Glossary

A reduction or cancellation of taxes, penalties, or interest assessed by tax authorities. Taxpayers may request an abatement when there’s reasonable cause for noncompliance, such as serious illness, natural disasters, or errors by the tax authority.

AGI is your gross income (from wages, business, investments, etc.) minus specific deductions such as student loan interest, retirement contributions, and some legal fees. AGI is a critical figure used to determine your taxable income and your eligibility for various tax credits and deductions. The IRS uses AGI as a benchmark for income-based phaseouts and credit limits.

When you fail to resolve outstanding tax debts, the IRS or state agency can seize (take legal ownership of) your assets, including homes, vehicles, bank accounts, or investment holdings. Asset seizure is typically a last-resort enforcement action following repeated notices and opportunities to pay or resolve your debt.

A formal IRS or state agency examination of filed returns, accompanying documents, and supporting financial records. Audits may be conducted via mail (correspondence audit), at the tax office, or on-site (field audit). Audits aim to verify reported income, claimed deductions, and compliance with tax law. Representation by an experienced tax attorney can dramatically improve audit outcomes.

If you disagree with the findings or outcomes of an IRS or state audit, collections action, or penalty assessment, you have a legal right to file an appeal. Appeals are reviewed by independent IRS offices or state boards, offering taxpayers a chance to provide more evidence, negotiate liabilities, and possibly overturn previous decisions.

An IRS process for reopening an audit result when new information, a missed hearing, or an address change led to an inaccurate assessment. Leading Tax Group uses audit reconsideration to correct liabilities the original audit got wrong.

A corrected version of a previously filed tax return, submitted when the original didn’t accurately reflect what was owed or overpaid. Leading Tax Group has corrected liabilities through amended returns when the original filing didn’t reflect the full picture.

A direct seizure of funds from your bank accounts initiated by the IRS or state agency to satisfy unpaid taxes after you’ve failed to address notices. Levies can drain an account up to the amount owed and often freeze your funds without prior warning.

The original value of an asset (property, stocks, business equipment) for tax purposes. Basis is used to calculate capital gains or losses when you sell, exchange, or transfer that asset. Adjustments may apply for improvements, depreciation, or previous tax treatments.

The ordinary and necessary costs incurred in operating a business. These include salaries, rent, utilities, materials, travel, and other expenditures. Only legitimate, documented business expenses are deductible, reducing taxable business income.

Manages the collection of sales, use, excise, and certain specialty taxes for the state of California. CDTFA audits, enforces compliance, and administers permits and licenses relevant to California businesses.

The profits or losses realized from the sale or exchange of assets such as stocks, bonds, or real estate. Short-term gains (assets held less than one year) are taxed at ordinary income rates, while long-term gains may qualify for preferential tax rates.

A formal opportunity to challenge IRS collection actions (such as tax liens or levies) before enforcement proceeds. A CDP hearing provides a stage to resolve disputes, propose payment alternatives, or present hardship claims.

Staying up-to-date and accurate with all tax filing and payment obligations. Compliance is necessary to avoid penalties, interest, and enforcement actions. Leading Tax Group helps clients achieve and maintain tax compliance even after major tax delinquencies or audit issues.

The date, generally 10 years from assessment, after which the IRS can no longer legally collect a tax debt. Certain events like bankruptcy or a pending appeal can pause the clock, so Leading Tax Group calculates the real CSED before recommending a strategy.

A faster, more limited appeals option for challenging IRS collection actions like liens or levies, compared to a Collection Due Process hearing. Leading Tax Group helps clients choose between CAP and CDP based on which one actually fits.

An IRS notice proposing changes to a tax return because reported income doesn’t match what third parties, like employers, reported. Leading Tax Group reviews every CP2000 for errors before a client agrees to owe more.

IRS notice that a tax debt has been certified as seriously delinquent to the State Department, putting a passport at risk. Leading Tax Group prioritizes CP508C cases to get certification reversed before travel plans are affected.

A state-licensed accounting professional who can represent taxpayers before the IRS but doesn’t hold a law license. Leading Tax Group’s individualized approach draws on accounting and tax resolution expertise together, not one or the other.

The California agency that administers state payroll tax, unemployment insurance, and worker classification enforcement. Leading Tax Group represents employers through EDD audits, assessments, and appeals statewide.

An examination by California’s Department of Tax and Fee Administration into whether a business properly collected, reported, and remitted sales tax. Leading Tax Group’s CDTFA experience covers audits triggered by resale certificates, nexus questions, and reporting gaps alike.

CDTFA’s formal assessment notice after a sales tax audit, starting the clock on a business’s right to dispute it. Leading Tax Group evaluates every Notice of Determination for errors before recommending whether to appeal.

A legally allowable expense that reduces taxable income. Deductions can be “above-the-line” (adjustments to gross income) or “below-the-line” (standard or itemized deductions). Documenting deductions is crucial for accuracy and defence during audits.

Taxes that remain unpaid after the due date lead to penalties, interest, and potential enforcement. Continued delinquency can result in aggressive collection actions such as liens, levies, and asset seizures.

In some bankruptcy or negotiated settlements, the IRS may agree to discharge (forgive) certain tax debts. Not all tax debts are eligible for discharge; eligibility depends on the type of tax, age of debt, and other legal factors.

The most common legal basis for an Offer in Compromise: the taxpayer likely can never pay the full balance. Leading Tax Group builds these offers around a financial picture the IRS can verify, not just one a client claims.

Required quarterly payments for taxpayers with significant non-wage income (self-employed, investors). Underpayment or late payment of estimated taxes can result in IRS penalties.

Previously, an amount that could be deducted for each taxpayer, spouse, or dependent. Exemptions have largely been replaced or supplanted by credits due to recent US tax law updates.

A term for IRS or state actions like wage garnishments, bank levies, and asset seizures to collect past-due taxes. Enforced collection can be stopped or resolved through prompt negotiation or representation by tax professionals.

A California Employment Development Department examination of whether an employer properly withheld and paid state payroll taxes. Leading Tax Group represents California businesses through EDD audits from the first notice to final resolution.

An EDD examination of whether workers were correctly classified as employees or independent contractors under California’s ABC test. Leading Tax Group defends businesses through these audits, which can carry significant back payroll-tax exposure.

A facts-and-circumstances form of spousal relief for situations that don’t fit innocent spouse or separation-of-liability rules, including underpaid rather than just underreported tax. Leading Tax Group uses this option when the other two forms of relief don’t apply.

A tax practitioner licensed directly by the IRS, with unlimited rights to represent taxpayers in examinations, collections, and appeals. Leading Tax Group’s team includes Enrolled Agents working alongside its broader tax resolution staff.

A mandatory disclosure (via FinCEN Form 114) for US persons with foreign financial accounts exceeding certain thresholds. Failure to file FBAR can lead to devastating financial penalties and, in extreme cases, criminal charges.

California’s agency for income and corporate taxes. FTB enforces compliance, audits, and assesses penalties for underpayment or late filing.

An IRS initiative aimed at helping taxpayers resolve debts through streamlined Installment Agreements, Offers in Compromise, and penalty relief measures. The program makes it easier for qualifying taxpayers to get out of collections and back in compliance.

IRS penalty relief available to taxpayers with a clean three-year compliance history, requiring no explanation beyond eligibility. Leading Tax Group checks FTA eligibility on every new case before moving to more involved relief options.

An IRS program that levies certain federal payments, including Social Security, to satisfy unpaid tax debt. Leading Tax Group moves to get an FPLP levy released before more benefit payments are affected.

The detailed financial disclosure the IRS uses to decide ability to pay for an Offer in Compromise, installment agreement, or Currently Not Collectible status. Leading Tax Group prepares this form so every allowable expense is actually claimed.

A shorter version of the IRS’s financial disclosure form, generally used for simpler cases worked over the phone or through automated collections. Leading Tax Group knows which form a case actually calls for before a client fills out the wrong one.

The application form that formally submits an Offer in Compromise to the IRS, filed alongside a financial disclosure form. Leading Tax Group completes Form 656 only after confirming the offer amount can actually be supported.

The form used to request relief from a tax liability caused by a spouse’s or former spouse’s erroneous reporting. Leading Tax Group files this form as part of building a complete innocent spouse case.

The form that requests a Collection Due Process hearing after an IRS lien filing or Final Notice of Intent to Levy. Leading Tax Group files this within the 30-day window whenever it can pause enforced collection.

California’s version of an IRS deficiency notice, proposing additional state tax after an audit or return adjustment. Leading Tax Group challenges FTB assessments the same way it challenges IRS ones: by checking the numbers first.

California’s settlement program for state tax debt, evaluated similarly to the IRS version but under the Franchise Tax Board’s own rules. Leading Tax Group handles FTB and IRS offers together when a client owes both.

California’s version of a wage levy, letting the FTB collect state tax debt directly from a paycheck. Leading Tax Group works to release an FTB earnings withholding order once a payment resolution is in place.

An in-person IRS audit conducted at a taxpayer’s home, business, or accountant’s office, generally reserved for more complex returns. Leading Tax Group prepares clients for exactly what a field audit will, and won’t, cover.

An IRS penalty charged for not filing a required tax return by its deadline, calculated separately from any failure-to-pay penalty. Leading Tax Group checks every case for penalty relief before treating this charge as final.

An IRS penalty charged monthly on tax that’s filed but not paid by the deadline, on top of interest. Leading Tax Group factors this penalty into every resolution strategy, since it keeps growing until the balance is addressed.

A legal order requiring your employer to withhold a portion of your earnings to satisfy a court-ordered debt, including tax debts. IRS wage garnishment continues until the debt is paid in full or a resolution is put in place.

All income received from any source in a tax year, before deductions or exemptions. This includes wages, business profits, dividends, capital gains, and miscellaneous income.

A filing status for unmarried taxpayers who pay more than half the cost of supporting a home for a qualifying individual. HOH status typically grants larger standard deductions and more favourable rates.

Special arrangements or suspensions of collection activity when paying tax debts would cause “undue hardship”—for example, by preventing you from paying living expenses. Legal documentation and negotiation are required.

An IRS-approved plan to pay owed tax over time, often in monthly instalments. Negotiate directly with the IRS or with expert assistance to obtain affordable and sustainable payment terms; defaulting on a plan may result in immediate enforcement.

This IRS program releases one spouse from joint tax debt liability when the debt resulted from the other spouse’s improper or fraudulent reporting on a shared return. To qualify, you must show you didn’t know about and had no reason to know about the understatement.

The federal tax authority is charged with collecting taxes, enforcing tax laws, conducting audits, and administering programs like the Earned Income Tax Credit or Fresh Start initiatives.

A detailed review of an individual’s or a business’s tax returns for accuracy. Examinations can be random or triggered by red flags like excessive deductions, large refunds, or mismatched income reporting.

A public claim registered by the IRS against your property for unpaid tax debts. A lien can affect your credit, ability to sell property, or secure loans.

Financial charges are imposed for late filing, underpayment, inaccurate returns, or noncompliance. Penalties can add up quickly, but many are negotiable or removable for reasonable cause.

The general sequence the IRS follows once a balance goes unpaid: notices first, then escalating enforcement like liens and levies. Leading Tax Group intervenes at any stage of that process, not only after enforcement has already started.

An IRS examination of a tax return to verify it was filed correctly. Leading Tax Group represents clients through audits so they’re never explaining their own return to the IRS alone.

The IRS division that reviews disputes independently from the office that made the original decision, without going to court. Leading Tax Group prepares Appeals submissions around the same evidence Appeals officers are trained to weigh.

A tax form filed by married couples, combining their incomes, deductions, and credits. Joint filing generally leads to lower tax liability but joins both spouses in responsibility for the content and payment.

A tax provision that taxes the unearned income (like dividends and investment interest) of children above a certain threshold at their parents’ tax rate to prevent income shifting for lower taxation.

A broad term for IRS seizures of funds or property, including bank levies, wage garnishments, or even forced sales of tangible assets.

A legal right to retain property belonging to another until a debt is paid. IRS liens are securely attached to property and must be satisfied or removed before that property can be refinanced or sold.

A tax-deferral tool (IRC Section 1031) for exchanging similar business or investment properties without paying tax immediately on the gain.

An IRS Final Notice of Intent to Levy generated by the Automated Collection System, and the notice most often mistaken for routine mail because it can resemble an earlier, less urgent letter. Leading Tax Group treats every LT11 as a 30-day deadline, not a formality.

The Final Notice of Intent to Levy issued once a Revenue Officer is personally assigned to a case, carrying the same 30-day deadline as an LT11. Leading Tax Group responds immediately, since it signals a human caseworker is ready to act.

The notice informing a taxpayer that a federal tax lien has been filed, which starts the 30-day window to request a Collection Due Process hearing. Leading Tax Group treats this letter as the start of a deadline, not just a status update.

The percentage rate applied to your last dollar of taxable income. This is crucial for tax planning because it determines the benefit of future deductions or credits.

Two methods for married taxpayers to file returns. Filing jointly usually reduces taxes but joins both parties in liability. Filing separately provides financial or legal separation in unique situations.

A payroll tax withheld from employees and matched by employers to fund Medicare; self-employed persons pay both parts.

A formal IRS letter (sometimes called a “90-day letter”) advising the taxpayer of assessed additional tax, giving them 90 days to challenge the finding in tax court.

Also called “Currently Not Collectible,” this is a temporary status for taxpayers experiencing extreme financial hardship, suspending IRS collection activity but not interest or penalties.

The public filing that establishes the IRS’s legal priority against a taxpayer’s property, distinct from the lien itself. Leading Tax Group works to withdraw or release an NFTL once it’s no longer protecting a live collection interest.

An IRS settlement tool permitting eligible, financially distressed taxpayers to resolve their entire debt for less than they owe. OIC approval is stringent, requiring honest disclosure and generally proving that collection is unlikely.

Additional charges for noncompliance, such as late filing, failure to pay, or inaccurate information. Penalties can sometimes be abated if reasonable cause or first-time relief applies.

Employer-withheld taxes for Social Security, Medicare, unemployment, and disability insurance. Employers who fail to remit payroll taxes are subject to severe IRS action.

A reduced monthly payment plan for taxpayers who can’t fully pay their IRS balance before it expires under the collection statute. Leading Tax Group structures PPIAs around what a client can actually afford, not just what’s owed.

Removal or reduction of IRS penalties, not the underlying tax, based on a clean compliance history or a valid reason for missing a deadline. Leading Tax Group reviews every case for abatement eligibility before assuming a penalty has to be paid in full.

IRS certification of a large unpaid tax debt to the State Department, which can result in passport denial or revocation. Leading Tax Group prioritizes these cases when a client’s travel plans are on the line.

A child or relative who meets the criteria set by the IRS for tax credits, deductions, and filing status. Proper documentation is vital to substantiate dependency claims.

Any excess tax payments returned by the government. Claiming a refund requires complete, accurate returns or amendments within specified time frames.

Having a licensed tax professional (attorney, enrolled agent, CPA) advocate for you with the IRS or state agency, especially during audits, appeals, or enforcement actions.

The IRS’s own estimate of how much it could realistically collect from a taxpayer, combining asset equity with future income. It’s the number that decides whether an Offer in Compromise gets accepted, so Leading Tax Group builds every offer around an accurate RCP calculation.

An IRS employee personally assigned to collect a specific taxpayer’s balance, with authority to levy, seize assets, and visit a business in person. Leading Tax Group represents clients directly with the assigned Revenue Officer so they’re not facing one alone.

The IRS employee who conducts an audit and determines whether additional tax is owed. Leading Tax Group’s team includes professionals with IRS-side experience who understand how a Revenue Agent builds a case.

Anyone with real authority over which company bills get paid, not just an owner, can be found personally responsible for unpaid trust fund taxes. Leading Tax Group examines exactly who the IRS is targeting, and why, before a TFRP interview happens.

State-levied tax on retail transactions for goods and certain services. In California, administered by CDTFA, it requires filing, reporting, and compliance to avoid penalties.

Voluntary or negotiated resolution of tax debt, via Installment Agreement, Offer in Compromise, or other program. Settlements usually result from diligent negotiation and presentation of financial realities.

A flat-dollar amount determined by filing status, reducing taxable income where itemizing does not provide a greater benefit.

An IRS payment plan available without a full financial disclosure, for balances under a set threshold. Leading Tax Group checks eligibility for the streamlined option first, since it’s usually the fastest path to an agreement.

A form of relief that divides a joint tax liability between divorced, separated, or widowed spouses based on who actually caused it. Leading Tax Group determines which spousal relief option, separation of liability, innocent spouse, or equitable relief, actually fits.

A legal expert specializing in tax law, IRS defence, negotiation, settlement, appeals, and court representation. At Leading Tax Group, our Tax Attorneys only handle tax resolution work for IRS, FTB, CDTFA, EDD and more. They don’t do any legal work or handle criminal cases.

Direct reductions of tax owed, sometimes refundable (you get money back) or non-refundable (they only offset owed tax, never creating a refund). Key credits include Child Tax Credit, Earned Income Tax Credit, and education credits.

The total amount you owe the IRS or state, including initial liability, penalties, and accrued interest. Resolving tax debt is possible via settlement, payment plans, OIC, or hardship claims.

Intentional misrepresentation or concealment of income or assets to avoid tax. Evasion is a federal crime with severe legal consequences, including imprisonment.

The process of negotiating, disputing, settling, or otherwise resolving outstanding tax problems to achieve compliance, regain control, and end IRS/state harassment.

An official government form where you report all income, deductions, credits, and alternate tax items for the year. Most individuals use IRS Form 1040, but specific situations call for other forms.

The annual accounting period for reporting income, typically January 1 through December 31.

An independent IRS office that assists taxpayers facing systemic issues, delays, or unique hardships not easily resolved through standard channels.

A federal program that redirects a tax refund or other federal payment to cover certain outstanding debts, including unpaid taxes. Leading Tax Group checks whether an expected refund is actually at risk before a client counts on it.

A personal penalty the IRS can assess against an individual who was responsible for paying over withheld payroll taxes and willfully failed to. Leading Tax Group defends business owners and officers against TFRP assessments before they become personal debt.

Returns that are overdue and unsubmitted. Unfiled returns expose taxpayers to penalties, substitute filings, and enforcement actions. Prompt professional intervention helps restore compliance before further escalation.

The federal court where taxpayers can dispute an IRS deficiency before paying it. Leading Tax Group prepares clients for what a Tax Court case actually involves, starting with the petition deadline.

California’s tax on out-of-state purchases used within the state, owed even when the seller didn’t collect sales tax. Leading Tax Group reviews use tax exposure as part of every CDTFA audit defense.

A program allowing taxpayers who have failed to report previously undisclosed income or assets to come forward before audits or investigations, often mitigating civil and criminal penalties.

Court- or IRS-directed deduction of earnings from your paycheque to satisfy debt. Garnishments continue until debts are resolved or negotiated relief is arranged.

The second test the IRS applies before assessing the Trust Fund Recovery Penalty: did the responsible person know taxes weren’t being paid and choose to pay other expenses instead. Leading Tax Group challenges willfulness findings that don’t match what actually happened.

How a business categorizes a worker for tax purposes, which determines whether payroll taxes are owed. Leading Tax Group defends California employers in EDD worker classification audits under the state’s ABC test.

The earnings generated from investments. For tax purposes, yields can take the form of interest, dividends, or capital gains—all subject to various tax treatments and disclosures on returns.