Breakdown of IRS Tax Payment Options

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DARRIN T. MISH: Good morning, and welcome to the IRS Solution Attorney Show. I am the one and only, IRS Solution Attorney, Darrin T. Mish.

KATRINA MADEWELL: I’m your cohost, Katrina Madewell. Hanging out and making the show fun and breaking up the sometimes boring topics.

DARRIN T. MISH: Today’s show is going to be fascinating. It’s all about a breakdown of how to pay the IRS.

KATRINA MADEWELL: Even if you don’t have an IRS problem, or owe any tax money, you might know somebody that does. If you’re listening today, you might be able to help them.

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DARRIN T. MISH: I think it’s timely. It’s April 6, 2017. The filing deadline this year, I believe, is April 18th. If you were dreading and thinking you might owe the IRS money and you’re not sure how you’re going to pay them, we’ll come up with some different options. Both physically and how to structure the payments.

KATRINA MADEWELL: My stuff was already filed last month, so I have a big smile on my face.

DISCOVER SEVEN SECRETS THE IRS DOESN'T WANT YOU TO KNOW


GET STARTED!

PAT GEORGE: Do they take food stamps?

KATRINA MADEWELL: No.

PAT GEORGE: Well, you said different ways to pay them.

KATRINA MADEWELL: I don’t want to brag, but I’ve been late the last couple of years. So, to have it done so early is nice. I had to send my bookkeeper and accountant a thank you because I was so pleased they filed so early.

PAT GEORGE: That’s a load off your mind.

DARRIN T. MISH: I do know the feeling.

KATRINA MADEWELL: And I got a refund. I didn’t even have to write a check.

DARRIN T. MISH: I am not early this year. I’m going to be on an extension. Here’s my excuse, I am too busy saving the rest of my clients from the big and bad IRS.

KATRINA MADEWELL: The show maker’s kids have horrible shoes.

DARRIN T. MISH: I have nice shoes, actually.

KATRINA MADEWELL: You know what I mean. That’s not the point.

DARRIN T. MISH: Let’s get right to it. The different ways to break down your IRS tax payment options.

KATRINA MADEWELL: The interesting part about the show and preparing for the show is you have to do some homework. Sometimes you end up discovering new things.

DARRIN T. MISH: I’ve been a tax attorney 18 years. I thought I knew all the different ways to pay the IRS. In doing research for the show, I learned of two bizarre ways to pay them. But there are two special ways, and no, it does not include food stamps, Pat George.

PAT GEORGE: Well, then I don’t know how I’m going to pay them this year.

DARRIN T. MISH: It is so tempting to tease him about his paycheck, but I won’t because it would wound him severely.

KATRINA MADEWELL: He makes the show fun, Darrin.

DARRIN T. MISH: He does.

KATRINA MADEWELL: Do not injure Pat.

DARRIN T. MISH: I don’t want him to go away.

KATRINA MADEWELL: I would go kicking and screaming. I would be in Charlie’s office if anything happened to Pat.

PAT GEORGE: The great people at Beasley changed things for me this week, so you probably won’t hear me complaining so much.

DARRIN T. MISH: Oh! Very nice and congratulations.

PAT GEORGE: I no longer work for the evil empire. I now work for Beasley.

KATRINA MADEWELL: It’s kind of weird how radio works. Pat contracts with somebody else, but you’re in this building.

PAT GEORGE: I’m here with the family of Beasley, it’s nice to be here.

KATRINA MADEWELL: I started radio on a completely different network, Darrin’s been with me. He’s been in that building. Totally different building than Beasley. There are some other major broadcast companies.

DARRIN T. MISH: I’ve been in a couple of different networks with you. Once as a guest and once as a host. One of those was not a quality deal.

KATRINA MADEWELL: There’s one that’s a powerhouse. I have to say; I love Beasley. I love this station and the people here so much better than I ever did at the other one.

DARRIN T. MISH: There’s a lot of quality people in this building. Everybody is really cool and nice. On occasion when I’m leaving the show, an employee will come to me and say they’re a fan of the show. I’m like, “wow! At least we have one!”

KATRINA MADEWELL: We do try to bring you a great show. We try to bring you a lot of quality. I think there’s a lot of quality shows on Money Talk.

DARRIN T. MISH: 1010 has always been one of my favorites. I’m not just saying that. That’s one of the reasons when we got the opportunity to come over here, I was all about it.

KATRINA MADEWELL: For you listening, we love you, and thank you. Thank you for listening.

DARRIN T. MISH: Thanks for listening, for sure. Let’s talk about the different ways to pay the IRS. If you’re not able to pay your taxes by the original filing due date, technically that tax is due on the filing deadline.

KATRINA MADEWELL: I want to ask you one more question before you dive into the meat and potatoes. What brought up the topic of this show? Darrin’s the one that picks all of the outlines and topics.

PAT GEORGE: Well, because we’re 12 days from paying.

DARRIN T. MISH: Yeah, because I’m trying to provide value to our listeners on a contemporaneous sort of vibe.

KATRINA MADEWELL: I get a lot of my content from stuff I see in the field, so I was just curious.

DARRIN T. MISH: I’m going to share some stories, especially if you pay by check, like how not to have some of the things that happened to me and my clients.

KATRINA MADEWELL: Ok, let’s go.

DARRIN T. MISH: If you owe taxes to the IRS, you’re supposed to pay them by the filing deadline. People don’t really realize if you file an extension.

KATRINA MADEWELL: Which is when?

DARRIN T. MISH: You have twelve days. If you don’t full pay by that date, then the balance is subject to interest and penalties.

KATRINA MADEWELL: Lots of penalties.

DARRIN T. MISH: Let’s talk about extensions really quick. That’s not the topic of this show, but if we’re at April 6 and if you are not going to get your tax returns done, even if you’re a non-filer and haven’t filed for many years, you still want to go ahead and file an extension. That will save you the late filing penalty. Which is around $500.

KATRINA MADEWELL: You’re saying non-filer or haven’t filed in many years, I would think if I was a non-filer and I hadn’t filed for many years, I would think that would provoke the IRS. Like poke the bear with the stick.

DARRIN T. MISH: Oh, no, they still know that you haven’t filed for years. It’s not a matter of that at all.

KATRINA MADEWELL: You know how they might feel like they fell off the radar?

DARRIN T. MISH: Some people do. I’ve never seen the filing of an extension trigger anything negative. It’s either going to happen or not. I don’t think the extension has much to do with that. Even if you can’t file your return on time, if you know in the ballpark of what you owe, it would be a good idea to pay that in advance so you don’t incur those interest and penalties.

KATRINA MADEWELL: Which most of the time is not the case, which is why they don’t file. Right?

DARRIN T. MISH: We’re not really talking to my typical client right now. We’re talking to the rest of the world. We’re talking about the regular person that may owe two grand and don’t have their tax return ready.

KATRINA MADEWELL: I would imagine when people hit that next tax bracket would be when that would happen.

DARRIN T. MISH: There’s all kinds of circumstances when special events happen in their lives. Where they sell their house where there’s capital gains due, where they have an early withdrawal from an IRA. Or where they hit it big at the Lotto or casino.

KATRINA MADEWELL: At the Hard Rock.

DARRIN T. MISH: Yeah, that happens. They’ve been gambling their whole lives and this year they had a 38,000 jackpot. Never mind they had $50,000 in losses.

KATRINA MADEWELL: Now they owe money. Don’t they take money automatically from the winnings? Or no?

DARRIN T. MISH: Not necessarily. Like you said, what if that $38,000 jackpot put you into the next bracket? There’s no way for the casino to do the withholding accurately. If you hit that jackpot and you’re a renter versus a homeowner, that will have a different tax ramification. There’s all kinds of special events that can occur one time in our life or very rarely that could cause you to owe tax. Even if you’re a W-2 wage earner and you have appropriate withholding.

I’ve noticed a trend lately too, where more and more people are coming into the office that are W-2 wage earners and they have a tax problem. So, I think, how did that happen? They say because they accidentally put 9 on their W-4 and there wasn’t enough withholding. I just look at them like, you had to work to create that problem. A self-employed person, to get their taxes paid, is not real intuitive. You kind of need a little bit of advice.

KATRINA MADEWELL: You would think they would be surprised, seeing as the gross amount is really close to the net amount.

DARRIN T. MISH: I don’t think your average person looks at their stub all that much.

KATRINA MADEWELL: We’ve talked about this before. We opened up the line about how many people get a pay stub, and it’s not that many.

DARRIN T. MISH: They just look at the net, how much shows up in the bank account. I’m kind of guilty too. Although I do look at my stubs, even though I generate them. I would say probably the most convenient way to pay the IRS right now, and the most accurate way would be to pay electronically.

Pay Your IRS Tax Payment Electronically Using IRS Direct Pay

KATRINA MADEWELL: Is that where you log in to the IRS site and pay there?

DARRIN T. MISH: Yeah, the way to do it is you just have to Google the name. It’s IRS Direct Pay. It’s a good website. I’ve paid on there, I’ve counseled lots of clients to pay there. It’s pretty fast. The thing I like about it, among other things is they don’t lose payments. Number two is, it’s pretty much instantaneously credited. If you’re talking big money like 50 grand or even more, a day matters. You’re accruing penalties and interest and with direct pay, it’s credited to the tax balance much faster.

KATRINA MADEWELL: It’s sort of like a wire, it’s going to go right away.

DARRIN T. MISH: It’s like an ACH I think. Where it’s pretty quick and accurate. You can print out a receipt. Especially if you’re making estimated tax payments and you pay them using IRS Direct Pay, you’re going to want to keep those receipts so you can provide them to your tax preparer.

KATRINA MADEWELL: Is that the same as the FTPS or is that different?

DARRIN T. MISH: It’s different. One of the many things I’ve learned while doing my research for today’s show.

KATRINA MADEWELL: So, don’t forget, we have some really cool stuff coming up. Including some stuff that Darrin found out in doing the research on the different ways, you can pay, and more. We have some neat topics coming up. We are streaming live on Facebook. If you hop on over to Darrin Mish, you can catch us there. Or if you have a question, call in 888-404-1010. Back in a minute.

(commercial break)

DARRIN T. MISH: Welcome back to the IRS Solution Attorney Show, I am the IRS Solution Attorney, Darrin T. Mish.

KATRINA MADEWELL: I’m your cohost, Katrina Madewell. Thank you for sticking with us during the break and thank you for listening to Money Talk 1010 and the IRS Solution Attorney Show. We’re glad you’re here.

DARRIN T. MISH: Absolutely. We’re perfectly glad you’re here and joining us today as we talk about the different ways of giving the big, bad, evil IRS their money. So, they don’t come after you with guns blazing.

KATRINA MADEWELL: Whether you owe them a little or a lot, we’re going to tell you how to pay them. If you have a question, you can call us at 888-404-1010 and Darrin will be happy to answer that question. I’ll chime in and make it fun. 88-404-1010.

DARRIN T. MISH: Before the break, we were talking about IRS Direct Pay. The best way to find that is to Google IRS Direct Pay, it’s the first result. One of the things I learned when doing research for the show, is you can schedule your payments on IRS Direct Pay. So, if you’re on an installment agreement and you don’t want to be on a formal direct debit installment deal, and you don’t want to mail checks because some reason the IRS doesn’t know how to mail statements on time for installment agreements.

KATRINA MADEWELL: So, the difference is the IRS will take the money from your account, versus you allowing it to go.

DARRIN T. MISH: It’s direct pay, it’s your decision to pay. If you’re in a direct debit installment agreement, it’s automatic, it’s their decision. The other thing about direct debit that’s not so great, is they screw them up a lot, it takes an inordinate amount of time to get started. Two or three months sometimes. We have to tell taxpayers if you’re going to be in a direct debit installment agreement, at the very beginning we have to tell them to wait until the due date, if the money doesn’t come out automatically, then mail a check. Or use direct pay. I would suggest you use direct pay because it’s much faster.

KATRINA MADEWELL: This is important, if you have been working with a client that has a huge tax bill especially and they have an installment agreement approved, you want to make sure they don’t default on that. It can do everything.

DARRIN T. MISH: I represent a really nice physician here in town. He owes about a million dollars, but he’s a very high earner. A million dollars is not out of reach for him to repay. He’s made the decision many times over, I’ve been working with him for many years because these things keep getting screwed up because the IRS screws them up, he’s paying $15,000 each month. The IRS keeps defaulting the installment agreement for just stupid things.

KATRINA MADEWELL: What?

DARRIN T. MISH: He pays a lot of tax every year. I think his tax bill is around 100-150 grand per year. Every year he owes maybe $10,000 at the end. He underpays around 10 grand. He files the return, pays the bill same day and that terminates his installment agreement and we have to start all over.

KATRINA MADEWELL: How does that terminate the installment agreement?

DARRIN T. MISH: When you have a new payment due, when you have a new balance due when you’re in an installment agreement, that automatically terminates and defaults the installment agreement.

KATRINA MADEWELL: That just makes no sense.

DARRIN T. MISH: That’s your government at work. What we’re going to do is counsel him this year to go ahead and prepare the return a little bit early, make the payment ahead of time, make sure the payment processes, then file the return. That should avoid all this nonsense that we’ve gone through over the past several years. I forget what my point is because you interjected with a question.

KATRINA MADEWELL: I’m sorry! I was talking about the difference between them paying themselves, having control, versus the IRS debiting from their account.

DARRIN T. MISH: When it comes to installment agreements, the IRS is insisting more and more on these direct debit installment agreements. For the last 7-10 years, I’ve seen the evolution of that program. It’s better now than it ever has been. In the past, it’s been an absolute joke. You would set up the direct debit installment agreement and it would never start. It was good for some clients.

KATRINA MADEWELL: So, you would sign up and then they wouldn’t take the money?

DARRIN T. MISH: Yeah, they wouldn’t take the money. Now they’re doing a lot better job of it. It’s still not super user-friendly. With virtually any other bill you pay online if you want to change the checking account or the fund’s source, you can log on and change it.

KATRINA MADEWELL: Or if you’re like me and you set it up and forget where you did that and you have to track it down when you make a change.

DARRIN T. MISH: If you want to change the bank account with the IRS, which is not a terribly unforeseen circumstance, you have to call the IRS and stay on hold for hours and then the person may or may not decide it’s more trouble than they want to deal with and hang up on you. That actually happened to me this week. It happened to me the day before yesterday.

KATRINA MADEWELL: We talk about this all the time, how they conveniently hang up on you in the interest of customer service.

DARRIN T. MISH: This was an active hang up. I was talking to the lady and she decided that what I was asking for, which was really quite simple. It was just more than she wanted to deal with that day, so she terminated the call.

KATRINA MADEWELL: Whoops, my finger hit the button.

DARRIN T. MISH: Yeah, I was a little irritated. I waited.

KATRINA MADEWELL: So, you have to start over again when you call?

DARRIN T. MISH: I have a secret back door that I pay for to get into the IRS now. Now I have the upper hand. I can get on the line with the IRS in three minutes. So, she hung up on me so I was like, ok, the 17 minutes I wasted talking to her was wasted, but I don’t have to wait two more hours on hold. The second lady I got, she was wonderful. I got a better solution than I wanted, so it worked out well. I thought it was funny that I could prove that she terminated the call because I guess she just didn’t like the idea of what I was…

KATRINA MADEWELL: You.

DARRIN T. MISH: It could have been me, it probably was.

KATRINA MADEWELL: Just kidding. What options do you have if you owe the IRS money and want to pay them?

Pay Your IRS Tax Payment with a Check

DARRIN T. MISH: We talked about direct pay pretty much to death. You can mail a check. If you decide to mail a check, what I want you to do is in the memo line of the check, I want you to write the form number, then semi-colon social security number, semi-colon….

KATRINA MADEWELL: Wait, did you say put your social on the check?

DARRIN T. MISH: That is a government approved…

KATRINA MADEWELL: You can’t just put the last four numbers?

DARRIN T. MISH: No, you have to put your social security number on the check and you have to put the period in question. So, for this year it would be 12/31/2016, so they apply it to the 2016 tax year. Let’s say you didn’t owe for any other year but 2016 and you put 12/31/2013, what’s going to happen is you’re going to have a refund and it’s going to have to filter down and get applied to 2016. It’s going to take much longer. Make sure you put the right period down.

KATRINA MADEWELL: They really are confused, aren’t they?

DARRIN T. MISH: If you have a bill from the IRS and you’re writing a check as a result of that bill, go ahead and tear the stub off and mail it with the check.

KATRINA MADEWELL: They should be able to get that right.

DARRIN T. MISH: That should work. I could tell you story after story in the last six months where the IRS has cashed the check and the money disappeared. It happened to me.

KATRINA MADEWELL: Oh, boy, that’s a fun fight.

DARRIN T. MISH: My check was only for $200. I don’t think I’ve told this story on the air. When I got the bill, I was kind of irritated so I just really quickly I just kind of scribbled out the check and was like “HERE”. That kind of reaction. I didn’t properly designate it in this particular case, but the stub was there so it should have worked out fine. What happened is, they cashed the check and I get the next bill and it’s not credited for the $200.

KATRINA MADEWELL: Oh, it says Mish, we got something for you.

DARRIN T. MISH: I waited until they issued a final notice of intent to levy and I got my appeal rights and I appealed it, over $200. So, then the appeals guy is like, “$200? Really?” Well, I paid the money. He said it’s your problem, you have to fight it. I didn’t think it was my problem. So, we went around and around. What you have to do is get a copy of the front and the back of the check. The back of the check has all the numbers and stuff that shows where the money went. What happened was they had put it on another taxpayer’s account.

KATRINA MADEWELL: What? They paid somebody else’s tax bill?

DARRIN T. MISH: They just put it on somebody else’s tax bill.

KATRINA MADEWELL: Did you put your social on the check?

DARRIN T. MISH: It was an EIN, but yeah. It took weeks and weeks to resolve. I had another case recently with a client. I can’t remember the amount of the check, but let’s say it was around 40 grand. They took the money, they cashed the check and they just left it in no man’s land. They applied it to an older year and then they closed out that year without issuing a refund or a credit or anything. I think that took about eight weeks to resolve.

KATRINA MADEWELL: I think most people would just write out another check because that is such a headache. So many calls and so many hours.

DARRIN T. MISH: You can’t write another check. They cashed the $40,000 check.

KATRINA MADEWELL: Oh, 40. You said $200 a minute ago, that’s what I was thinking.

DARRIN T. MISH: Most people over the $200 probably would have, but I was like, nope, sorry, it’s the principle of the matter. And I knew I was going to win. I went ahead and fought them over that and was successful.

KATRINA MADEWELL: That was probably not a good use of your time, Darrin.

DARRIN T. MISH: No, but it was actually kind of fun and I got to irritate the guy at the IRS. It was wonderful.

KATRINA MADEWELL: Because you know you’re right, you mailed the check.

DARRIN T. MISH: I don’t think there’s probably very many people listening that would think it’s fair they can just take your money.

KATRINA MADEWELL: Agreed. I just think it should be better organized and it’s not.

DARRIN T. MISH: What I think is happening, and this is only a hypothesis, is there have been IRS cutbacks and they’re cutting back in the payment processing area. Which makes zero sense. If you’re running an institution or business or government agency, would you cut back your source of funds?

KATRINA MADEWELL: Well, you did say they’re putting more effort into the collection process.

DARRIN T. MISH: Yeah, but if you could collect the money and you can’t actually cash the checks…

KATRINA MADEWELL: Well, they cashed the check. They got the money, they just didn’t apply it right.

DARRIN T. MISH: They have the check cashing part down pat.

KATRINA MADEWELL: They know how to endorse it. Their system from 1970 is a little antiquated.

DARRIN T. MISH: That’s for sure. When we come back we’ll talk about a couple of areas I found out that were new to me on how to pay your taxes with the IRS. One of them completely blows my mind, I never knew about it.

KATRINA MADEWELL: Alright, so you’re going to stick around and find out what that is. If you have a question, 888-404-1010. If you’re driving, don’t jot the number down. Just come back and we’ll give it to you again. 888-404-1010. Back in a minute.

(commercial break)

DARRIN T. MISH: Welcome back to the IRS Solution Attorney show. I am the one and only IRS Solution attorney, Darrin T. Mish.

KATRINA MADEWELL: I can vouch for him, that’s true. I’m your co-host, Katrina Madewell. Probably not a lot of people with that name.

Ask the IRS for a 120-Day Extension on What You Owe

DARRIN T. MISH: Today we’re talking about the various ways you can pay the IRS if you owe them. So far, we’ve gone over paying by check, which in my opinion now is not that great of an idea, but it’s possible. The other way is IRS Direct pay which is an electronic payment solution the IRS runs.

The next thing I want to bring up, and it’s not exactly a way to pay the IRS, but if you know you’re going to owe the IRS money or you have a bill. You just got the bill or you just filed and you get the bill on May 15th. And the bill is a little more than you can afford to pay now, but you think you can afford to pay it over the next 120 days, then you can go ahead and call the IRS and they will automatically give you a 120-day extension.

KATRINA MADEWELL: Sweet. No charge?

DARRIN T. MISH: No charge, they’ll just give you an extra 120 days to pay. That’s a good thing to do if just need short term time to get that paid and you don’t want to enter into an installment agreement. So, if you can’t afford to pay it off in four months and you still want to pay them, as opposed to an offer in compromise or ignore them…

KATRINA MADEWELL: What’s the secret? You’re not telling what you learned.

DARRIN T. MISH: Then you can enter into an installment agreement.

KATRINA MADEWELL: We already lost half the show and you haven’t spilled the beans yet.

Pay Your IRS Debt Using a Payroll Deduction

DARRIN T. MISH: So, we’ve talked about mailing a check, we’ve talked about IRS direct pay. We kind of talked about the direct debit option from your bank account if you’re in an installment agreement. Here’s something I guess I heard of, but I never really thought of is, you can have a payroll deduction from your employer. Which is kind of bizarre to me.

KATRINA MADEWELL: What would the advantage to that be? Other than you don’t forget?

DARRIN T. MISH: Let’s say you had to pay $400 a month on your installment agreement and you got paid twice a month, you could pay $200 twice a month instead of $400 once a month. There are people who would like that convenience. It just disappears and they don’t notice. It’s not as painful. If you do that, you must use form 2159. You can go to the IRS website and look up form 2159 and there is a payroll deduction agreement.

KATRINA MADEWELL: I was thinking who that might be good for and I think about someone that was self-employed and incurred a huge tax liability and now they have to pay it and they’re working back in corporate America. That might be a good option for them.

DARRIN T. MISH: If they get paid even once a week and they want to chop it up into smaller payments and they don’t have the discipline or don’t really want to worry about it, you can just get the automatic payroll deduction. Income tax was passed in 1913, but withholding from pay for wage earners didn’t pass for decades later. The reason they did it was because prior to automatic withholding from your paycheck, everyone had a tax bill every year and nobody paid their taxes. So, there was a real big collection problem. So, somebody who was smart, figured out if they take the money before they even see it, then we’ll have more compliance.

KATRINA MADEWELL: The tax rate probably went up too, I would imagine, right after that.

DARRIN T. MISH: I think that happened right around WWI.

KATRINA MADEWELL: Isn’t that funny how when they take the money, you don’t notice or complain as much, and then they end up taking more just because you didn’t notice.

Pay Your IRS Tax Debt Using a Credit Card

DARRIN T. MISH: There’s also a way to pay your tax debt, and that’s by credit card. This isn’t one of the super-sneaky ways, I’m not there yet. You can pay your tax debt by credit card. It’s not at the IRS Direct Pay site.

KATRINA MADEWELL: It might be cheaper, with some of their fees.

DARRIN T. MISH: Well, it’s not. There’s a fee, I think it’s about $4.95 plus a percentage and there’s a variety of official payment solution providers that charge different rates, according to which one you use. They’re all about the same. Around 1.5%. If you have to pay by credit card, you can do that. A better option, if you’re going to pay by credit card, is if you had one of those zero percent checks, that’s probably a better way to get things done than to use the credit card itself. There are people that’s just what they have to do or they want the points. So, they have to pay by credit card.

Pay Your IRS Tax Payment with Cash

Now, here’s the big secret one that I did not know until I was doing the research for the show. You can actually pay the IRS with cash at a retail partner. When I saw that, I wondered what in the world is a retail partner. I understand the concept, it’s some store, some chain store someplace. So, I looked it up. It’s a 7-11. You can pay your IRS tax debt at 7-11.

KATRINA MADEWELL: There you go, Pat, problem solved.

DARRIN T. MISH: With cash.

KATRINA MADEWELL: Take some cash, and go pay it.

PAT GEORGE: And get a Big Gulp or an Icee.

DARRIN T. MISH: If you’re getting your 12-pack for the day, you can stop off and pay your taxes. It’s kind of odd.

KATRINA MADEWELL: When my kids were in girl scouts, they would stand in front of Publix and public places, they loved 7-11 on a Friday afternoon because they would do better than any other place, selling more Girl Scout cookies.

DARRIN T. MISH: Workers go in there and cash their paychecks, or they already cash their paycheck and they’re going to go buy all their stuff. I used to live right by a 7-11. I’d go there often in the mornings. It was amazing how many tradesmen people would go in there pretty much all day.

KATRINA MADEWELL: Think about how smart this is on 7-11’s part to offer services like this. That’s their customer, they’re going to get people in there that buy their fountain drinks, the chips at the counter, and all that stuff.

DARRIN T. MISH: I thought it was amazing and I loved learning it. When doing the research for the show, I couldn’t believe that was an option.

KATRINA MADEWELL: It’s good for your people with money under the mattress that just wants to go pay cash.

DARRIN T. MISH: Yeah, I guess I don’t run into that many people with their money under the mattress that want to pay their taxes.

KATRINA MADEWELL: I’ve seen them. People that try to go drop cash at Title. No, they’re not going to take that. They have to have a paper trail.

DARRIN T. MISH: That’s the big spoiler for the day, you can pay your IRS tax debt at 7-11 paying cash. This makes me scratch my head. If you’re going to pay your tax bill with cash, where is the cash coming from?
KATRINA MADEWELL: I guess the IRS is not asking that question, just hang onto your receipt.

DARRIN T. MISH: It also seems like tracking payments would be an absolute nightmare. I have no experience with this, but it sounds like it could be a nightmare.

KATRINA MADEWELL: You better keep those receipts somewhere you can find it.

Set Up an Installment Agreement to Pay your IRS Debt

DARRIN T. MISH: Let’s finish up the show talking about installment agreements and what are the ramifications of an installment agreement. The IRS charges a user fee to enter into an installment agreement. I don’t think we’ve ever talked about that.

KATRINA MADEWELL: No, there’s a fee to do that?

DARRIN T. MISH: I don’t typically think about it that often because it’s just one of the costs of doing business…

KATRINA MADEWELL: I could probably follow you around for a couple of days and come up with show ideas for a month.

DARRIN T. MISH: For sure. The user fee is for an installment agreement or payroll deduction agreement is $225. It used to be that some IRS employees would try to say, your first payment would be whatever your payment is going to be, plus $225. They’re not doing that anymore. They just tack the $225 on the bill and it gets paid when it gets paid.

KATRINA MADEWELL: Do they take the money off the top first?

DARRIN T. MISH: I don’t know the answer to do that. I guess I could figure it out.

KATRINA MADEWELL: My brain just works like that.

DARRIN T. MISH: That’s if it’s a standard installment agreement where you pay by check or the payroll deduction. If you choose the direct debit option, then the user fee goes all the way down to $175.

KATRINA MADEWELL: That’s because they’re reaching into your account and taking it, right?

DARRIN T. MISH: If you’re entering into an installment agreement, which is sort of an expensive way to deal with your IRS problem because the penalties and interest are continuing to accrue, I don’t think you really care that much about what the installment agreement user fee is. But it’s sort of interesting that the IRS has decided it costs them money to set it up so they’re going to charge the taxpayer that money.

That brings me to a point that I was thinking about yesterday. I just saw a new feed on a transcript the other day. I look at IRS transcripts all day every day and I noticed there was a $20 IRS collection fee. That’s what it said. Collection cost, I think. Then I was wondering…

KATRINA MADEWELL: Must be the cost of the new people they hired.

DARRIN T. MISH: So, the penalties and interest are not sufficient to cover the collection cost. Now we have to put $20 extra on there.

KATRINA MADEWELL: It’s an IRS commission.

DARRIN T. MISH: It makes you scratch your head. Ok, I guess.

KATRINA MADEWELL: So, can I brag for a minute? We have a customer that was a tenant on a property and she was buying it. This week when Darrin came into the studio, guess what he brought me?

DARRIN T. MISH: We should make this an IRS train wreck of the week.

KATRINA MADEWELL: The release of tax lien…Ok, I’ll wait. I’ll be quiet. Ok, guv, carry on.

DARRIN T. MISH: Ok, we’ll make that the train wreck. Oh, no, we just had a premature train wreck. Ok, let’s just do it. This is the IRS Train Wreck of the Week. This is the segment of the show where somebody has a problem with the IRS and ultimately, we solved it.

KATRINA MADEWELL: Let me set the foundation. This couple rented a property…I don’t really do property management, but this is one of my regular customers. Originally didn’t have enough equity to sell, now they do because the market has changed. The couple that’s in there is an older couple. They’re probably not quite retirement age, but they’re older.

It was probably quite an ordeal to move in there. The homeowner called me and said they wanted to sell the property. I talked to them and I remember we pulled their credit when we initially did the prescreen for the tenant application. I had to ask Darrin about it, and I said hey, there’s tax liens on there. We can do a loan for them because their scores are high enough and they’ve paid their rent on time, but we have to get rid of these tax liens because they’re going to be an issue for underwriting. So, Darrin dug into this. This was a surprise train wreck.

DARRIN T. MISH: We had trouble finding these liens because they were in Orange County Florida. They had a real common name. You and I looked together for a while and we found the one we thought we were going to work on. I looked and it and thought it was releasable. I didn’t think they owed that money anymore because of a statute of limitations.

KATRINA MADEWELL: So, talk about that really quick.

DARRIN T. MISH: The statute of limitations is 10 years from the date of the assessment of the tax. One of the cool things about looking at a federal tax lien is it has the date of the assessment of the tax right on it. Then the tax lien is technically released 10 years plus 30 days from the date of the assessment on the tax lien. These were technically released, but that’s not good enough for underwriting. We need to secure actual certificates of release from the IRS.

KATRINA MADEWELL: So, this one tax bill that we had found was almost six grand.

DARRIN T. MISH: It was around six grand I thought we could get it released for sure. I went ahead and submitted a written release request to the IRS.

KATRINA MADEWELL: Clock ran out, no money.

DARRIN T. MISH: A couple of weeks after I submitted the faxed request, I get a phone call from the IRS. She says, yeah, we got both of those liens released and they’re on their way to you. So, long story short, there were two liens there. One was for over $22,000 that we didn’t even know about. But it was also releasable because the statute of limitations had expired on that as well.

KATRINA MADEWELL: Was this in the same county as the other one?

DARRIN T. MISH: Yeah, it was in the same county. What’s really cool is these folks will get to close on their house when they wouldn’t have been able to because these liens were still there gumming things up.

KATRINA MADEWELL: I’m going to have to ask them, but I’m going to go on a limb and say they probably haven’t ever owned a home before.

DARRIN T. MISH: It felt fantastic. So, that’s really neat. We have a couple nearing retirement age and for the first time they’re going to be in their own home. They’re not going to be renters anymore.

KATRINA MADEWELL: Their housing payment is actually going to go down.

DARRIN T. MISH: That’s wonderful, that makes me feel good.

KATRINA MADEWELL: Icing on the cake.

DARRIN T. MISH: I like being part of the Tampa Home Talk team. We worked with Sarah there too, in the mortgage part of the case. It’s just really cool to work with good people like you guys.

KATRINA MADEWELL: We’ll be back in just a second.

(commercial break)

DARRIN T. MISH: Welcome back to the IRS Solution Attorney Show. I am the IRS Solution Attorney, Darrin T. Mish. I think that Pat George really picks some cool bumper music.

KATRINA MADEWELL: He does.

DARRIN T. MISH: He always does a good job.

PAT GEORGE: You’re giving lots of help today. I know you helped me because I’m going to have to pay something.

DARRIN T. MISH: Well, good, you can go on down to 7-11 with your cash and pay. There are a couple of 7-11’s within a couple miles from here.

KATRINA MADEWELL: I’m your cohost, Katrina Madewell. We rearranged your show a little bit today. You can always count on me for that.

DARRIN T. MISH: Let’s talk about what you have to do to get any of these options to work for you. The option of full paying is always there available for you.

KATRINA MADEWELL: Of course, they’ll take the money in full.

DARRIN T. MISH: And the option of partial paying, is always there, available to pay.

KATRINA MADEWELL: Some money is better than none.

DARRIN T. MISH: Let’s say you owe $5,000, Pat, and you can’t pay the $5,000 all at once, but you have $2500. You can go on down to 7-11 with 25 $100 bills and you can pay. That would be a spectacle, I would like to video that. You can go to 7-11 to pay or you can pay it on direct pay, or whatever. So, you still owe $2500, what do you do?

PAT GEORGE: You stand there and make a decision on whether you’re going to pay or buy lottery tickets.

DARRIN T. MISH: Be very careful which neighborhood you go to the 7-11 with the 25 benjis.

KATRINA MADEWELL: We looked it up on the map and I don’t know that I would go to some of them.

DARRIN T. MISH: No. I don’t go to 7-11 or convenience stores very often because any place where they need to put that ruler on the side of the door where they can tell how tall you are. Any place that has that means I don’t need to be in there, my family doesn’t need to be in there. It’s just not worth going in there.

PAT GEORGE: I always slouch over when I walk by to throw them off.

DARRIN T. MISH: You want them to think you’re 5’2″ just in case they need to describe you to the proper authorities. They won’t have an accurate description. Let’s say, Pat, you owe $2500 to the IRS, what will you do now? Option #1, if you think you can get it paid pretty quickly, the option would be to call them and ask for the 120-day extension because that would be…

KATRINA MADEWELL: It’s like the same as cash.

DARRIN T. MISH: It’s not really saying it’s cash because there are still penalties and interest, but on $2500, it’s not going to be super significant.

PAT GEORGE: What is it? What percentage? Roughly?

DARRIN T. MISH: The interest rate is 3%, compounded daily. But the interest rate is going to eventually be 5% with a maximum of 25%. I think. I screw this up every time.

PAT GEORGE: So why wouldn’t you just make an installment agreement right then?

DARRIN T. MISH: The penalties also accrue while you’re in the installment agreement.

PAT GEORGE: There are penalties?

KATRINA MADEWELL: Yes. I don’t think there should be, either.

DARRIN T. MISH: So, if there weren’t penalties…the thought process is…

KATRINA MADEWELL: Darrin, you should be the attorney that changes that part of the law.

DARRIN T. MISH: Ok, good luck.

KATRINA MADEWELL: He didn’t like that idea.

DARRIN T. MISH: It’s like people saying I don’t think income taxes are constitutional. I say, ok, you’re entitled to that option and I’m not going to argue with you about that. And they want me to take it all the way to the supreme court and get rid of the tax system.

KATRINA MADEWELL: You say, I’m not your guy? Is that what you’re saying?

DARRIN T. MISH: To which I say, how will I get paid for that? And they’ll say I’ll be famous. Ok, then what? There are a lot of broke famous people. I’m just like everybody else. I have to pay, I have to raise kids and send them to college and all that. I think if there weren’t penalties, then I think compliance will go down.

KATRINA MADEWELL: You do?

DARRIN T. MISH: Well, if it’s same as cash, it’s 0% interest, then why would I pay the IRS? I need to pay my other bills first. They already have that problem. I’m not on the IRS side by any means, but the penalties…I don’t think they should be so high…but if they were eliminated I think the compliance would be down.

KATRINA MADEWELL: I think they should be capped. Like once you enter into an installment agreement, whatever they’ve charged you so far…like there shouldn’t be any more penalties because you’ve already complied. The interest makes sense, they haven’t gotten their money. But I think the penalty should at least stop.

DARRIN T. MISH: We should write our congress people and see what happens.

KATRINA MADEWELL: Ok. I’m in.

DARRIN T. MISH: So, let’s say you can’t pay within 120 days, then you should consider entering into an installment agreement on the $2500 balance. The agreement would be really low. You could probably get away with $25-$50. Then you could always pay more if you wanted to. There’s no pre-payment penalty ever. The idea behind getting into an installment agreement early is while you’re in an installment agreement, they’re not going to take any adverse collection actions against you. They’re not going to levy your paycheck, garnish your bank account or anything like that. They’ll pretty much leave you alone. If you owe under $50,000 and you’re in an installment agreement, they’re probably not going to file a tax lien, as long as you make your payments.

One of the things about an installment agreement that we have to remember is you can’t have any missing returns. That doesn’t work out well. I have people call me and say they owe $5,000 for 2016, but I haven’t filed for the ten years prior, can I just get into an installment agreement for 2016? No. The IRS, more than collecting the money you owe, is more interested in getting you currently compliant. They’re interested in making those missing tax returns, if you have to make estimated tax payments to be current, they want you to make some estimated tax payments.

KATRINA MADEWELL: We have a couple of good questions. We should get to one of these news stories too.

DARRIN T. MISH: Go ahead.

KATRINA MADEWELL: One of the questions that Lisa had is, “Is the income I earn from tips taxable since I earn below minimum wage?”

DARRIN T. MISH: The answer equals yes. Tips are taxable. Do all tips get taxed? I doubt that, seriously. I think there’s a difference between the number of tips received and the number of tips reported as received, as well.

KATRINA MADEWELL: Would not doubt that at all. So, let’s jump into this one because I find this fascinating. Americans paid 3 billion dollars in Obamacare penalties.

DARRIN T. MISH: I’m starting to see them in my practice too. I think they started in 2014 and they went up in 2015. They call them Shared Responsibility payments.

KATRINA MADEWELL: What are they doing? That’s 3 billion with a “B” dollars.

DARRIN T. MISH: 3 billion is like, a bad government….

KATRINA MADEWELL: What are they doing with it? They didn’t have it before. Where’s it going?

DARRIN T. MISH: I don’t know what they do with the money. I think it just goes into the treasury and goes to pay the bills of the federal government. Some interesting things about those penalties is they’re not leviable, which means if that’s all you owe the IRS, they can’t levy your paycheck and they can’t just grab it out of your bank account like with any other tax debt. It’s a special category. All they can do is recover it from a future tax refund.

KATRINA MADEWELL: So that’s how they get it.

DARRIN T. MISH: That’s how they’re going to get it. I have some cases where people owe $25,000, $100,000 and they have some of these Obamacare penalties and we just lumping them on top for offers in compromises.

KATRINA MADEWELL: Yeah, and there was one more, really quick. Senators introduce a bill to protect IRS whistleblowers.

DARRIN T. MISH: I don’t think this is going to be real effective. Apparently, the IRS is talking about legislation to protect tax fraud whistleblowers from retaliation. If we’re talking about retaliation from the companies they’re blowing the whistle on, that would probably work. If they’re talking about retaliation from the IRS, that definitely won’t work. The IRS doesn’t have a great track record of not retaliation at people who’ve ratted them out.

KATRINA MADEWELL: It’s been a great show, it’s been fun. I’m sorry I ruined your Train Wreck moment and moved it up, but I was so excited about it. You can get Darrin at 888-GET-MISH.

DARRIN T. MISH: That’s 888-GET-MISH. 888-438-6474. Or you can visit the website at getirshelp.com

KATRINA MADEWELL: Thanks for joining us this week. We’re out.

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