A tax debt is unlike any other debt. The IRS and the Franchise Tax Board do not need to sue you. They assess, send a series of notices, and then take: a levy on your bank account, a continuous levy on your wages, a lien recorded against everything you own. The system is built to run on autopilot, and it treats a person who cannot pay exactly like a person who will not pay until someone steps in and says otherwise.
Stepping in is the work. Nearly every tax problem in Los Angeles has a defined resolution: a payment plan that fits the budget, an offer that settles the balance for less, a hardship hold that stops collection entirely, penalties removed, an audit result reduced or reversed, or, in the right case, a discharge in bankruptcy. The difficulty is in knowing which one the government will actually accept on your numbers, and in getting the levy released while the rest is put in place.
Attorney Gregory Grigoryants has represented individuals and business owners before the IRS, the Franchise Tax Board, the CDTFA, and the EDD for more than thirteen years. He handles each matter himself, under a power of attorney so the agencies deal with him and not with you, and he and his staff speak English and Russian.
Unfiled Tax Returns
Getting into compliance, because nothing else can be negotiated until the returns are in.
Every resolution the IRS and the FTB offer, from a simple payment plan to an offer in compromise, requires that your returns be filed first. Many people who are years behind assume the balance will be catastrophic and keep not filing. In practice the opposite is common: when the government files a substitute return for you, it uses only the income reported to it and allows no deductions, no business expenses, and no dependents, so the assessed balance is often far higher than what an actual return would show.
The IRS generally requires the last six years of returns to be considered in compliance, though the right number depends on the facts. We pull the account transcripts for every year, see what has been reported and what has been assessed, reconstruct the records where they are missing, and file the returns in the order that reduces the balance fastest. Our guide to unfiled returns explains the process year by year.
Coming forward before the letter arrives is almost always better than waiting for it. A voluntary filing avoids the substitute-return assessment, keeps the matter civil, and starts the clocks that eventually end the government’s ability to collect.
The Notices and What They Mean
Reading the sequence, and acting before the one with the deadline.
IRS collection runs on a series of letters. The first is a bill. The next several are reminders, each a little sharper. Then comes a final notice of intent to levy, sent by certified mail, which gives you 30 days to request a collection due process hearing. That hearing is the single most valuable right in the sequence: while it is pending, the IRS cannot levy, and the hearing officer must consider the payment plan, offer, or hardship status you propose. Miss the 30 days and the levy can issue on day 31 with no further warning. The FTB follows a similar path, with its own notices and shorter fuses.
Which letter you are holding tells us how much time we have. Bring every notice to the first meeting, with the envelopes. Our guide to tax liens and levies walks through the notices in order.
Levies, Liens, and Wage Garnishments
Getting the money back, keeping the paycheck, and clearing the title.
Bank levies
An IRS bank levy freezes what is in the account on the day it is served, and the bank holds the funds for 21 days before sending them. Those 21 days are the window to get the levy released, by showing hardship, by putting a resolution in place, or by showing the levy was premature. An FTB order to withhold works on a shorter timeline. Either way, the day the levy hits is the day to call.
Wage levies
An IRS wage levy is continuous: it attaches to every paycheck until it is released, and the exempt amount it leaves you is small. An FTB earnings withholding order for taxes takes up to 25 percent of disposable earnings. Neither needs a court judgment. An IRS wage levy is released once a payment plan, offer, or hardship status is in place, often within days when the financial picture is clear and the returns are filed. The FTB is different: it will generally not release an earnings withholding order outright, but it will modify the withholding to an amount the budget can bear, and in a documented hardship case reduce it substantially, while a payment arrangement runs.
Tax liens
A recorded tax lien attaches to everything you own and everything you acquire while it stands, and it surfaces at the worst time: a home sale, a refinance, a business loan. A lien is released when the balance is paid, settled, or expires. Short of that, the IRS can withdraw a lien in several defined situations, including certain direct debit payment plans, can discharge a specific property from the lien so a sale can close, and can subordinate the lien so a refinance can fund. Each is a separate application with its own showing, and we handle all three.
A garnishment on an ordinary court judgment, for a credit card or a loan, follows California’s claim of exemption rules rather than tax procedure. That work is covered on our debt collection defense page.
The Resolution Options
Choosing the route the government will accept on your numbers, not the one that sounds best in a commercial.
Every option below turns on the same financial statement: your income, your necessary living expenses measured against the agencies’ allowances, and the equity in what you own. We run the calculation before recommending anything, because the numbers decide which door is open.
| Option | What it does | Who it fits |
|---|---|---|
| Payment plan | Monthly payments over time; the IRS offers streamlined plans for balances up to $50,000 over as long as 72 months, with no financial statement. The FTB offers a similar plan for smaller balances. Larger balances require a financial statement and payments based on ability to pay. | Steady income, a balance that can be paid within the collection period. |
| Offer in compromise | Settles the full balance for less, in a lump sum within five months of acceptance or in monthly payments over up to 24 months. Acceptance depends on a formula: what the government could collect from your income and assets over the time it has left. The FTB runs its own offer program with its own standards. | Income that barely covers necessary expenses, little equity, a balance that could never be paid in full. |
| Currently not collectible | Collection stops entirely while the account is on hold. The debt remains and interest accrues, but no levies issue, and the collection clock keeps running. The FTB grants hardship status for 3, 6, or 12 months at a time. | Income that does not cover basic living expenses; retirees, people between jobs, people on fixed benefits. |
| Penalty abatement | Removes failure-to-file, failure-to-pay, and deposit penalties, and the interest on them. First-time abatement is available on a clean prior history; reasonable cause relief requires documenting what happened that year. | Almost everyone. Penalties often make up a quarter or more of an old balance and are the most negotiable part of it. |
| Bankruptcy | Discharges older income tax entirely when the age and filing tests are met, and stops all collection the day the case is filed. | Older income tax years, often with other debts, where an offer would not be accepted. |
The options combine. A typical result for a self-employed client with several unfiled years is: returns filed, first-time abatement on the oldest year, reasonable cause relief on the others, and a payment plan or hardship hold on what remains. The best route is the one that costs least over the whole collection period, which is not always the one with the lowest monthly payment.
Audits and Appeals
Representing you in the examination, and taking the result up when the examiner gets it wrong.
An audit letter names the years, the items, and a response date, usually about 30 days out. From that point, you do not need to speak to the auditor at all; under a power of attorney, the examination runs through us. We prepare the records for the items actually in question, present them in the form the examiner needs, and keep the scope from spreading to years and issues that were not on the letter. Our guide to IRS and FTB audits describes each stage.
The audit ends with a report proposing changes, additional tax, interest, and often a 20 percent accuracy penalty. That report is not the end. A written protest takes the case to the IRS Independent Office of Appeals, which settles most cases on the hazards of litigation, and if Appeals does not resolve it, the notice of deficiency gives you 90 days to petition the United States Tax Court before paying anything. California audit results are appealed to the Office of Tax Appeals. We also represent clients in CDTFA sales tax audits and EDD payroll and worker classification audits, which follow their own procedures and their own deadlines.
Call us first. The initial conversation with an examiner shapes the entire audit, and statements made casually about records, income, or a business are difficult to walk back. There is no penalty for having a representative respond instead of you.
Business Tax Problems
Business tax debt differs from personal tax debt in one critical way: parts of it follow the owner personally. The trust fund portion of unpaid payroll taxes, the income tax and Social Security withheld from employees’ paychecks, can be assessed against any person the IRS finds responsible for paying it, as a penalty equal to 100 percent of that portion. The proposal comes with 60 days to protest, and the interview that precedes it is where responsibility is decided. Our guide to payroll tax debt covers the investigation and the defenses.
California sales tax collected and not remitted can likewise be assessed against responsible persons, and the EDD pursues owners for unpaid state payroll taxes and for workers it reclassifies as employees. For a business that is winding down, the order of operations matters: which accounts to close, which returns to file, and how to leave the owners with the least personal exposure. Our guide to closing a California business lists the steps agency by agency.
When Bankruptcy Discharges the Tax
Many people are told that taxes cannot be discharged in bankruptcy. That is wrong for income tax. An income tax debt is discharged in Chapter 7 when the return was due, including extensions, more than three years before the filing; the return was actually filed more than two years before the filing; and the tax was assessed more than 240 days before the filing, with no fraud or willful evasion. Older income tax years often meet every test. Payroll trust fund taxes, sales tax, and recent years do not, and a recorded tax lien survives the discharge as to property you owned when the case was filed.
In Chapter 13, tax that cannot be discharged is paid through the plan over three to five years, generally without further penalties and interest accruing while the plan runs, and the IRS and FTB stop collecting the day the case is filed. Because we practice both bankruptcy and tax resolution, we run both analyses at the first meeting. For a client with old income tax and significant other debt, bankruptcy is often the faster and cheaper route; for a client with recent tax and little else, an offer or a plan usually is.
Fees
Most of our tax resolution work is done for a flat fee, quoted at the consultation and set out in a written agreement before work begins: a levy release, a streamlined payment plan, a hardship request, a penalty abatement request, or an offer in compromise once the calculation shows an offer is realistic. Audits, collection due process hearings, appeals, and payroll tax investigations are billed by the hour, with an estimate at the first meeting after we have read the notices. Catch-up returns are quoted per return.
We do not recommend paying anyone, including us, to prepare an offer in compromise until the calculation has been run. Most of the complaints about the tax resolution industry come from offers that were sold before anyone checked whether they could be accepted.
- Every notice from the IRS, the FTB, the CDTFA, or the EDD, with envelopes, especially any final notice of intent to levy or audit letter
- A list of years for which returns have not been filed, and the last return you did file
- Three months of bank statements and recent pay stubs, or a profit-and-loss statement if self-employed
- Your rent or mortgage, vehicle, insurance, and medical expenses
- Any payment plan, offer, or correspondence you already have with either agency
Where We Practice
We represent clients before the IRS collection, examination, and appeals offices that serve Los Angeles County, the Franchise Tax Board, the California Department of Tax and Fee Administration, the Employment Development Department, the Office of Tax Appeals, and the United States Tax Court when it sits in Los Angeles. Most of the work is done by correspondence, phone, and fax under a power of attorney, so you rarely need to appear anywhere.
- Sherman Oaks: 15303 Ventura Blvd, Suite 900, Sherman Oaks, CA 91403, serving Sherman Oaks, Studio City, Encino, Tarzana, Van Nuys, North Hollywood, Burbank, Glendale, and the San Fernando Valley.
- Beverly Hills: 9350 Wilshire Blvd, Suite 203, Beverly Hills, CA 90212, serving Beverly Hills, West Hollywood, Santa Monica, Culver City, Westwood, Hollywood, Mid-Wilshire, Koreatown, and downtown Los Angeles.
Consultations are available in person, by phone, and by video. The attorney and staff speak Russian. Мы говорим по-русски.
Frequently Asked Questions
The IRS levied my bank account. Can I get the money back?
Often, yes, if you act within the 21 days the bank holds the funds. A release is granted when the levy causes economic hardship, when a payment plan or other resolution is put in place, or when the levy was issued without the required notices. After the bank sends the money, recovery is much harder.
How much of my paycheck can the IRS or the FTB take?
An IRS wage levy leaves you only a small exempt amount based on your filing status and dependents and takes the rest, every pay period, until released. An FTB earnings withholding order takes up to 25 percent of disposable earnings. The IRS releases its levy once a resolution is in place, usually within days when the returns are filed and the financial statement is ready. The FTB generally does not release a wage garnishment; it modifies the amount withheld based on a financial statement, and the garnishment continues at the reduced rate until the balance is paid or otherwise resolved.
Do I qualify for an offer in compromise?
It depends on a calculation, not a feeling. The IRS compares what you offer with what it could collect from your monthly disposable income over a set period plus the equity in your assets. If that figure is less than the balance, an offer can work. If it is more, the IRS will reject it, and we will tell you that before you pay for one.
I have not filed in years. Will I go to jail?
Almost never. Failure to file is handled as a civil matter for the overwhelming majority of people, and coming forward voluntarily, before the government contacts you, keeps it that way. The practical consequences are penalties, interest, and substitute returns assessed without your deductions, all of which are fixable.
Can tax penalties be removed?
Yes, and they are the most negotiable part of a tax balance. First-time abatement removes failure-to-file and failure-to-pay penalties for a year when the prior three years were clean. Reasonable cause relief covers illness, death in the family, disaster, bad advice, and similar events when they are documented. Interest on the removed penalty goes with it.
Can I discharge tax debt in bankruptcy?
Income tax can be discharged in Chapter 7 when the return was due more than three years ago, was filed more than two years ago, and the tax was assessed more than 240 days ago, with no fraud. Payroll trust fund taxes and sales tax cannot. Recent years are paid through a Chapter 13 plan while collection stays stopped.
Should I talk to the IRS myself first?
For a simple matter, such as a small balance you can pay in full, you can. For anything involving a levy, an audit, unfiled years, a business, or a balance you cannot pay, speak with a lawyer first. What you say in the first call becomes part of the file, and a power of attorney lets us handle every contact from then on.
How long does the IRS have to collect?
Generally ten years from the date the tax was assessed, extended by periods when collection was suspended, such as during an offer, a bankruptcy, or a collection due process hearing. The FTB’s period is twenty years. Knowing where each year stands in its collection period is part of choosing the right resolution.
Gregory Grigoryants is a California attorney (State Bar No. 286804) who has represented individuals, families, and business owners in bankruptcy, debt collection defense, and tax resolution matters for more than 13 years. He practices from offices in Sherman Oaks and Beverly Hills and speaks English and Russian.