Frequently Asked Questions

Tax resolution is the process of working with the IRS or your state tax authority to resolve unpaid taxes, unfiled returns, or collection actions in a way that is manageable for your financial situation. A licensed tax resolution firm like Lothamer reviews your complete financial picture, communicates directly with the IRS on your behalf, and pursues the best available outcome based on what you actually owe and what you can realistically pay. You do not have to speak with the IRS yourself. Lothamer handles all contact, correspondence, and negotiation from start to finish.

If you have received an IRS notice you do not understand, owe more in taxes than you can pay in full, have unfiled returns from previous years, are facing wage garnishment or a bank levy, or have received a visit or call from an IRS Revenue Officer, professional help is strongly recommended. The IRS moves quickly once enforcement begins, and the decisions you make in the early stages of a collection action have long-lasting consequences. Lothamer offers a same-day consultation to review your situation and tell you exactly where you stand.

A tax preparer files your annual return. A tax resolution firm like Lothamer steps in when there is a problem with taxes already filed or owed. This includes negotiating payment plans, pursuing offers in compromise, stopping wage garnishments, representing you in IRS audits, and resolving years of unfiled returns. Lothamer’s team includes enrolled agents and tax professionals with specific IRS representation authority that standard tax preparers do not hold.

Yes. Once Lothamer is authorized to represent you, the IRS is required by law to direct all communications through us rather than contacting you directly. Depending on your situation, we can pursue a hold on collection activity while your case is being reviewed, request currently not collectible status, or file for a Collection Due Process hearing to pause enforcement actions. Many clients experience an immediate reduction in IRS pressure from the day they engage us.

The timeline depends on the type of resolution being pursued. An installment agreement can often be set up within a few weeks. An offer in compromise typically takes anywhere from several months to over a year for the IRS to review and respond. Penalty abatement requests are often resolved faster. Lothamer will give you a realistic timeline based on your specific situation from the very first consultation and keep you informed throughout every stage of the process.

Not exactly. Tax resolution is the umbrella process of resolving a tax problem. Debt forgiveness in the formal sense occurs when the IRS accepts an offer in compromise and agrees to settle for less than the full amount owed. Not everyone qualifies for that outcome. Other resolution paths, such as installment agreements or currently not collectible status, do not eliminate the debt but make it manageable. Lothamer is transparent about which outcomes are realistic for your situation and will never promise results that are not achievable.

When you stop filing, the IRS does not simply forget about you. The IRS may file what is called a Substitute for Return on your behalf, which calculates your tax using available income data and no deductions. This almost always overstates what you actually owe. The IRS will then begin collection proceedings based on that inflated amount. Lothamer can file accurate returns for all missing years, often significantly reducing the total owed, and then pursue the best resolution path for whatever balance remains.

Failing to pay taxes is treated as a civil matter in the vast majority of cases. The IRS pursues unpaid taxes through financial penalties, interest, liens, and levies rather than criminal prosecution. Criminal tax charges are reserved for cases involving deliberate fraud, evasion, or willful refusal to file, combined with efforts to conceal income. Simply being unable to pay, or falling behind without realizing the consequences, does not rise to that level. Lothamer helps you get into compliance and resolve the civil debt, which is the appropriate path for almost everyone who owes back taxes.

You have the right to dispute the IRS’s assessment. If the IRS filed a Substitute for Return for you, that number is almost certainly too high because it ignores your deductions and credits. If you received a CP2000 notice or other adjustment, it may be based on incorrect or incomplete information. Lothamer reviews all IRS records, identifies discrepancies, and files accurate returns or formal disputes on your behalf. Resolving the underlying amount before pursuing a payment option is often the most important first step.

Yes. If you have an outstanding tax debt, the IRS will apply any refund you are owed to that balance before issuing you any remaining amount. This offset applies to both federal and, in some cases, state refunds. If you are in an active resolution arrangement with Lothamer, we factor this in when building your plan so there are no surprises.

Yes, and this is actually the required first step for most resolution options. Before the IRS will consider an installment agreement, offer in compromise, or penalty abatement, all outstanding returns must be filed. Lothamer handles the filing of missing returns as part of the overall resolution process, not as a separate step you have to manage on your own. We gather the records, prepare the returns accurately, and file them in the right sequence to support your resolution strategy.

An IRS installment agreement is a formal arrangement that allows you to pay your tax debt in monthly installments over time rather than in a single lump sum. It stops most active collection actions while the agreement is in place. The amount you pay each month depends on your balance, your income, and your allowable living expenses. Lothamer negotiates these agreements on your behalf, working to secure the lowest monthly payment your situation supports rather than whatever amount the IRS initially proposes.

A streamlined installment agreement is a simplified payment plan available when your balance meets certain thresholds and can be repaid within a set timeframe. It requires less financial documentation than a standard agreement and is generally faster to set up. Lothamer reviews whether you qualify for a streamlined agreement and whether that option or a more negotiated arrangement is more favorable for your specific balance and financial situation.

Missing a payment can put your installment agreement in default, which allows the IRS to resume collection actions, including levies and garnishments. If you realize you will miss a payment, contacting the IRS or your representative immediately is critical. Lothamer monitors active agreements for clients and can intervene quickly to reinstate an agreement before it formally defaults, which is much easier than trying to restore one after enforcement has already resumed.

No. Entering a payment plan stops active enforcement actions like levies, but penalties and interest continue to accrue on the unpaid balance until it is paid in full. This is one reason why resolving your balance as efficiently as possible matters. Lothamer often pursues penalty abatement at the same time as establishing a payment plan, which can significantly reduce the total amount you ultimately pay.

Yes. Businesses facing unpaid payroll taxes, income taxes, or other federal tax liabilities can negotiate installment agreements with the IRS. Business agreements often involve more complex financial disclosure requirements than individual plans. Lothamer has extensive experience negotiating on behalf of business owners and understands the specific risks business owners face, including personal liability for certain unpaid business taxes.

An offer in compromise is a formal agreement between a taxpayer and the IRS that resolves a tax debt for less than the full amount owed. It is available to taxpayers who can demonstrate that paying the full amount would cause genuine financial hardship, that there is legitimate doubt about how much is actually owed, or that requiring full payment would be fundamentally unfair given the circumstances. Lothamer prepares and submits offers in compromise for qualifying clients and manages the entire IRS review process.

To be eligible, you generally must have filed all required tax returns, received a bill for the tax debt included in the offer, and made any required estimated payments for the current year. The IRS evaluates your income, monthly expenses, asset equity, and your ability to pay over the remaining collection period. Qualifying is not automatic, and not everyone will be approved. Lothamer conducts a thorough analysis of your financial situation before determining whether an offer in compromise is a realistic strategy for you.

The IRS uses a formula called Reasonable Collection Potential to determine the minimum it will accept. This calculation considers the net value of your assets plus an estimate of your future income over a set period, minus allowable living expenses. If your offer meets or exceeds this threshold, it has a strong basis for acceptance. Lothamer builds offers strategically based on how the IRS will assess your specific financial profile and presents your case in the format most likely to succeed.

The IRS review process for an offer in compromise typically takes several months to over a year. During this time, most collection activity is paused, which gives clients meaningful relief from enforcement. Lothamer tracks the status of every active offer and responds promptly to any IRS requests for additional information, which is one of the most common reasons offers get delayed or rejected without professional help.

A rejection is not the end of the road. You have the right to appeal a rejected offer within a specific timeframe. Lothamer reviews every rejection to determine whether the grounds are valid and whether an appeal or a revised offer makes strategic sense. In many cases, an offer is rejected on technical grounds or because of missing documentation, which can be addressed in an appeal or a new submission. We never abandon a client simply because the IRS says no the first time.

Yes. The IRS has several mechanisms for reducing or eliminating penalties. First-time penalty abatement is available to taxpayers with a clean compliance history in the three years before the penalty was assessed. Reasonable cause abatement applies when you can demonstrate that your failure to file or pay was due to circumstances genuinely beyond your control. Lothamer evaluates your eligibility for both types of relief and pursues abatement aggressively because reducing penalties directly reduces the total amount you owe.

First-time abatement is an IRS administrative waiver that removes failure-to-file, failure-to-pay, and failure-to-deposit penalties for taxpayers who have a clean three-year compliance history. This means no similar penalties in the three years before the year being penalized and no previous use of first-time abatement. Many taxpayers who qualify never request it because they do not know it exists. Lothamer reviews abatement eligibility for every client as part of the standard resolution process.

Interest on unpaid taxes is very rarely waived. The IRS only abates interest in specific situations, primarily when the interest itself resulted from an IRS error or unreasonable delay on the part of IRS staff. However, if the underlying penalty is abated, any interest that accrued on that penalty is also removed. Lothamer pursues every available avenue for reducing the total balance, which indirectly reduces the interest burden over time.

Reasonable cause means you can demonstrate that you exercised ordinary care and caution but were still unable to file or pay on time due to circumstances beyond your control. Valid examples include a serious illness or hospitalization, a natural disaster affecting your records or ability to access funds, a death in the immediate family during the relevant filing period, or documented postal or IRS processing errors. Lacking money to pay does not by itself constitute reasonable cause, though it can be a factor when combined with other circumstances.

Yes. Your installment agreement payment covers your total outstanding balance, which includes the original tax, all accrued penalties, and all interest. While the agreement is in effect, new penalties generally stop accruing for the months covered, but interest continues. This is why pursuing abatement alongside your payment plan often produces a meaningfully lower final cost.

A federal tax lien is the government’s legal claim against your property when you fail to pay a tax debt after notice and demand. Once filed, the lien attaches to all assets you currently own and many you acquire in the future. It is a public record and can appear on credit reports, affecting your ability to sell property or obtain financing. Lien withdrawal is possible under certain circumstances, and Lothamer pursues this where it is available as part of a broader resolution strategy.

A lien is the IRS’s legal claim against your property, establishing priority over your assets. A levy is the actual seizure of those assets. The IRS typically files a lien first, then proceeds to levy if the debt remains unresolved. A levy can affect your bank accounts, wages, retirement accounts, or other financial assets. Lothamer acts quickly when a levy notice arrives because there is a narrow window to respond before the IRS takes action.

Yes. Once the IRS has issued a Final Notice of Intent to Levy and you have not responded within the required timeframe, the IRS can issue a continuous wage levy. Unlike a one-time bank levy, this applies to each paycheck and takes a defined exempt amount based on your filing status. Your employer is legally required to comply. Lothamer can intervene to get a wage levy released by establishing a resolution arrangement with the IRS.

A bank levy can be released if you establish a payment plan, qualify for currently not collectible status, have an offer in compromise accepted, or demonstrate other grounds for release, such as financial hardship. You generally have a short window between when the levy is served and when the funds are actually sent to the IRS. Lothamer contacts the IRS immediately on your behalf and works to get the levy released before funds are transferred, where possible.

The IRS has the legal authority to seize and sell real property, including your home, but this is rare and requires multiple steps and approvals before it happens. The IRS generally pursues bank accounts, wages, and other more accessible assets before moving to real property. That said, if a lien has been filed against your home, selling or refinancing may be complicated until the lien is resolved. Lothamer protects clients by pursuing resolution before enforcement reaches that stage.

An IRS Revenue Officer is a field agent assigned to collect on a specific tax debt. Unlike automated notices, contact from a Revenue Officer means your case has escalated to personal enforcement. Revenue Officers have broad authority to investigate your finances and can recommend enforcement actions quickly. If a Revenue Officer contacts you, do not attempt to handle it alone. Lothamer places a representative between you and the Revenue Officer immediately, which is your right as a taxpayer.

Currently not collectible status, sometimes called Status 53, is a temporary hold the IRS places on collection activity when it determines that a taxpayer genuinely cannot pay their tax debt without jeopardizing their ability to meet basic living expenses. While in this status, the IRS suspends active collection actions. It is not permanent, and the IRS reviews it periodically. Lothamer pursues this status for clients who are in genuine financial hardship as a way to create breathing room while longer-term resolution options are developed.

The most important thing is not to ignore it. Every IRS notice has a response deadline, and missing it allows the IRS to proceed unilaterally. You should read the notice carefully to identify exactly what is being claimed and what response is required. Many notices are routine and can be resolved without extensive action. Others, particularly those involving proposed assessments or collection warnings, require an immediate and strategic response. Lothamer reviews IRS notices for clients and advises on the correct response from the first call.

A CP2000 notice is sent when the IRS identifies a discrepancy between the income reported on your tax return and the income reported to the IRS by third parties such as employers, banks, or brokerages. It is not a bill and not an audit, but it proposes an adjustment to your tax. You have the right to agree, disagree, or partially agree. If the income in question was unreported or the IRS’s figures are correct, Lothamer can help you respond in a way that minimizes the financial impact.

There are three main types. A correspondence audit is conducted entirely by mail and typically involves a specific item on your return. An office audit requires you to visit an IRS office to discuss particular issues. A field audit involves an IRS examiner visiting your home or business and is the most comprehensive type. Correspondence audits are the most common. Lothamer represents clients through all three types, handling all IRS communication so you do not have to appear or speak with the IRS directly.

A bank levy can be released if you establish a payment plan, qualify for currently not collectible status, have an offer in compromise accepted, or demonstrate other grounds for release, such as financial hardship. You generally have a short window between when the levy is served and when the funds are actually sent to the IRS. Lothamer contacts the IRS immediately on your behalf and works to get the levy released before funds are transferred, where possible.

No. You have the right to have a licensed representative handle all communication with the IRS on your behalf. In fact, speaking directly with the IRS without preparation during an audit is one of the most common ways taxpayers make their situation worse. A casual statement, an incomplete explanation, or volunteering information that was not requested can expand the scope of an audit significantly. Lothamer communicates directly with IRS examiners and ensures that only accurate, relevant information is shared.

Innocent spouse relief is an IRS provision that can relieve a spouse from liability for taxes, penalties, and interest resulting from errors or omissions on a jointly filed return where the errors were primarily attributable to the other spouse. It is relevant in situations involving divorce, separation, or cases where one partner was unaware of the other’s financial activity. Lothamer assesses whether a client qualifies and prepares the formal request with the documentation the IRS requires.

Payroll taxes are funds withheld from employee wages that employers are legally required to remit to the IRS. When a business fails to remit these funds, the IRS treats it very seriously because the money was never the employer’s to begin with. The IRS can assess the Trust Fund Recovery Penalty personally against business owners, officers, or anyone with authority over the funds. This means personal assets are at risk even if the business is separate. Lothamer works with business owners facing payroll tax issues to resolve both the business liability and any personal exposure simultaneously.

When you authorize Lothamer to represent you, we file IRS Form 2848, Power of Attorney and Declaration of Representative. This gives our team the legal authority to communicate with the IRS on your behalf, review your IRS account records, receive IRS correspondence, and negotiate on your behalf. The IRS is then required to direct all contact to us rather than to you. It does not give us access to your bank accounts or authorize us to make payments. It is strictly an authorization to act as your representative with the IRS.