Success Stories
IRS Audit Examinations
$2.1M Assessment Reduced to $120,000 The taxpayer and their accountant initially tried to handle the audit directly with the IRS. The records were a mess, the interview with the Revenue Agent went poorly, and penalties were on the table. I was brought in at Appeals and completely redirected the case. I never allow my clients to be interviewed by the IRS – I handle that personally, protecting them from making damaging statements. Unlike accountants, who often feel compelled to defend their work, I focus solely on the result. That approach was key here, particularly in abating penalties. Result: liability reduced from $2.1 million to $120,000.
Unreported Income Allegation Defeated In this audit, the IRS sought to assess unreported income based on unexplained bank deposits. We showed that many deposits were non-income items, including funds from a refinance. These cases are particularly difficult when the taxpayer is a sole proprietor using a single bank account for both business and personal activity, rather than operating through a corporation. While corporations carry costs, the structural benefits can make audits far more manageable – an analysis worth doing early. Result: IRS conceded significant proposed income adjustments.
Civil Fraud Penalty Eliminated The Revenue Agent in this case included a civil fraud penalty, one of the most severe penalties the IRS can impose. Worse, the agent failed to properly consider the documents we submitted. At that point, it was clear this case needed to be resolved at Appeals – where a fresh set of eyes could see the full picture. Protecting the file at the audit stage is crucial to prevent Appeals from receiving a one-sided, persuasive IRS report that becomes difficult to overcome. Having an experienced tax attorney to steer the matter at this stage was critical. Result: case resolved at Appeals, with the civil fraud penalty eliminated.
Worker Classification Resolved Using Section 530 Safe Harbor The IRS challenged the classification of independent contractors, threatening to reclassify them as employees. We relied on the Section 530 Safe Harbor provisions, a powerful but often overlooked statute that, under the right conditions, allows businesses to preserve independent contractor status. Because we knew the fine details of the statute, we were able to craft a winning argument. Result: workers maintained as independent contractors, avoiding massive payroll tax liability.
Disallowed Losses Reinstated In audits where the IRS can’t substantiate unreported income or disallowed deductions, Revenue Agents often feel pressure to “get something” to justify their time to supervisors. In this case, they sought to disallow legitimate losses simply to walk away with an adjustment. Sometimes it makes sense to compromise on a small point to end the audit quickly, but sometimes you need to hold firm. Knowing the IRS playbook – and when to hold versus when to fold – is key. Result: we pushed back, preserved the client’s losses, and closed the audit on favorable terms.
EDD Audit Examinations
Payroll Return Mistakes – Penalties Eliminated A bookkeeper made errors on payroll tax returns, and the EDD tried to take full advantage by proposing draconian penalties for what was a simple mistake. With declarations from both the business owner and bookkeeper, I was able to show the error was inadvertent and not abusive. The auditor and EDD are supposed to act like a baseball umpire – calling balls and strikes, not trying to determine the outcome – but often need to be reminded of that role. Result: penalties eliminated, liability reduced to the tax actually owed.
Truck Drivers Preserved as Independent Contractors A trucking company that leased vehicles to drivers came under audit. Even though the company owned the trucks, the drivers had freedom to choose which loads to take, set their own routes, and operate their businesses independently. Under California’s evolving worker classification standards, including Dynamex and the ABC test, these cases are particularly challenging. Through a thorough understanding of the law and persuasive advocacy, I was able to establish that the drivers were truly in business for themselves. Result: drivers remained independent contractors, avoiding massive reclassification liability.
Production Subcontractors – Independent Contractor Status Upheld An event production company was audited for worker classification. They regularly hired makeup artists, lighting specialists, and other subcontractors. The EDD argued that because many subs were used repeatedly, they were employees. Worse, the independent contractor agreements were poorly drafted and the EDD was relying on them heavily. By focusing on substance over form, I proved that the subcontractors were running their own businesses and not employees of the company. Result: subcontractors classified as independent contractors, with no payroll tax assessment.
Aggressive EDD Collection Action Resolved with Long-Term Plan A company facing significant payroll tax liability was hit with aggressive EDD levies, putting its operations in jeopardy. Income was highly variable, making a standard installment agreement risky — any cash flow dip would trigger a default. I immediately secured a hold on collection, then negotiated a long-term payment arrangement tailored to the company’s financial realities. Result: levies released and a manageable long-term payment plan put in place, saving the business from collapse.
Real Estate Company – Penalties Removed Through Settlement A real estate company failed to issue 1099s to independent contractors performing services such as drywall and painting. The EDD sought to reclassify the workers and impose steep penalties that would have destroyed the business. Many workers lacked Social Security numbers, complicating the defense. By working through the EDD’s settlement program, I negotiated a resolution that eliminated the penalties in exchange for issuing proper 1099s in the future. Result: penalties eliminated and company preserved, with compliance plan moving forward.
IRS Offer in Compromise
Our client, a successful television director, earned between $600,000 and $700,000 annually but had no real estate or significant assets following a divorce. He faced an IRS liability of $1.2 million.
Using the Internal Revenue Manual, which requires the IRS to analyze what could be collected if the taxpayer filed bankruptcy, we demonstrated that the IRS would recover very little in a Chapter 7 proceeding. Since certain income tax liabilities are dischargeable in bankruptcy, this analysis was not optional for the IRS—it was mandatory.
By leveraging this rule, we successfully negotiated a settlement. The taxpayer’s $1.2 million liability was reduced to $48,000.
Our client, a cinematographer, had enjoyed years of steady work on lucrative projects. However, as he aged, Hollywood no longer offered him the same level of opportunities, and his income dropped sharply. Despite his reduced earnings, he faced an IRS liability of $800,000.
We demonstrated that his prior level of income was no longer attainable and that the IRS could not base collection potential on outdated earning history. After presenting evidence of his new financial reality, we successfully negotiated a settlement. The taxpayer’s $800,000 liability was reduced to $122,000.
Our client, a well-known musician, had enjoyed a long and successful career but had significantly overspent his earnings. In the later stage of his career, while he continued to perform, his income was far lower than in his prime. He faced an IRS liability of $1.8 million.
We demonstrated that his royalty streams would continue to decline and that if he filed bankruptcy, the IRS would recover only $70,000–$80,000. Leveraging the bankruptcy analysis the IRS is required to conduct, we negotiated a settlement. The taxpayer’s $1.8 million liability was reduced to $124,000.
The key to this result was showing how bankruptcy law treats tax debt. Unlike consumer debt, tax liabilities are often considered non-consumer debt and not subject to the means test, which means even high-income earners may discharge taxes in bankruptcy.
Wage Earner with Pension Withdrawal: Our client was a steady wage earner, making approximately $75,000 per year. After withdrawing funds from a pension plan to cover medical expenses, he was unable to repay the resulting tax liability. With interest and penalties, the total debt grew to about $200,000.
The primary challenge in this case was the IRS’s assertion that there was significant equity in the taxpayer’s residence, which would prevent a favorable settlement. We carefully reviewed the valuation and demonstrated that the IRS’s calculation was flawed. By presenting a professional real estate comparable that highlighted issues with the property and supported a lower value, we persuaded the appeals officer to accept our analysis.
As a result, the taxpayer’s liability of approximately $200,000 was reduced to $24,000.
Collection Statute Expiration Strategy: Our client owed the IRS $400,000, but much of the liability was approaching the end of the IRS’s 10-year collection statute. As the expiration date neared, the IRS became aggressive, threatening to reduce the assessment to judgment and file a lien against the client’s property.
We filed an Offer in Compromise, which suspended the collection statute but allowed us to negotiate strategically. By persuading the offer specialist and appeals officer that pursuing judgment and enforcement was not a practical use of IRS resources, we achieved a favorable settlement. The taxpayer’s $400,000 liability was reduced to $75,000.
This case underscores an important principle: knowing precisely when the IRS collection statute expires, and how to leverage that fact, can make the difference between a taxpayer being forced into judgment or securing a fresh start.