Tax Glossary

Innocent Spouse Relief Request – If you filed jointly with your spouse on a previous year’s income tax return but do not feel you are responsible for tax liabilities, you may file an Innocent Spouse Relief Request.

Installment agreement – The IRS may allow you to repay your tax debt in monthly payments.

Offer in Compromise – A proposal to the IRS asking to pay a lesser amount than what is owed. Often times, this is referred to as a “tax settlement.”

Penalty – If you file your taxes late, the IRS will issue a penalty requiring you to pay more. You may also have to pay interest on the late amount AND the penalty…so it’s important to contact a tax attorney as soon as possible.

Statute of Limitations – The IRS can only collect on the tax liability owing for 10 years. This 10 years starts to run the day that the return is filed with the IRS. Once the 10 years had expired, the IRS liens are removed and the tax is retired.

Tax levy – If you have overdue taxes, the IRS is allowed to levy some of your assets. In other words, the IRS can collect the money you owe by taking money from your bank accounts, retirement annuities, social security benefits, and more.

Tax liability – The total amount of money you owe to the IRS for your taxes.

Tax lien – Property owners who have not paid their taxes appropriately may receive a tax lien notice from the IRS. The title of a property with a tax lien cannot be transferred (or sold) until the lien is paid.

Tax penalty abatement – “To abate” means to reduce. To receive a “tax penalty abatement” means the IRS forgave all or a portion of the tax penalty. Interest, which is based upon the total amount that you owed, will also be adjusted.

Wage garnishment – The court orders your employer to take out a portion of wages from your paycheck and put that money toward a debt or other financial obligation (i.e., child support, tax debts, etc.).

Uncollectible Status 53 Request – The IRS recognizes your inability to pay and will temporarily stop the collections process. Your debt does not go away and the penalties and interest fees will continue to increase.

Underpayment penalty – If you don’t pay the required amount of tax each year, the IRS may issue an underpayment penalty, which requires you to pay more.