential) for OIC purposes.

     Offer In Compromise
An OIC is an agreement between the IRS and taxpayer that allows the taxpayer's delinquent tax debt to be compromised for less than the amount owed.  The IRS has the authority to settle, or "compromise," federal tax liabilities by accepting less than full payment under certain circumstances. The offered dollar amount is based on the taxpayers net worth plus their future income potential.  If an offer in compromise is accepted by the IRS,  it resolves the taxpayer's tax debt.  The IRS will accept an Offer in Compromise (OIC) when it is unlikely that the tax liability can be collected in full and the amount offered reasonably reflects collection potential.

The OIC process is complex and time-consuming and can take up to 24 months to resolve.  The IRS will not consider an OIC if the client-submitted documents are more than three months old. In addition, the client must be in compliance (all taxes must be filed and quarterly estimated payments, if applicable, have to be current).

     Power of Attorney
The legal form giving an authorized individual (Certified Public Accountant, Enrolled Agent, or Attorney, etc) authority to represent a taxpayer before the Internal Revenue Service.

     Reasonable Collection Potential
The total realizable value of the taxpayers assets plus any future income. The total is generally the minimum Offer in Compromise amount.

     Refund Statute Expiration Date
A taxpayer may request a refund of an overpayment within three years from the time the return was filed or within two years from the time the tax was paid, whichever is later. If no return was filed by the taxpayer, the claim must be filed within two years from the time the tax was paid.

     Statute of Limitation
Specific time periods before expiration of certain actions, i.e. to collect a tax, make an assessment to an account, to request a refund, to file bankruptcy, etc.

     Subordination of Federal Tax Lien
The legal process whereby the IRS will subordinate its Federal Tax Lien to a third party by temporarily setting aside the lien to enable a refinance or sale of a piece of property. Normally the IRS must determine that it is in its best interest to subordinate, which translates, What are we going to get out of this?

     Substitute for Return
If a taxpayer has not filed a return and the IRS feels it can collect from the money earned, an IRS Revenue Officer may file a SFR. When a SFR is filed, the agent lists all of the income reported to the IRS for that year, but only gives the taxpayer one exemption and only the standard deduction, i.e. nothing is itemized. Even if for the past 10 years the taxpayer has itemized, the IRS prepares the return in their favor. If the taxpayer has children the IRS tries to file the return based on the information from the previous years, i.e. married filing joint with 2 children. But IRS will only file this way if they have previous returns showing this info.

     Tax Liability
The total tax bill that an individual or business owes after all withholding (individuals), Federal Tax Deposits (businesses), Estimated Tax Payments (individuals, sole proprietorships & corporations), and payments attached to the tax return are submitted and credited by the IRS.

     Tax Problem
Tax problems can refer to any type of problems taxpayers are having with the IRS (federal) or state tax authority.  These problems may include garnishments, levies, liens, back taxes and interest owed, haven't filed a tax return, haven't paid your business taxes, haven't paid your self-employment taxes, can't pay your Installment Agreements, etc.

     Tax Return
Any federal, state, or local tax return (personal income tax, corporate income tax, employer quarterly tax return, excise tax return, estate tax return, partnership tax return, fiduciary tax return, or any other return) required by law to be filed to report income, taxes withheld, sales tax, etc.