Glossary
The tax and IRS terms you are most likely to run into, explained simply. If a word on this site is unfamiliar, this is the place to look it up.
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Key Terms
Taxes you owe from a prior year that were not paid in full by the filing deadline. Unpaid balances keep growing over time as penalties and interest are added, which is why addressing them sooner generally costs less than waiting.
More on back taxes →A collection action in which the IRS legally seizes funds directly from your bank account and applies them to a tax debt. Unlike a lien, which is a claim against your property, a levy is the actual taking of funds, and it can often be released once a resolution is in place.
More on bank levies →The date after which the IRS generally can no longer legally collect a tax debt. The IRS usually has ten years from the date a tax is assessed to collect it, though certain events can pause or extend that clock.
A state-licensed accounting professional. CPAs are one of the three types of professionals the IRS authorizes to represent taxpayers without limitation, alongside enrolled agents and tax attorneys.
A status the IRS may grant when paying anything toward a tax debt would keep you from covering basic living expenses. While an account is in this status, active collection such as levies generally pauses, though penalties and interest continue to accrue and the balance remains.
More on Currently Not Collectible status →A tax professional licensed directly by the federal government, with authority to represent taxpayers before the IRS without limitation. Enrolled agents specialize specifically in taxation.
A legal claim the government places against your property when a tax debt goes unpaid. A lien does not take your property, but it attaches to what you own and can affect your credit and the sale of assets until the debt is resolved.
More on tax liens →An arrangement to pay your tax debt over time in fixed monthly payments rather than all at once. It is one of the most common ways to resolve a balance you cannot pay in full right away.
More on installment agreements →An official letter from the IRS about your account, often reporting a balance, a proposed change to a return, or a deadline to respond. Many notices have firm response windows, so reading them promptly and getting advice before the deadline matters.
More on IRS notices →Official IRS records showing what has been filed and assessed on your account, the balances owed, and the actions the IRS has taken. Pulling them gives an accurate picture of where you actually stand instead of relying on memory or guesswork.
How the process works →A program that lets some taxpayers settle a tax debt for less than the full amount owed. Approval is based on a detailed review of income, expenses, and assets, and most people do not qualify, so an honest assessment of eligibility comes before any offer.
More on Offers in Compromise →The federal taxes an employer withholds from employee wages and reports on Form 941, along with the employer's matching share. The IRS treats unpaid payroll taxes especially seriously because they include money held on behalf of employees.
Help for business owners →Additional amounts the IRS adds to an unpaid balance over time. Penalties are charged for things like filing late or paying late, and interest accrues on the total, which is how a balance can grow well beyond the original tax.
The reduction or removal of IRS penalties when you qualify. Common grounds include a clean prior compliance history under First-Time Abatement, or reasonable cause such as serious illness or other circumstances beyond your control.
More on penalty relief →A form that authorizes a licensed representative to deal with the IRS on your behalf. Once it is on file, your CPA, enrolled agent, or attorney can speak with the IRS, receive your notices, and handle your case directly.
How the process works →A return the IRS files for you when you do not file one yourself. An SFR is calculated in the government's favor and usually leaves out deductions and credits you would be entitled to, so filing your own accurate return often lowers the balance.
More on unfiled returns →A licensed attorney who focuses on tax matters. Tax attorneys are one of the three types of professionals authorized to represent taxpayers before the IRS without limitation, and they can be especially important where legal questions or disputes are involved.
A review by the IRS of a tax return to confirm that income, deductions, and credits were reported correctly. An audit does not automatically mean you did anything wrong, and you have the right to be represented by a licensed professional throughout.
More on audit defense →A broad term for the programs and options that help people resolve what they owe the IRS on terms they can manage, including payment plans, settlements for those who qualify, penalty reductions, and protections when paying would cause hardship. It is a set of legitimate, established processes, not a loophole.
A penalty the IRS can assess personally against the individuals responsible for a business's unpaid payroll taxes. Because it can reach owners and certain employees in their personal capacity, unpaid payroll tax is one of the most serious situations a business can face.
Help for business owners →Tax returns that were required but never filed. Filing the missing years is usually the first step toward any resolution, and the IRS generally looks for the last several years of returns before it will consider you compliant.
More on unfiled returns →A collection action in which the IRS requires your employer to send part of your paycheck directly to the IRS toward a tax debt. A garnishment can often be reduced or released once a resolution is arranged.
More on wage garnishment →Definitions are a start. A 30-minute consultation will tell you exactly where you stand and what your options are, with no obligation and no pressure to commit.
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