Securities Broker


All names and identifying details of the client and the client’s family have been changed to protect the privacy of the the individuals. Any resemblance to actual persons, living or dead, is purely coincidental. All other details are actual events involved in resolving a real client’s tax problems.

Securities Broker


Jim and Stacy Morgan faced tax debt of more than $300,000 to the IRS, a foreclosure of their family’s home, and the possibility of Jim Morgan losing his professional licenses and employment. Jim and his wife asked Private Tax Solutions for help with their tax problems and the IRS.

The Morgan’s Federal Tax Lien was ultimately removed and they were able to resolve their tax debts with the IRS. This is Jim and Stacy’s story and the success that they achieved through tax representation with the team at Private Tax Solutions

Tax Problems Indicated Potential Loss of Professional Licenses and Home

Jim Morgan is a licensed securities broker who called our office for assistance in removing a notice of Federal Tax Lien because he needed to do a loan modification for his personal residence. When working with the bank that held his mortgage, the bank refused to refinance or do a loan modification because the notice of Federal Tax Lien came up on his personal credit report. Jim called our office, and we discussed his tax problems.

While discussing his IRS problems, we learned that Jim owed more than $300,000 to the IRS and also carried a large tax balance with the state of New Jersey. Jim not only had the tax problem but was also behind on his home mortgage and was facing foreclosure. Jim emphasized the urgent need to remove the Federal Tax Lien from his credit report so that he could refinance his home with a loan modification.

As we talked, we learned that Jim was a Licensed Securities broker. Suddenly, we realized the problem was much larger than Jim even realized. Licensed Securities brokers are subject to federal and state regulation and are required to report Federal Tax Liens to the Financial Industry Regulatory Authority Corporation (FINRA).

In our experience, once a broker-dealer discovers that one of their securities brokers has a reportable transaction, the broker-dealer usually terminates the broker from employment. We also discovered that Jim had an insurance license in multiple states. In a like manner, once the compliance departments at insurance companies discover the Federal Tax Lien, they usually end their affiliation with the insurance agent.

If these facts weren't enough, we also learned that Jim had a CPA license. If the IRS had known of Jim's CPA license, the Office of Professional Responsibility (OPR) at the IRS most likely would have disbarred Jim from professional practice before the IRS. Such proceedings are disastrous for professionals because the loss of one license usually means the loss of all licenses.

Suddenly, the desire to refinance Jim's house or do a loan modification quickly changed to become an effort to save Jim's professional licenses and his income. After taking a power of attorney on IRS form 2848, we pulled a complete set of transcripts including tax return transcript, the account transcript, the wage and income transcripts, and the TXMODA transcript so that we could understand the complete problem. We also did a complete financial analysis so that this could be provided to the IRS.

2-Step Plan to Resolve Jim Morgan's Tax Problems

After performing a complete account and transcript review and completing a financial analysis, we advised Jim and his wife to resolve their tax problems in a two-step process that ran simultaneously. The first process would be an attempt to withdraw the Federal Tax Liens. This would be extremely difficult given a lengthy period of poor tax compliance that included unfiled tax returns, late tax returns, and a large tax balance due. We explained the significant risk that the IRS would not grant our withdrawal request, but Jim and his wife needed to quickly get the Federal Tax Liens removed to keep his job.

The second process that we undertook was to prepare a complete financial disclosure and to submit an Offer in Compromise (OIC) for the IRS. While preparing the financial disclosure, we felt confident that the reasonable collection potential which would become our offer for the offer in compromise would be approximately $6,200.

Lien Withdrawal Request

We organized a package to withdraw the Federal Tax Liens filed against the Morgans. One of the unique characteristics of our lien withdrawal packages is that we provide documentation and letters from individuals within the same profession. For cases like the Morgan’s, we have documentation from other securities brokers who have experienced significant employment problems from Federal Tax Liens. We also obtained letters from individuals who have lost employment in the securities industry that we use to justify the need for withdrawing the Federal Tax Liens. We also submit letters from branch managers and compliance professionals within the securities industry that describe the likely consequences of the tax problems.

A lien withdrawal application is prepared using IRS Form 12277, Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien. Current administrative tax law allows several reasons for withdrawing a Federal Tax Lien. In the Morgan’s case, we made two claims:

  1. The withdrawal of such notice would facilitate the collection of the tax liability pursuant to Internal Revenue Code (IRC) § 6323(j)(1)(C), and
  2. The Taxpayer, or the Taxpayer Advocate acting on behalf of the taxpayer, believes withdrawal would be in the best interest of the taxpayer and the government IRC § 6323(j)(1)(D)).

Our position for this claim was that the Federal Tax Lien would probably cost Mr. Morgan his employment as a securities broker. Our package heavily supported our position that Mr. Morgan’s employment was in jeopardy.

We also included a complete financial disclosure in our package to demonstrate that the Morgans would fully qualify for an Offer In Compromise. As a result, we also included a complete OIC package with IRS form 433 – A OIC and IRS form 656 to demonstrate that the Morgans were in the process of fully resolving their tax debts.

Our goal was to show that the Morgans would ultimately get approved for a lien withdrawal through the OIC program. However, if the IRS waited to grant lien withdrawal until the offer in compromise had been accepted, Mr. Morgan faced the very real prospect of losing his employment and losing his home. In such circumstances, most of the reasonable collection potential in the offer in compromise would be lost.

Unfortunately, most administrative tax law matters take considerable time before the appropriate IRS Personnel even begin to consider the case. In the Morgan’s case, 30 days elapsed following our submission of the lien withdrawal request. With the impending foreclosure on their personal residence and the prospect of Mr. Morgan losing his job, we needed a quick resolution of the lien withdrawal request.

First Taxpayer Advocate Request

After about 30 days, we filed IRS form 911, Request for Taxpayer Advocate Service Assistance and Application for Taxpayer Assistance Order. The Office of the Taxpayer Advocate, also called the Taxpayer Advocate Service, is an independent group within the IRS designed to assist the taxpayer. Taxpayer Advocate reports directly to the Commissioner of Internal Revenue. The office was created under the Taxpayer Bill of Rights, which became a law on July 30, 1996.

Taxpayer Advocate Service consists of approximately 1,800 employees. About 1,400 of these are Case Advocates, who personally assist taxpayers and their representatives in resolving their problems with the Internal Revenue Service. To qualify for this personal assistance, taxpayers must be experiencing economic harm or significant cost (including fees for professional representation), have experienced a delay of more than 30 days to resolve their tax issue, or they have not received a response or resolution to the problem by the date that was promised by the IRS.

First Lien Unit Response

With the assistance of the taxpayer advocate office, the Centralized Lien Operation finally assigned a Lien Examiner to consider the lien withdrawal request filed with IRS Form 12277. The Lien Examiner quickly reviewed our request package. Unfortunately, she also quickly denied the lien withdrawal request. We asked for a conference call to discuss the case, which she granted.

The Lien Examiner called us within a few days; however, she was completely against withdrawing the Federal Tax Lien. We discussed the case and even demonstrated how the taxpayer would lose their employment as an insurance agent and as a licensed securities salesperson. We showed documentation of the client’s foreclosure documents and impending sale of their primary residence. We explained that all of the employment and foreclosure consequences would happen quickly if the IRS did not withdraw the Federal Tax Lien. We needed the lien withdrawal for our client to maintain their employment and to refinance their home with a loan modification.

Next, we reviewed the Offer in Compromise package that had been simultaneously filed with the lien withdrawal. We explained and demonstrated to the Lien Examiner that the offer being made to settle the entire IRS tax balance would likely be accepted. We tried to review the calculations, but an impending Offer in Compromise did not seem to move the Lien Examiner to withdraw the lien before an OIC acceptance.

Finally, we tried to show that the lien had no value in securing the financial interest of the IRS. We showed that the client had almost no asset value for the Federal Tax Lien to secure. This information was disclosed in the Asset Equity Table of the offer in compromise Form 433-A OIC. We also showed that the client had almost no disposable income in the Income Equity Table of the offer package. We explained that the Federal Tax Lien really served no purpose in protecting the U.S. government’s interest by reviewing the very limited value of the assets and income of the taxpayers.

Notwithstanding everything that we discussed with the Lien Examiner, the Lien Examiner flatly denied our request to withdraw the Federal Tax Liens explaining that the taxpayers had been a long-term IRS problem. The examiner reprimanded us by explaining that our clients had consistently filed their tax returns late and had not paid most of their federal taxes for years. Although the examiner was correct about our client’s severe lack of tax compliance, we still felt there was a position for lien withdrawal.

I reassured the Lien Examiner that the client had turned the corner and had hired our firm to resolve their tax debts, to become compliant, and to keep current with their federal tax obligations. Ultimately, the Lien Examiner held that there was no merit, nor could she find any reasonable basis for withdrawing the lien.

IRS Office of Appeals Consideration

Typically, the normal recourse for the denial of a lien withdrawal request is to appeal the decision to the IRS Office of Appeals. Although I felt confident that the taxpayers had a good chance of prevailing in the appeals unit, our experience shows that a normal appeals request might take about 6 months to process before an appeals hearing is held. In that 6 months, our clients would lose their sole source of income and their home would be foreclosed.

Faced with the horrible consequences of unemployment and losing the client’s home to foreclosure, I asked the lien examiner for a manager conference. She commented that she had already discussed the case with her manager, and they both agreed with her decision to retain the Notice of Federal Tax Lien. I insisted that my client had a right to the manager conference and pushed for a manager conference knowing the likely outcome might still be negative. She agreed with our rights for a manager conference and then assured me that she would have her manager call me in the next couple of days.

Collection Appeal Request

While waiting for the manager conference, our office prepared a Collection Appeal Request (known as a CAP appeal) on Form 9423 as a protective measure in the event that our manager conference was not successful. Within the IRS, there are two primary collection appeal actions used to refer a case to the IRS Office of Appeals – the Collection Due Process (CDP) appeal and a CAP appeal. A CAP appeal is a means of quickly getting in front of an IRS appeals officer for an appeal hearing. Given the urgent need for the lien withdrawal, we had to be prepared for going to appeals quickly, so we prepared the CAP appeal. Fortunately, we didn’t have to file the CAP appeal; the Centralized Lien Operation manager called within a couple of days.


Manager Conference for Lien Withdrawal

In preparing for the manager conference, we made sure that our large, highly supported lien withdrawal request package was also provided to the Lien Unit manager. Unfortunately, when the conference call began, the Lien Unit manager was completely unwilling to consider the withdrawal request.

Recognizing the severe resistance to granting our request, I simply relaxed and quietly explained, “I know how bad this case looks. We have a taxpayer that has been a long-term problem for you.” I apologized and continued, “Thank you for at least meeting with me. I had to do something for this client. They are desperate. Would you mind considering, for just a moment, if is there any possible way you would consider withdrawing the liens?”

“No, these people have been long term problems for the IRS! Absolutely not!” the Lien Unit manager complained.

I was quiet and really listened. He scolded me, “We file tax liens for this exact purpose… to get compliance.” I swallowed my impulse to respond to his claims and waited for him to get his opinions completely voiced.
He continued to vent about how terrible my clients were. I waited. When the manager finally finished, I responded with an apology, and expressed understanding to his complaints. 

I even said, “I know they are a problem to the IRS, but this will not happen again as long as they are my clients.” I explained that I require my clients to become compliant (even though this is also an IRS requirement for resolving tax debts anyways) or I end my relationship as their representative. I promised him that if they didn’t maintain tax compliance from now on that I would cancel my power of attorney and send them back to the IRS to resolve their tax problems on their own. As we talked the manager calmed a little.

At the appropriate moment, I asked again (and I probably asked multiple times and in multiple ways), “Is there any possible way you would consider withdrawing the liens?”

As I noticed a shift in the manager’s emotions, I reassured the manager that the taxpayer would remain compliant. They would both file their tax returns on time and pay their taxes timely. He again shifted and made the comment that the taxpayer had not even paid their estimated taxes for the current year.

I waited for a moment and then said something like, “Well, actually they just made an estimated tax payment for the current year.” The manager was surprised and started checking the system for verification of estimated tax payments. After a couple of minutes, he said, “I don’t show any estimated tax payments in the system.”

I responded that the taxpayers had, in fact, made their estimated tax payment recently, but the payment had not yet posted onto the IRS system. I reassured him that I could provide a cancelled check from my client with proof that the IRS both received and endorsed the check. I probably paused a moment to allow the manager time to process

Finding Resolution with the IRS Lien Unit Manager

At some point, we discussed how the client would resolve their tax debts. I mentioned that we had already prepared and filed an Offer in Compromise. I continued that I had personally been involved with the calculation of the taxpayer's Reasonable Collection Potential (RCP). I knew the RCP calculation was correct, and that the taxpayers had submitted a solid offer in compromise that would likely be accepted based on the RCP calculation and our client's offer. He immediately dismissed this and commented that offers don't usually get accepted. While this comment is actually true, it is largely because many people either try to do an OIC by themselves or work with an inexperienced or unknowledgeable representative. I responded that every Offer in Compromise that I had ever submitted had been accepted. I said that I was willing to review the entire OIC package with the manager to help him understand that this tax debt would be fully resolved. I asserted again that I had a 100% success rate with every offer that I had ever submitted. I invited him to confirm this through the CAF and the OIC units. Even though I was uncertain whether the IRS could confirm this fact, I personally knew that this fact was true. At some point, I became aware that he was beginning to believe me. The reluctance to withdraw the Federal Tax Lien was still there. However, I had now persuaded the manager that this tax problem was getting solved. Now that I had demonstrated that the tax problem was getting solved, I began to show how the tax lien withdrawal would facilitate the collection of the tax liability and be in the best interests of the taxpayer and the United States. These two principles are identified in Section IRC 6323(j)(1) of the Internal Revenue Code as two different reasons for lien withdrawal. To demonstrate this, I showed the manager in our package that the primary taxpayer was receiving letters from insurance companies revoking his appointments and other letters denying his request to be appointed as an insurance agent. Furthermore, I demonstrated that most individuals employed in the securities industry are terminated once a Federal Tax Lien is disclosed to FINRA. The compliance departments in the broker dealer industry constantly monitor the FINRA records of their employees. We provide a letter in our lien withdrawal package from an individual who was employed as an investment advisor and was quickly fired when a notice of Federal Tax Lien was filed against him. I explained to the manager that although the taxpayer had received a small window of time to retain his employment to resolve the Federal Tax Lien, the insurance companies were already disabling his ability to earn a living. I concluded by communicating that if the lien wasn't withdrawn, the client would not only lose his means for earning an income (as I had shown) but he would also not be able to refinance his home. In such circumstances, I explained that the client would then have an even lower RCP amount for which to offer in the OIC. The IRS could either have a larger offer amount by releasing the lien today and saving the taxpayer's income source or the IRS could receive a much lower offer amount by not granting the request. Under either scenario, I would ultimately be able to withdraw the lien after the OIC was approved. At the appropriate moment, I asked, "If I can prove that my client made their estimated tax payment, would you please take the weekend and just consider the possibility of withdrawing the liens?" He responded by saying, "I'm not going to commit to anything so don't make any conclusions from what I am saying now." He continued, "If you can get me a copy of the cancelled check for the estimated tax payment from the bank, I will think about this over the weekend. You need to know that I am not saying that I will approve the lien withdrawal. But, if for some reason, I approve the lien withdrawal, this will be a total one-time only gift to the taxpayer. Furthermore, I will put notes in the account history that will prevent this from ever happening again if the taxpayers continue to have tax problems." I thanked the manager for taking the weekend to evaluate the request and reassured him that we understood the implications if he decided favorably. He quickly interrupted and reaffirmed his earlier message that he had not yet decided to withdraw the lien. I reassured the manager that I understood, but I was grateful for his agreement to at least ponder and reconsider our request over the weekend. We ended the call, and I quickly faxed a copy of the check for estimated taxes to the Lien Unit manager.


The IRS Lien Manager’s Decision

While we waited for the decision, we finalized our collection appeal (CAP Appeal) request using IRS Form 9423 just in case we were denied a favorable outcome from the Lien Unit manager. As mentioned previously, a CAP appeal takes a little time to process and to obtain a hearing, but we needed to be ready. We also arranged with the taxpayer advocate to expedite the CAP appeal hearing. Once we knew everything was prepared for both outcomes, we waited … anxiously.

A few days later, I received a call from the taxpayer advocate assigned to our case. We discussed the client’s case and the manager conference held during the previous week. I inquired whether there were any notes or decisions made regarding the lien withdrawal request. The taxpayer advocate began to research the notes from the manager conference in the IRS database to see if a decision had been rendered. I held my breath.

After a moment, the taxpayer advocate quickly found the manager’s decision had been favorable to our client. Elatedly, the taxpayer advocate shared that the manager had agreed to withdraw the Federal Tax Lien as long as the taxpayers’ estimated tax payment posted in the near future.

“I don’t know how you did it,” he commented, “But, it looks like you got the lien withdrawal.”

We were thrilled.

The taxpayer advocate was pleased. This was one of the most difficult lien withdrawal requests that we had ever submitted to the IRS. The taxpayers had a long history with noncompliance and tax collection issues with the IRS, and now we had been given a favorable ruling.

The taxpayer advocate was quick to remind me that the withdrawal was completely contingent to the estimated tax payment being posted to the account. I didn’t care, I already had an IRS endorsed copy of the check that had been fully processed by the bank. I knew we were only a day or two away from the full lien withdrawal.

By the end of the week, the estimated tax payment had posted to the account, and our clients’ Federal Tax Liens were completely withdrawn. This allowed our client, Jim Morgan, to immediately secure needed appointments as an insurance agent, to retain his employment, and to begin to refinance his family’s home. Our client was thrilled! This was the first financial break his family had received in years.

Now, our work shifted to obtaining a settlement offer on the entire IRS account balance through the Offer in Compromise program. When taxpayers have tax debt and limited disposable income and assets, the IRS Offer in Compromise program is a settlement option that should be considered to resolve the tax debts. In this case, the taxpayers had fairly high income, but almost no assets with equity or value.

The continued story of how we obtained a settlement with the IRS through the Offer in Compromise program will follow in “Part 2” of this case study.