You check your bank account on payday, expecting your usual deposit, but the balance is shockingly low. Or your HR manager calls you into the office with an embarrassed look and hands you an IRS Notice of Levy. In San Bernardino, where the cost of living leaves little margin for error, a wage garnishment is a financial catastrophe.

Unlike regular creditors who need a court order to touch your wages, the IRS can garnish your paycheck administratively. And they are ruthless – they can legally take a massive percentage of your net pay, leaving you with a meager “exempt amount” that is often insufficient to cover rent and food for a family.

The “Exempt Amount” Reality Check

The IRS uses a standard table to determine how much you are allowed to keep. For a single person with one deduction, this might be as little as $500 per week, regardless of whether your rent in Fontana is $2,000 a month. The rest goes straight to the Treasury. This continues every single pay period until the debt is paid in full.

Three Ways to Stop a Garnishment Immediately

1. Negotiate a Partial Payment Installment Agreement

The IRS generally prefers voluntary payments over forced collections. We can often get a garnishment released by contacting the IRS Collections division and setting up a formal payment plan. Even if you can only afford $100 a month, establishing this agreement officially halts the levy.

2. Prove Financial Hardship (Status 53)

If the garnishment prevents you from meeting basic living expenses (food, shelter, medical care), we can file for Currently Not Collectible (CNC) status. We prepare a financial statement (Form 433-F or 433-A) documenting your income and allowable expenses. If we prove that you have zero disposable income, the IRS must stop the garnishment. This doesn’t erase the debt, but it buys you peace (and your full paycheck) for a year or more.

3. File a Collection Due Process (CDP) Appeal

If you received a “Final Notice of Intent to Levy,” you have 30 days to request a CDP hearing. Filing this request legally pauses all collection activities while your case is reviewed by an independent Appeals Officer. This is a powerful strategic tool that buys time to negotiate a better settlement, such as an Offer in Compromise.

Why You Need a Local Attorney

Calling the IRS 1-800 number yourself often results in hours of hold time and agents who are trained to demand full payment. As tax attorneys, we have access to a dedicated Practitioner Priority Service line. We can speak directly to Revenue Officers in the San Bernardino field office when necessary. We know the specific documentation they need to release a levy immediately.

Do not work for free. If the IRS is taking your wages, contact Kugelman Law immediately. We act fast to protect your income.

Riverside County is currently experiencing one of the most significant construction booms in Southern California. From commercial logistics centers in Jurupa Valley to residential expansions in Menifee and French Valley, the industry is thriving. However, this visibility comes with a hidden cost: heightened scrutiny from the Internal Revenue Service (IRS) and the California Franchise Tax Board (FTB).

The IRS explicitly categorizes construction as a “Cash Intensive Business.” This designation automatically flags your business for specific types of audits that are far more invasive than a standard correspondence audit. If you are a general contractor, subcontractor, or tradesperson in the Inland Empire, understanding these specific audit techniques is the only way to protect your livelihood.

Why Riverside Contractors Are Under the Microscope

The IRS “Construction Industry Audit Technique Guide” instructs examiners to look for specific patterns common in our region. Unlike a tech company where every transaction is digital, construction often involves:

• High volumes of cash transactions for materials and day labor.
• Complex job costing that can mask profit margins.
• Variable workforce sizes that fluctuate with project demands.

The “Cash T” Method: How They Find Hidden Income

If you are audited, the IRS may not even look at your Quickbooks initially. Instead, they will perform a “Cash T” analysis. They look at your lifestyle in Riverside—your mortgage in Corona, your truck payments, your grocery bills—and compare it to your reported income.

If you reported $40,000 in net income but your personal bank statements show $80,000 in outgoing expenses, they will assume the difference is unreported cash income from your business. This “economic reality” check is difficult to fight without a forensic reconstruction of your accounts.

The AB 5 Worker Classification Nightmare

California’s Assembly Bill 5 (AB 5) has fundamentally changed how Riverside construction companies can hire workers. Under the “ABC Test,” a worker is presumed to be an employee unless you can prove all three of the following:

1. The worker is free from your control and direction.
2. The worker performs work that is outside the usual course of your business. (This is the hardest hurdle for general contractors hiring subs).
3. The worker is customarily engaged in an independently established trade.

If the EDD or IRS determines you have misclassified employees as independent contractors to save on payroll taxes, the penalties can be staggering. You may be liable for back taxes, unpaid workers’ compensation premiums, and massive fraud penalties that can pierce the corporate veil and attach to you personally.

3 Steps to Take If You Receive an Audit Notice

1. Do Not Speak to the Auditor Alone

The IRS manual specifically instructs auditors to interview the taxpayer before they have legal representation if possible. They want you to make off-the-cuff estimates about your cash flow or how you pay your crew. These statements can and will be used against you. Direct all communication to your tax attorney immediately.

2. Reconstruct Your “Lost” Expenses

Many contractors in Riverside lose receipts for cash purchases of materials. We help clients use the Cohan Rule, a legal doctrine that allows you to estimate expenses if you can prove the work was done. We can use supplier invoices, blueprints, and industry standard “cost-to-complete” ratios to reconstruct your deductions and lower your tax liability.

3. Review Your Bank Deposits

A common error is the “non-income deposit.” Did you transfer money from savings to checking? Did you get a loan from a family member to float a job? The IRS sees every deposit as taxable income unless you prove otherwise. We meticulously categorize every transaction to strip out non-taxable cash flow.

Protect Your License and Your Legacy

A tax audit does not just threaten your bank account; it threatens your CSLB license. Do not let a paperwork error destroy what you have built in the Inland Empire. Contact Kugelman Law today for a confidential review of your audit risk.

While some notices are indeed serious, many are routine requests for information or notifications of minor adjustments. The most important thing is not to panic—and not to ignore it. Taking prompt and strategic action is key to resolving the issue efficiently.

If you’ve received an IRS tax notice, here’s a step-by-step guide on what to do next.

Step 1: Read the Notice Carefully

Don’t just glance at the letter. Read it from top to bottom, including any fine print. Pay close attention to a few key areas:

• The Notice Number: Usually found in the top right corner (e.g., CP2000, CP12, LT11). This number identifies the specific issue the IRS is contacting you about. You can look up the notice number on the IRS website to get a general understanding of its purpose.
• The Tax Year: The notice will specify which tax year it pertains to.
• The Deadline: Most notices require a response within a specific timeframe, typically 30 or 60 days. Missing this deadline can result in additional penalties or limit your appeal rights.

Step 2: Compare the Notice with Your Tax Return

The notice will explain why the IRS is contacting you. Often, it’s because their records don’t match the information you reported on your tax return. For example, a CP2000 notice is generated when the income reported by third parties (like your employer or a brokerage) is different from the income you reported.

Pull out your copy of the tax return for the year in question and compare it line by line with the changes the IRS is proposing. It’s possible the IRS is correct, or it could be that you made a simple clerical error. It’s also possible the IRS is wrong.

Step 3: Determine Your Course of Action: Agree, Disagree, or Need More Information?

Based on your review, you have three primary paths:

1. You Agree with the Notice: If the IRS is correct and you owe additional tax, the notice will include a payment voucher. You should pay the amount due by the deadline to avoid further interest and penalties. If you can’t pay the full amount, you can explore payment options like an installment agreement.
2. You Disagree with the Notice: If you believe the IRS’s information is incorrect, you need to respond in writing by the deadline. Your response should clearly explain why you disagree and include copies of any supporting documentation (e.g., corrected 1099s, bank statements, receipts). Do NOT send original documents.
3. The Information is Incorrect, but Not Your Fault: Sometimes a third party reports incorrect information to the IRS. In this case, you should contact the third party to have them issue a corrected form (e.g., a corrected 1099-B).

Step 4: Respond in Writing

Even if you speak with someone at the IRS on the phone, always follow up with a formal written response.

Send your letter and supporting documents via certified mail with a return receipt requested. This provides proof that you sent the response and that the IRS received it.

Your written response should be professional, concise, and directly address the issues raised in the notice.

When to Call a Tax Professional

While you can handle some simple notices on your own, it is highly recommended that you seek professional help in certain situations:

• The notice proposes a large tax liability.
• You don’t understand the notice or what the IRS is asking for.
• The issue involves complex tax laws, such as those related to business expenses, investments, or cryptocurrency.
• You are being audited.
• The notice is a Notice of Deficiency, which gives you 90 days to petition the U.S. Tax Court.

A California tax resolution lawyer can communicate with the IRS on your behalf, ensure your rights are protected, and develop a strategy to achieve the best possible outcome. They can lift the burden from your shoulders and provide the expertise needed to navigate the IRS’s complex bureaucracy.

Receiving an IRS notice doesn’t have to be a catastrophe. By taking a calm, methodical approach, you can resolve the issue and move forward with confidence. If you need help, the team at Kugelman Law is here to provide expert representation.

Disclaimer: This post is for informational purposes only and is not a substitute for professional tax or legal advice. Consult a qualified professional for guidance on your specific situation.