Joseph Pearman, Attorney at Law Joseph Pearman, Attorney at Law 2026-07-28T07:04:53Z https://www.josephpearman.com/feed/atom/ WordPress /wp-content/uploads/sites/1103754/2024/04/cropped-Joseph_Pearman-site-icon-32x32.png On Behalf of Joseph Pearman, Attorney at Law <![CDATA[How an Offer in Compromise may resolve tax controversies]]> https://www.josephpearman.com/?p=47842 2026-07-28T07:04:53Z 2026-07-28T06:48:45Z Tax debt can create uncertainty that affects your finances and your peace of mind. If you owe more than you can realistically pay, you might wonder if the Internal Revenue Service (IRS) offers any way to settle the debt. An Offer in Compromise could provide that opportunity for some taxpayers. Still, the program follows strict rules and approval is never guaranteed. Learning how an IRS Offer in Compromise works may help you decide if it fits your situation and what role it could play in resolving a tax controversy.

What is an Offer in Compromise?

An Offer in Compromise is a program that may allow you to settle your tax debt for less than the full amount you owe. The IRS reviews your financial situation before deciding if it will accept your offer. Your income, expenses, assets and ability to pay all play a role in that decision. It also helps to know what an Offer in Compromise does not do. It does not erase tax debt automatically or forgive taxes simply because paying them feels difficult. You must qualify under IRS standards and continue meeting your future tax filing and payment obligations if the IRS accepts your offer.

How could an Offer in Compromise resolve a tax controversy?

Once the IRS accepts your Offer in Compromise and you satisfy its terms, the tax debt covered by the agreement generally reaches a final resolution. That outcome may stop collection efforts related to that liability and give you a structured path toward compliance. An accepted offer could help you:
  • Settle eligible tax debt for less than the full balance.
  • Resolve the specific tax liability covered by the agreement.
  • Create a clear plan for meeting future tax obligations.
An Offer in Compromise may not resolve every tax controversy. For example, an ongoing audit or another dispute with the IRS could continue unless it receives a separate resolution. The IRS administers the Offer in Compromise program which authorizes the agency to compromise certain tax liabilities when legal requirements support that result.

When might an Offer in Compromise make sense?

Several financial situations may lead taxpayers to explore tax debt settlement through an Offer in Compromise. The program often serves people whose financial circumstances make full payment unrealistic. Common examples include:
  • Carrying large tax balances that exceed your ability to pay.
  • Facing IRS collection actions, such as tax liens or levies.
  • Experiencing reduced income or long-term financial hardship.
Each application receives an individual review, so similar financial situations may produce different outcomes.

A possible path toward financial resolution

An IRS Offer in Compromise may provide an opportunity to resolve certain tax debts and reduce the uncertainty that often comes with collection activity. Still, the program requires careful preparation and strict compliance with IRS requirements. Getting legal advice, reviewing your financial circumstances and the program's eligibility rules may help you determine if this option deserves further consideration for your tax situation.]]> On Behalf of Joseph Pearman, Attorney at Law <![CDATA[What is a theft-loss tax deduction?]]> https://www.josephpearman.com/?p=47840 2026-07-23T15:42:32Z 2026-07-23T15:42:32Z A theft-loss tax deduction allows certain taxpayers to deduct qualifying financial losses caused by theft or fraud. For better and worse, the rules related to this particular deduction are far more complex than many people realize.  Whether a loss qualifies depends on the facts of the situation, the Internal Revenue Code and current IRS guidance. As a result, individuals who have suffered significant financial losses due to another’s theft or attempt to defraud them should not assume they either qualify or are automatically excluded from claiming this kind of deduction without careful review and legal support.

The basics of theft-loss deductions

Recent IRS guidance issued in 2025 clarified that some victims of sophisticated financial scams may be eligible to claim theft-loss deductions. This includes certain investment-related fraud schemes, such as so-called "pig butchering" scams, in which criminals persuade victims to invest money through fraudulent platforms while falsely promising substantial returns. Because these transactions were entered into with the expectation of making a profit, the IRS has recognized that some losses may qualify for favorable tax treatment. The outcome is different for victims of romance scams. Although the financial harm caused by this kind of scam can be just as devastating, the IRS has generally concluded that these losses do not qualify for the same deduction because the victim's primary motivation was to establish or maintain a personal relationship rather than to earn income or make investment gains. This distinction has generated considerable discussion among taxpayers and tax professionals. Two individuals may lose significant funds to equally sophisticated fraud operations, yet receive different tax treatment based largely on the reason they were persuaded to transfer their funds. One person's expectation of financial return may support a deduction, while another person's reliance on emotional trust may not. Determining whether a theft-loss deduction is available requires careful analysis of the underlying facts, applicable tax law and supporting documentation. Every situation is unique, and seemingly minor details may significantly affect the outcome, which is one of the many reasons why it is generally wise for fraud victims to seek legal guidance when navigating their tax obligations. ]]> On Behalf of Joseph Pearman, Attorney at Law <![CDATA[What is IRS Letter 2566?]]> https://www.josephpearman.com/?p=47837 2026-07-10T12:55:09Z 2026-07-10T12:55:09Z If you receive IRS Letter 2566, it is a proposed individual tax assessment. This may mean that more taxes are due, and the IRS has sent you the letter as notice that they are assessing your tax obligations. Often, this means that the IRS has no record that you actually filed a tax return. They may have proposed the amount of taxes that they believe are due. The letter allows you to get this process started, although providing more in-depth information could change the exact amount that you have to pay the IRS.

How can the IRS decide how much you owe?

Often, the IRS is going to get information from other sources. This information can still be connected to you through your tax identification number. For example, your employer should have filed tax paperwork that includes the amount of money they paid you as an employee. Your financial institutions may have filed paperwork that includes information about transactions. This gives the IRS some idea of the money that you have received, even if they have not actually received your paperwork detailing how much you believe you should pay in taxes. Because you have not filed, the IRS has prepared a tax return for you, and Letter 2566 will tell you how much they believe is due in taxes, interest and any necessary penalties. That said, you can still file an original tax return on your own, which may reduce the total amount that you owe.

Acting quickly

There is a deadline to reply to this notice, which is typically 30 days. If you have received Letter 2566 from the IRS, it is important to act quickly so that you do not lose your right to appeal. Be sure you know what legal steps to take.  ]]> On Behalf of Joseph Pearman, Attorney at Law <![CDATA[How Illinois’ new digital advertising tax could affect business]]> https://www.josephpearman.com/?p=47835 2026-06-26T19:06:38Z 2026-06-26T19:06:38Z Understanding Illinois’ new digital advertising tax Illinois recently approved a new tax on certain targeted advertising services as part of its Fiscal Year 2027 budget. Beginning January 1, 2027, the law imposes a 10% tax on gross receipts earned from targeted advertising services provided in Illinois by businesses that exceed the state's revenue threshold. Unlike an income tax, this tax is based on gross receipts, meaning it applies before business expenses are deducted. The tax generally targets businesses that provide targeted advertising services using personal information to deliver ads to specific audiences. This can include advertising delivered through:
  • Websites
  • Social media platforms
  • Search engines
  • Other digital channel
While the law is aimed primarily at advertising providers rather than businesses simply purchasing advertisements, companies involved in digital marketing should understand how their advertising relationships may be affected. Because the legislation contains broad language, additional guidance may be needed to clarify exactly which businesses are covered and how certain transactions will be treated. Businesses that sell digital advertising, operate advertising platforms or generate revenue from targeted advertising should begin reviewing their operations before the law takes effect. Evaluating advertising contracts, sourcing methods and tax compliance procedures now may help reduce future complications. As Illinois releases additional guidance, businesses may also need to update their internal processes to ensure they remain compliant with the new requirements. Tax laws involving digital services continue to evolve, and even small changes can have significant financial consequences. Businesses with questions about how Illinois' new digital advertising tax may apply to their operations should consider speaking with a qualified legal professional to better understand their obligations and prepare for future compliance.]]> On Behalf of Joseph Pearman, Attorney at Law <![CDATA[4 things that can trigger an IRS audit]]> https://www.josephpearman.com/?p=47819 2026-06-15T16:16:40Z 2026-06-15T16:16:40Z Audits do happen, but they are relatively rare. Some reports indicate that they have dropped by about 66% since 2010. Many people will never experience an audit at all. However, even though it is rare, since it is a possibility, it is important to know what can trigger it. What makes the IRS decide to conduct an audit on someone's tax return, and what red flags should you be aware of? Below are a few examples.

1. Unreported earnings

First and foremost, discrepancies between reported earnings can cause an audit to occur. If your employer reports that they paid you a certain amount of money, but you report that you earned far less, for example, the IRS is going to see that the numbers simply do not match up.

2. High annual income

Additionally, the IRS does sometimes focus more resources on those with a high level of income. These returns can often be more complex, perhaps with multiple sources of income, and it can be complicated to sort through all of the details and paperwork.

3. Numerous deductions

The IRS also looks at the things that you deducted from your taxes. Someone who has a high number of deductions may be more likely to be audited. The IRS simply wants to check to make sure that those deductions actually apply and should have been used to reduce the tax burden.

4. Typos and mathematical mistakes

Finally, the IRS is going to check your mathematical calculations, and discrepancies or typos may be flagged. This does not necessarily mean that you have done anything wrong, as it could just be a negligent mistake, but paperwork errors could trigger an audit. If you do find yourself facing an audit, especially if it is the first time, it can help to work with an experienced attorney to explore your options.]]> On Behalf of Joseph Pearman, Attorney at Law <![CDATA[What is a short-term payment plan?]]> https://www.josephpearman.com/?p=47810 2026-06-01T20:09:58Z 2026-06-01T20:09:58Z A short-term payment plan is an option that the IRS may use to give you a small amount of additional time to pay off your tax liabilities. If you owe an outstanding balance, the first step is often for the IRS to ask you to pay it in full immediately. There are various options you can use to do this, such as using IRS Direct Pay. You may have the money on hand to pay the outstanding balance, which can resolve the issue relatively quickly. However, if you cannot pay in full right away, then the IRS may authorize a short-term payment plan that runs for up to 180 days. This is done with no additional fee.  Both businesses and individuals are able to set up these short-term payment plans, though businesses need to do so by phone and individuals can sometimes use the Online Payment Agreement application. Either way, although potential penalties and interest may apply, this is a way to pay your tax balance over the next few months without significant issues.

What if 180 days is not enough?

If 180 days will not be enough time to pay off the balance, there are also long-term payment plans. You may need to submit specific paperwork, such as Form 9465. There is often a user fee for a long-term plan, but it depends on the individual. Some low-income taxpayers are eligible to have this fee waived.

Exploring your options

This helps demonstrate various ways to pay off your tax balance with the IRS. It is important to know exactly what you are eligible for and what legal options you have.  ]]> On Behalf of Joseph Pearman, Attorney at Law <![CDATA[What to do after an IRS CP501 notice]]> https://www.josephpearman.com/?p=47808 2026-05-18T04:29:01Z 2026-05-18T04:29:01Z Getting a CP501 notice from the IRS can feel stressful, especially if you are unsure what it means. This notice is usually the first reminder that you have unpaid taxes on your account. While it is important to take it seriously, it does not mean you are facing immediate penalties like wage garnishment or property seizure. The key is to respond early and stay organized.  A CP501 notice will typically include the amount you owe, any added penalties or interest and payment instructions. Before doing anything else, read the notice carefully. Confirm that the balance is correct and compare it with your tax records. Small errors, missing payments or outdated information can sometimes cause confusion. 

Don’t Panic: Start With These Steps

Taking calm and informed action can help you avoid bigger tax problems later. Here are a few helpful steps to follow:
  • Review the notice line by line to confirm the tax year and amount owed.
  • Check your records to see if you already made a payment.
  • Pay the balance if you can, since interest may continue to grow.
  • If you cannot pay in full, look into IRS payment plan options.
  • Keep copies of all letters, payment confirmations and tax documents.
  • Respond before the deadline listed on the notice.
Ignoring a CP501 can lead to additional IRS notices and higher penalties over time. Even if you disagree with the amount, responding quickly gives you more opportunities to fix the issue before it becomes more serious.  Tax matters can become complicated when penalties increase or financial hardship is involved. In situations like these, having a legal professional review your options and explain the next steps clearly may help you make more informed decisions and avoid unnecessary setbacks.]]> On Behalf of Joseph Pearman, Attorney at Law <![CDATA[What should you do if you receive a CP504 from the IRS?]]> https://www.josephpearman.com/?p=47805 2026-05-02T21:23:36Z 2026-05-02T21:23:36Z Receiving any notice from the IRS can be concerning, but a CP504 is particularly alarming. The language is serious because it indicates that the IRS intends to seize certain assets. If you don’t respond promptly, the IRS may escalate its collection efforts. Still, while the situation is urgent, it’s also manageable with the right steps.

What is a CP504 notice?

A CP504 is not the first notice the IRS sends about unpaid taxes. By the time you receive it, they have likely already sent prior reminders. The CP504 notice is a “Final Notice of Intent to Levy” on specific assets, such as your state tax refund. It also warns that broader enforcement actions could follow. It’s crucial that you do not ignore a CP504 because doing so can lead to more aggressive IRS collection efforts, including:
  • Garnishing your wages
  • Taking the funds directly from your bank accounts
  • Filing a federal lien against your property
Once these actions begin, resolving your tax issue becomes more complicated. Instead, you want to act quickly to maintain control over the situation. Your first step is confirming the accuracy of the notice. Mistakes can happen, and you have the right to dispute inaccuracies. If the notice is accurate, you should pay the balance if you can. Doing so will stop further collection notices. If full payment isn’t possible, the IRS may allow:
  • Monthly payment plans
  • Offers in compromise (settling for less than the full amount owed)
  • Temporary hardship status, which can delay collection if you can’t pay
Your CP504 will include instructions for contacting the IRS. Reaching out promptly after receiving your notice shows good faith and can prevent escalation. Considering the legal and financial complexity of your tax issue, you should consider working with someone who can help you evaluate your options and negotiate with the IRS on your behalf. Their assistance can make a meaningful difference and, where possible, protect your assets from IRS seizure.  ]]> On Behalf of Joseph Pearman, Attorney at Law <![CDATA[How far back can an audit go?]]> https://www.josephpearman.com/?p=47803 2026-04-15T11:47:24Z 2026-04-15T11:47:24Z If you have received a notice of audit from the IRS, you are likely curious how far back they are going to look. It is natural that they may want to audit you if there are questions about your most recent tax return.  But what about returns that you submitted in previous years? Should you be worried about the impact of the audit on tax returns you filed a decade ago? As a general rule, you do not have to concern yourself with tax returns going back more than a few years. The IRS usually tries to conduct an audit as quickly as possible, and most of them address tax returns from just the past two years.

3 to 6 years

That said, while the goal is to look at returns from the past two years, the statute of limitations may be extended beyond that. In many cases, the IRS has the option to go back three years to conduct the audit. If this does not provide a satisfactory result, they can sometimes ask to extend the statute of limitations. But even if they do ask for this extension, they generally only ask for another three years. This means that they are usually not going to look at anything that is more than six years old. This is why it is a common piece of advice to keep documentation going back seven years. As long as you do this, you know that you always have the proper documentation on hand to address even the most lengthy audit that the IRS would be expected to conduct. This covers all of your bases, even though the reality is that most audits will just look at returns from the past one to three years.

Guidance when working with the IRS

Going through an audit with the IRS can be complex, especially if they have requested extensions and you have a complicated tax history. It can help to have experienced legal guidance from an attorney at this time.]]> On Behalf of Joseph Pearman, Attorney at Law <![CDATA[Could your home be at risk if you owe the IRS?]]> https://www.josephpearman.com/?p=47801 2026-04-08T02:35:41Z 2026-04-08T02:35:41Z Why home seizures are rare In practice, IRS home seizures are uncommon. Seizing and selling a home is expensive, time-consuming and legally complex, which is why the IRS typically prefers to recover money through other less disruptive means. These include installment agreements, offers in compromise, penalty abatement or wage garnishment. Property seizures are generally reserved for situations involving significant tax debt, repeated noncompliance or attempts to conceal assets. Even then, the IRS must obtain court approval before seizing a primary residence, adding another layer of protection for taxpayers. If a seizure does occur, the IRS will sell the property and apply the proceeds to your tax debt. Costs of the sale are paid first, then your outstanding taxes. Any remaining funds will be returned to you.

Don’t wait until it’s too late

Facing IRS collection action doesn’t mean the situation is hopeless. You may still have options to resolve the matter before it escalates, and the sooner you act, the better. Tax problems don’t age well. Interests compound, penalties multiply and your options narrow with time. Seeking experienced legal guidance can help you understand your rights, explore all available avenues and take proactive steps to protect your interests. This can increase your chances of a favorable resolution and avoid unnecessary financial and emotional stress.]]>