Tax Resolution

Few financial problems escalate as quickly, or as quietly, as unresolved tax debt. A missed filing season turns into a Substitute for Return. A balance due turns into penalties and compounding interest. A series of ignored notices turns into a federal tax lien on your Miami home or a levy that empties your business operating account the week payroll is due. For Miami residents, entrepreneurs, hospitality operators, and self-employed professionals, tax problems rarely stay the same size; they grow until someone intervenes with a concrete legal strategy.

Tax resolution is that intervention. It is the structured process of stopping enforced collection, correcting the underlying liability where possible, and negotiating or litigating a resolution that fits your actual financial capacity. This page explains how federal tax collection works, the resolution tools available under the Internal Revenue Code, how Florida Department of Revenue liabilities differ, and when bankruptcy becomes the most powerful tax resolution tool of all.

Why Miami Taxpayers End Up in Collection

Miami's economy creates tax exposure in ways that salaried employees in other industries rarely experience. Common fact patterns we see include:

• Self-employment and 1099 income. Real estate professionals, rideshare and delivery drivers, consultants, and gig workers who receive gross payments without withholding often fall behind on quarterly estimated taxes under 26 U.S.C. § 6654, then face a large April balance they cannot pay.
• Restaurant, bar, and hospitality businesses. Cash-intensive operations attract both IRS scrutiny and Florida sales tax audits. Sales tax collected from customers but not remitted creates personal (and sometimes criminal) exposure.
• Payroll tax defaults. Struggling businesses sometimes use withheld employee taxes as working capital. The IRS treats this as one of the most serious civil violations in the Code, and the Trust Fund Recovery Penalty under 26 U.S.C. § 6672 pierces the corporate entity to reach owners and managers personally.
• Unfiled returns. Years of non-filing lead the IRS to prepare Substitute for Returns under 26 U.S.C. § 6020(b), which allow no deductions beyond the standard deduction and typically overstate the true liability dramatically.
• Divorce and joint-return liability. A spouse who signed a joint return can be held fully liable for the other spouse's underreporting unless relief is available under 26 U.S.C. § 6015.

How IRS Collection Actually Works: and the Deadlines That Matter

Understanding the collection machinery is the foundation of every resolution strategy, because nearly every meaningful right you have is tied to a deadline.

Assessment and the Collection Statute

The IRS generally has three years from the date a return is filed to assess additional tax under 26 U.S.C. § 6501(a), six years if income is understated by more than 25% under § 6501(e), and no limit at all for fraud or unfiled returns under § 6501(c). Once tax is assessed, 26 U.S.C. § 6502 gives the IRS ten years to collect. That ten-year Collection Statute Expiration Date (CSED) is the strategic backbone of many cases: a taxpayer whose CSED expires in 18 months should almost never submit an Offer in Compromise, because filing an offer suspends the collection statute under 26 U.S.C. § 6331(k) while it is pending. Knowing your CSEDs (which requires pulling and decoding IRS account transcripts) is step one in every engagement.

Liens: 26 U.S.C. §§ 6321 and 6320

A federal tax lien arises automatically under 26 U.S.C. § 6321 the moment tax is assessed, demand is made, and payment is not received. When the IRS files a Notice of Federal Tax Lien in the Miami-Dade County official records to perfect its interest against other creditors, it must notify you under 26 U.S.C. § 6320, and you have 30 days after the five-business-day notice window to request a Collection Due Process (CDP) hearing. A recorded lien attaches to all property you own, including your homestead, even though Florida's homestead protections under Article X, Section 4 of the Florida Constitution do not defeat a federal tax lien.

Levies and the Collection Due Process Hearing: 26 U.S.C. §§ 6330 and 6331

Before the IRS can levy wages, bank accounts, or accounts receivable under 26 U.S.C. § 6331, it must send a Final Notice of Intent to Levy and Notice of Your Right to a Hearing (typically Letter 1058 or LT11). Under 26 U.S.C. § 6330, you have 30 days from the date of that notice to file Form 12153 requesting a CDP hearing. Filing on time does three critical things: it bars levy while the hearing is pending, it preserves your right to appeal the IRS determination to the United States Tax Court, and it forces a settlement officer to consider collection alternatives such as an installment agreement or offer in compromise.

Worked example: An LT11 dated March 3 gives you until April 2 to file Form 12153. File on March 28, and the IRS cannot levy your bank account while Appeals considers your proposed installment agreement, and any adverse determination can be petitioned to Tax Court within 30 days of the determination letter. Miss April 2, and you are limited to an "equivalent hearing" (available for one year), the levy bar disappears and so does your Tax Court review right. The difference between day 30 and day 31 is the difference between negotiating from protection and negotiating while your accounts are exposed.

Bank levies have one built-in safety valve: under 26 U.S.C. § 6332(c), the bank must hold levied funds for 21 days before remitting them, giving counsel a narrow window to negotiate a release under 26 U.S.C. § 6343 by demonstrating economic hardship or securing a collection alternative.

Federal Tax Resolution Options

Installment Agreements: 26 U.S.C. § 6159

The IRS is authorized to accept payment over time under 26 U.S.C. § 6159. The right structure depends on the balance:

• Guaranteed agreements (§ 6159(c)): liabilities of $10,000 or less, paid within three years, must be accepted if filing history is clean.
• Simplified agreements: under current IRS procedures, individual balances up to $50,000 can generally be paid over 72 months without submitting full financial disclosures, and expanded criteria reach higher balances paid within the CSED.
• Ability-to-pay agreements: larger balances require Form 433-A or 433-B financial statements, where the fight is over the IRS's allowable expense standards versus your actual Miami cost of living, housing, transportation, and insurance figures that the national standards frequently understate.
• Partial-pay installment agreements (PPIA): where full payment before the CSED is impossible, § 6159 permits agreements that intentionally pay less than the full balance before the collection statute expires, often a better outcome than an Offer in Compromise, with no 20% down payment.

Offer in Compromise: 26 U.S.C. § 7122

An Offer in Compromise (OIC) settles a tax liability for less than the full amount based on doubt as to collectibility, doubt as to liability, or effective tax administration. The governing regulation, Treas. Reg. § 301.7122-1, and IRS Form 656 procedures reduce the analysis to a formula called reasonable collection potential (RCP): net realizable equity in assets plus a multiple of monthly disposable income (12 months for lump-sum offers, 24 months for periodic-payment offers).

Worked example: A Miami taxpayer owes $95,000. She has $6,000 in reachable equity (the IRS applies a quick-sale discount to asset values), and after allowable expenses her monthly disposable income is $250. Her lump-sum RCP is $6,000 + ($250 × 12) = $9,000. An offer at or slightly above $9,000 is legally supportable regardless of the $95,000 balance. Change one fact (say she has $60,000 in home equity) and the offer likely fails, making a PPIA or bankruptcy analysis the better path. This is why competent tax resolution begins with the math, not with a promise to "settle for pennies on the dollar."

Under § 7122(f), an offer not rejected within 24 months is deemed accepted. If an offer is rejected, you have 30 days to appeal to the IRS Independent Office of Appeals.

Currently Not Collectible Status

Where a taxpayer's allowable expenses meet or exceed income, the IRS will code the account as Currently Not Collectible (CNC) under its hardship authority reflected in 26 U.S.C. § 6343(a)(1)(D) and Internal Revenue Manual 5.16.1. CNC halts levies while the ten-year collection statute keeps running, for taxpayers near their CSEDs, CNC can quietly resolve the entire debt through the passage of time.

Penalty Abatement

Failure-to-file and failure-to-pay penalties under 26 U.S.C. § 6651 can reach a combined 47.5% of the tax. Two abatement paths exist: first-time abatement, an administrative waiver for taxpayers with a clean three-year compliance history, and reasonable cause under § 6651(a), serious illness, hurricane-related disruption (a recurring reality for Miami taxpayers, where federally declared disasters also trigger deadline postponements under 26 U.S.C. § 7508A), destroyed records, or reliance on incorrect professional advice.

Innocent Spouse Relief: 26 U.S.C. § 6015

Spouses who signed joint returns without knowledge of the other spouse's understatement may seek relief under § 6015(b), elect separation of liability under § 6015(c) within two years of the first collection activity, or seek equitable relief under § 6015(f), which may be requested any time before the collection statute expires.

Florida Department of Revenue Problems: A Different and Harsher Animal

Florida imposes no personal income tax, but Miami business owners answer to the Florida Department of Revenue for sales and use tax under Chapter 212, Florida Statutes, and reemployment tax under Chapter 443. Sales tax collected from customers is trust money, Fla. Stat. § 212.15(1) declares it state funds from the moment of collection.

• Criminal exposure: Under Fla. Stat. § 212.15(2), theft of state funds is a felony when unremitted collections reach $1,000 or more, a third-degree felony from $1,000 to $19,999, escalating with the amount. The Department refers cases for prosecution; this is not a theoretical risk.
• Personal liability: Fla. Stat. § 213.29 imposes a penalty equal to 200% of the unremitted tax on any officer or director who willfully fails to collect or pay it over, converting a corporate debt into a personal one.
• Compromise authority: Fla. Stat. § 213.21 and Rule Chapter 12-13, Florida Administrative Code, authorize the Department to compromise tax based on doubt as to liability or collectibility and to compromise penalties based on reasonable cause. Stipulated payment agreements are available but typically shorter than IRS terms.
• Audit deadlines: A Florida sales tax audit begins with Form DR-840, and the assessment that follows (Notice of Proposed Assessment) becomes final unless protested within 60 days (150 days if you pursue informal protest), with subsequent review available in circuit court or before the Division of Administrative Hearings under Fla. Stat. § 72.011, generally requiring action within 60 days of the final assessment and, for court challenges, payment or security for the uncontested amount.

Because the deadlines are short and the personal-liability stakes are severe, a Miami business that receives a DR-840 should engage counsel before the auditor's first records request, not after the assessment issues.

The Trust Fund Recovery Penalty: 26 U.S.C. § 6672

On the federal side, when a business fails to remit withheld income and FICA taxes, the IRS assesses the Trust Fund Recovery Penalty against every "responsible person" who "willfully" failed to pay, owners, officers, bookkeepers with check-signing authority, sometimes even outside investors. The penalty equals 100% of the trust fund portion and survives the business's closure. Before assessment, the IRS issues Letter 1153, and you have 60 days to protest responsibility or willfulness. Defending a § 6672 case is about the record: who controlled which accounts, who decided which creditors got paid, and when each person actually learned of the delinquency.

Bankruptcy as a Tax Resolution Tool

Contrary to popular belief, income taxes can be discharged in bankruptcy. Under 11 U.S.C. § 523(a)(1) and the priority rules of 11 U.S.C. § 507(a)(8), an income tax debt is generally dischargeable in Chapter 7 if all of the following are true:

1. The return was due (including extensions) more than three years before the bankruptcy filing (§ 507(a)(8)(A)(i));
2. The return was actually filed more than two years before the bankruptcy filing (§ 523(a)(1)(B));
3. The tax was assessed more than 240 days before filing (§ 507(a)(8)(A)(ii));
4. There was no fraud or willful evasion (§ 523(a)(1)(C)).

Worked example: A taxpayer owes $70,000 for a tax year whose return was due April 15 more than three years ago, filed the return 30 months ago, and the IRS assessed the tax 14 months ago. All three timing rules are satisfied, and a Chapter 7 discharge can eliminate the entire liability, an outcome no installment agreement or OIC could match. But timing traps abound: a prior OIC or CDP request tolls the periods (§ 507(a)(8) hanging paragraph), and filing even one day early destroys dischargeability for that year. Trust fund taxes under § 6672 and Florida sales tax collected from customers are never dischargeable under § 523(a)(1)(A) and § 507(a)(8)(C).

Whether bankruptcy beats an IRS negotiation depends on your full financial picture, including whether you meet the qualifications for Chapter 7 bankruptcy in Miami and how your income compares under the means test applied to above-median debtors. Tax debt also interacts with the means test in a taxpayer-friendly way: priority tax debt is deducted in calculating disposable income. And if your tax problem travels with credit cards, medical bills, or aggressive collectors (including third-party collectors whose conduct may violate federal law, as explained in our guide to FDCPA protections against collection calls) a single bankruptcy filing may resolve everything at once, with the automatic stay of 11 U.S.C. § 362 immediately halting IRS levies the moment the case is filed.

What to Bring to a Tax Resolution Consultation

Effective strategy starts with complete information. For a productive first meeting, gather:

• All IRS and Florida Department of Revenue notices, especially anything labeled "Final Notice," LT11, Letter 1058, Letter 1153, or DR-840, the deadlines run from these documents;
• Your last two filed federal returns, and a list of any unfiled years;
• Recent pay stubs, profit-and-loss statements, and bank statements;
• A summary of assets: real estate, vehicles, retirement accounts, business interests;
• Any prior agreements with the IRS or the Department (installment agreements, offers, audit reports).

If your debts extend beyond taxes, our overview of the initial bankruptcy consultation process in Miami explains how we evaluate whether negotiation, litigation, or a bankruptcy filing produces the best net outcome.

Why Deadlines, Not Promises, Decide Tax Cases

The pattern across everything above is unmistakable: 30 days to demand a CDP hearing under § 6330; 60 days to protest a Trust Fund Recovery Penalty; 60 days to challenge a Florida assessment under § 72.011; 21 days to release a bank levy; three years, two years, and 240 days to make a tax dischargeable in bankruptcy; ten years until the IRS's collection power dies under § 6502. Taxpayers rarely lose because no remedy existed; they lose because the remedy expired. The first thing experienced counsel does is map every deadline in your case onto a calendar and act before the shortest one runs.

You can contact the Law Offices of Albert Goodwin by phone at 786-522-1411 or by email at [email protected].