4 Tips for Filing a Tax Extension

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DARRIN T. MISH:   Welcome, welcome, welcome this is the IRS Solution Attorney, Darrin T. Mish, I’m here today again with my co-host Katrina Madewell.

KATRINA MADEWELL:   That’s me welcome to the show good morning.

DARRIN T. MISH:   How you doing?

KATRINA MADEWELL:   Doing pretty good, how are you doing Darrin since April 15th is right around the corner, creating any havoc for you?

PAT GEORGE:   What are you doing here? Because I thought you would be so busy that you couldn’t be here. By the way, we have until the 18th this month because of some laws or things right?

KATRINA MADEWELL:   Some holiday, right?

DARRIN T. MISH:   You got to love it when the producer steals your thunder.  He chimes in “hey here is the punch line”.

KATRINA MADEWELL:   I know right?  And here is Pat George.

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DARRIN T. MISH:   So the question was what am I doing here well you know I am so dedicated to my audience that I wanted to make sure that I was here to bring the news that they had an extra few days to file their taxes this year.  Everybody thinks it’s April 15th and that’s on a Friday so why would there be an extension right? And the answer is it’s like Patriots day in Massachusetts and Maine something along those lines and when that happens it’s in the Federal Statutes somewhere that when that happens there is a filing extension.  I mean how is that for having some influence right?

PAT GEORGE:   Apparently that’s a lot of influence and we finally get to be appreciative of the folks from the Boston area.

KATRINA MADEWELL:   So like Monday the 18th is when the returns are due is that what you are saying?

DARRIN T. MISH:   Yeah Monday is the last day to file on time without an extension and ironically that is the topic of the show today which is 4 tips for filing a tax extension.  You wouldn’t even think there were 4 tips right?

KATRINA MADEWELL:   Well usually have a few more but I guess this could kind of be a long topic.  But it’s right on time and if you have these questions like I know the person listening is thinking about April 15th right around the corner you can call us we are live in the studio today 888-404-1010 Darrin can answer a lot  of those questions, some of them I had myself on the way to the studio this morning so I’ll ask a couple that you might be thinking but by all means we will take the ones that you have that we are not talking about, 888-404-1010.

PAT GEORGE:   And before you get started on your 4 tips I need to ask you about W-9’s.  You know some people get a bunch of W-9’s and I was just freaking out all week when we were finishing our taxes that, may be that I’m missing one of those, what happens if you miss one of those and you know, I maybe have 4, 5, 6 at the most but there’s some people that could have 10 or 12 if you miss one and you don’t put it in your return and it’s found what happens?

KATRINA MADEWELL:   Well talk about what a W-9 is first.

DARRIN T. MISH:   Yeah so let’s fix the let’s fix the vocabulary here you are not talking about a W-9.  A W-9 is a different form entirely, that’s where you give form to a potential payer to get them….

PAT GEORGE:   That’s right.

DARRIN T. MISH:   So oh W-9’s you are talking about you are not talking about W-2’s.

PAT GEORGE:    No.

DARRIN T. MISH:   You are talking about W-9’s.

PAT GEORGE:   They wanted a W-9 because I worked for them.

DARRIN T. MISH:   Ok I gotcha.

PAT GEORGE:   They got to send something back to me and if they don’t send it back and I forget about it and I get it.

KATRINA MADEWELL:   Which equals.

DARRIN T. MISH:   Ok, ok.  Or you don’t get it at all. Ok so do you have some system to make sure that your income is, all of your income is recorded or you just kind of wing it and figure it out?

PAT GEORGE:   I have a system, I know that but I will do you know I might and I say this cause I DJ, I might work for somebody for you know I might make $500 and I know that I have up to $600 before, isn’t that true?

DARRIN T. MISH:   Yes.

PAT GEORGE:   Ok yeah I have up to $600 but I might get 15 different people and I might have done one for $800.

KATRINA MADEWELL:    Is that the threshold now is it $600?  I thought it was $900.

DARRIN T. MISH:   No it’s $600 for a 1099 which is what Pat’s worried about right?

PAT GEORGE:   I’m worried about maybe someone didn’t send me one.

DARRIN T. MISH:   Yeah they didn’t send you the 1099.  Ok so the text book answer is if you have some system like your checking account, like your business checking account, though making sure you capture all the gross revenue, so you just add up the deposits and that’s what your income is, your gross income is for the year.  As long as you do that it’s not really a problem if they send you a 1099 or not. But if otherwise if they just don’t send you a 1099 I mean….

KATRINA MADEWELL:   It would be rare that they would even file that right because you would have to fill out a W-9 which has all your social or employer identification number or whatever you are using.

DARRIN T. MISH:   Right.

PAT GEORGE:   Well I say that because I did and I kept my tracking system and I found one that wasn’t sent and I you know I don’t get the mail so I asked my wife she said yeah we got that but I didn’t trust that so I called the person I worked for and I made probably $4000 and they go oh no that should have been out 3 months ago, they found out that their accounting company had not sent that out and I almost missed that and that was my concern.

DARRIN T. MISH:   So since you don’t send the 1099’s in with the tax return like you do with a W-2 since you don’t send the 1099’s in there really is no, it’s like no harm no foul as long as you report on your schedule C for example as long as the gross income matches at least the amount the 1099’s are issued for you are not going to have a problem.  If your gross income reported was less than the accumulative total of all the 1099’s, ding, ding, ding audit time, you are going to get audited.  It’s not necessarily the big, gnarly, hairy you know office audit but you are going to get at least a correspondence audit which is a fancy way of saying you are going to get a letter that says hey you forgot this 1099 we added it on and now you owe us some more money.

KATRINA MADEWELL:    So talk about that scenario because that is probably a better question right cause most people even though you know you sent the W-9 Pat and that there should be a 1099 following, I would say 9 out of 10 people probably are not thinking hey I’m missing a 1099 and they are going to file with whatever they have so in that scenario Darrin if they did that…

DARRIN T. MISH:  They are going to get a letter called a CP2000.

KATRINA MADEWELL:   How often is that like every single time?  Every time they file the form?

DARRIN T. MISH:   Happens all the time.  Virtually every time if you leave a W-2 or 1099 off you’re going to get a CP2000.  It’s going to take anywhere from you know 3 months to a year maybe and you are going to get this letter and the letter gives you 30 or 60 days I don’t remember to respond and you know you can agree or disagree and that brings up a sort of interesting issue and that is Americans think that the IRS has the unilateral authority to just go ahead and assess additional tax penalty and interest.  You know we think that if we make a mistake on our tax return they can just decide to do it on their own and just add it on there.  And  that is kind of true and kind of not it’s really actually more not true and that is that because, we are going to talk about the Constitution here for a second, because of the due process clause in the Constitution they actually have to give you the right to disagree.  So the CP2000 is really important because it gives you the right to disagree.  If you agree, fine, they are just going to go ahead and assess it, if you disagree then they have to issue something called a statutory notice of deficiency which is like it’s a letter that gives you the right to file a tax court petition and you can actually sue the government, the IRS for filing fee of 60 bucks and then you go to people’s court for taxes so that is one thing that you can do.

KATRINA MADEWELL:   And how often does the consumer actually win people’s court for taxes? I guess that’s a pretty valid question wouldn’t you say?

PAT GEORGE:   Well if they use this guy they win a lot.

KATRINA MADEWELL:   I’m just curious what you see.  I have no doubt that Darrin would go head to head with them and they would come out not smelling so pretty.

DARRIN T. MISH:  So the fancy term, the lawyer term for an unrepresented client is pro se and  pro se litigants are a nightmare for everybody in the court system and let me tell you why, I’m not saying anything bad about pro se litigants it’s just that they don’t know any of the rules in the courtroom and so if you are the attorney on the other side from a pro se litigant you just want to pull your hair out because you don’t know the crazy thing that they are going to argue, you don’t know the crazy thing that they are going to do, you know the judge is going to give them extra leeway  because the judge realizes that they are not an attorney and that they don’t know what they are doing so the judge is going to bend over backwards to protect their constitutional rights.  So when you are the lawyer like if you are the prosecutor or you are the tax division attorney in the tax court it  just gives them fits because…..

KATRINA MADEWELL:   Because attorneys are usually planned right like you know what the other sides arguments going to be so both of you can prepare right isn’t that like a normal like attorney court….

DARRIN T. MISH:   Yeah our rules of the road are really narrow like we know if we do something crazy the judge is going to smack us around and you know if we do it enough he could put us in jail so we are not going to go too crazy on the rules and yeah any good lawyer is going to try to either through discovery to find out what the other side’s argument is or you are just going to really be imaginative and just figure it out which it really is not that hard to figure what their defense is or what not so.  Pro se litigants often do really well because….

KATRINA MADEWELL:   They have so much leeway they don’t have the regulation that attorney’s do.

DARRIN T. MISH:   Yeah they are all over the map and it’s really hard for the attorney’s in the court to deal with it.  So I’ve actually spoken to a lot of Pro se litigants who have won in tax court which is kind of cool actually…..

KATRINA MADEWELL:   We should do a whole show on that it would be fun.

DARRIN T. MISH:   Yeah for sure.  I’ve actually never tried a tax court case because I always get them settled.

KATRINA MADEWELL:   That’s a good sign.

DARRIN T. MISH:   Yeah we usually get you know we get a king Solomon decision where we just cut the baby in half and we are all happy and that’s ok in these big cases where you got a lot at stake and getting half is a pretty good deal.

KATRINA MADEWELL:  So the letters you are talking about with Pat we should start to see those in about 90 days from now or should they already start popping up?

DARRIN T. MISH:  Yeah you see them all year long because we are seeing them now all right now for filers that were in October, even last April.

KATRINA MADEWELL:  Gotcha, we are really going to get to the 4 tips for filing a tax extension but if you have a question we will take it in between our tips.  888-404-1010, 888-404-1010 save it in your phone, lock it in, be safe when you are driving.  Stick around we will be back in just a second.

 

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KATRINA MADEWELL:   So I’m teasing Pat, giving him funny looks here behind the glass because last week during the show when the music was playing he’s like don’t you dare talk I want to hear the song, shh.

PAT GEORGE:   That’s why I was trying to look at you then I mean…

KATRINA MADEWELL:   I didn’t say anything the mic was on it was red I was quiet believe it or not I was quiet.

DARRIN T. MISH:   So who is that anyway?

KATRINA MADEWELL:   The bumper music is Don Gates and company so that’s my hubby and his band and they are doing their CD release party tomorrow so April 15th…

DARRIN T. MISH:   Tax day…

KATRINA MADEWELL:   Non tax day this year…

DARRIN T. MISH:   Friday…

KATRINA MADEWELL:   At the Brass Mug and it’s a family friendly event, there’s going to be food, live music, about 5 different bands.

DARRIN T. MISH:   Where’s the Brass Mug?

KATRINA MADEWELL:   It’s off of like, most people know where the Army-Navy surplus store is right there on Skipper, Nebraska area down the road from Skippers smoke house.

DARRIN T. MISH:   Ok.

KATRINA MADEWELL:   Which has been there for ions right Pat?

PAT GEORGE:   It’s right on the curve, right on the curve there right underneath those trees they are just like the Army-Navy store it’s across the street from the driving range.

KATRINA MADEWELL:   Somehow I don’t think you will miss the music. They are actually a brand new.

PAT GEORGE:    Why are they playing outside?

KATRINA MADEWELL:   I mean bands are kind of loud I’m sure you can hear them from afar but they are giving away a Dean guitar actually.  Brand new Dean which is Elliot Robinson over there, he donated a brand new guitar for them to raffle off.

PAT GEORGE:   Giving away any Dean’s sausages?

KATRINA MADEWELL:   I don’t know what the food is, I’m not in charge of that.

PAT GEORGE:   Oh it’s a different Dean?

DARRIN T. MISH:   It could be a different Dean.

KATRINA MADEWELL:   But a brand new guitar, lots of food, family friendly event it’s going to be fun.

DARRIN T. MISH:   It’s not James Dean either.  So no sausage, no…

PAT GEORGE:   It’s one of the brothers.

DARRIN T. MISH:   No flaming car wrecks.

KATRINA MADEWELL:   No ok so you know tomorrow is April 15th and….

DARRIN T. MISH:   We are supposed to be talking about the 4 Tips for Filing a Tax Extension, not the wonderful band opening or the CD party tomorrow night at the Brass Mug in Tampa near Skippers.

KATRINA MADEWELL:   Are you coming?  Are you, Heather and the kids coming?

DARRIN T. MISH:   Not sure can’t commit at this time, it’s been a rough week man for sure.

KATRINA MADEWELL:   I’ll call the boss.

DARRIN T. MISH:   Yeah you need to call the boss.  By the way, she is listening today out in Tampa at the office.  If you need to call the office for any reason you can speak to Heather, 888-438-6474 that’s 888-get-mish.  So we are going to talk about my first tip.

KATRINA MADEWELL:   Say hi Heather Darrin told me to call.

DARRIN T. MISH:   Yeah exactly I’m sure that will just make her day to be a little bit even busier because you know one of the things that happens at this time of the year, and I’ve been in the tax problem resolution business for a long time, about 16-17 years now, and one of the things that happens every single year right at this time, is my tax problem clients who haven’t filed a tax return you know in 5 years, 10 years, 20 years whatever they call this week because they are thinking about it.

KATRINA MADEWELL:   April 15th, everybody knows that day.

DARRIN T. MISH:   They call this during this week and they want to know what’s going on, they want to feel better and they don’t want to feel scared anymore and I understand that but so consequently our phones are just blown up and it’s not really current year tax returns and we do a lot of current year tax returns, we do about 400 tax returns a year which is pretty good for a tax prep.  If we were just a tax prep company that’s not bad.

KATRINA MADEWELL:   Is there any ramifications if your accountant has all your stuff but is negligent in some regards like had it since January but choose to not get everything in order by the deadline just curious question.

DARRIN T. MISH:   Well that actually leads to the first tip and that is you know well…

KATRINA MADEWELL:   Go ahead.

DARRIN T. MISH:   Let me say this your tax preparer has some duty to get either an extension filed or to prepare your return on time, however, good luck if they blow it because what is your remedy?  You got to sue them.  So you are going to sue, let’s say  your penalty is $500 for late filing which is I think right in the neighborhood of what it is if you don’t owe any taxes or if you owe you know $10 or something there’s a $500 penalty for filing late so you are going to sue him for $500? No, most of them don’t. So yeah what I would say is you are going to want to get an extension either get them to get an extension and little helpful tip on this would be if they say yeah I got you, I filed an extension try to see if they will send you a copy of the confirmation.  Now I just threw all of my tax preparer you know friends under the bus because that is exactly what we need is even more time to send people proof that we filed extensions.  What we do in our office is we just we try to just go ahead and file extensions as a matter of course if we can’t get to it.

KATRINA MADEWELL:   So if you file an extension but you actually file on time it really doesn’t matter right?

DARRIN T. MISH:   Correct yeah it doesn’t matter at all.  My first tip here on the outline is that filing an extension doesn’t actually extend the time to pay your taxes.

KATRINA MADEWELL:   That is an excellent point.

DARRIN T. MISH:    You know technically the taxes are due this year on April 18th period so if you don’t pay if you get an extension and you file in October, September the summer or whatever and you still owe taxes there are still going to be penalties, there is not going to be a penalty for late filing because you got that covered with extension but there is going to be a penalty for late payment.

KATRINA MADEWELL:   So if it’s around this time and say someone is very close to having their returns finished or maybe they are done but they have been hesitant to file them because they owe money and maybe they don’t have the money you are saying it’s better to go ahead and file that return on time by the deadline and then let them work out a payment plan with you like how would the person listening to this since it is April 14th right?

DARRIN T. MISH:   Here is a lawyer answer, it depends.

KATRINA MADEWELL:   No don’t give me the lawyer answer tell me what to say and I will say it.

DARRIN T. MISH:   Yeah, it depends.  You know they are going to owe $3000 then yeah that is all they owed.  Actually had a guy come in yesterday and he wanted to talk about his tax problems in quotes and he owed $4000 before he sat down I said if you only owe $4000 then you are the happiest person in this building right now.  So if you owe $3-4000 and that is all you are going to owe then yes you should file on time and work out a payment installment plan because it is going to be really low, it’s going to be like $100 a month so you know then you would at least avoid….

KATRINA MADEWELL:   So how does someone do that they would call the IRS and say hey I am filing my return can I work out a payment plan for what I owe?

DARRIN T. MISH:   Yeah go ahead and try calling this week it will be fun.

KATRINA MADEWELL:    That is what I’m thinking.

DARRIN T. MISH:   No but the phones ever there do calm down after April you know the 18th this  year so yeah if it’s a really small case like that for sure you qualify, you don’t need a professional to do that.  I can’t charge you enough to make it worth you know doing.

KATRINA MADEWELL:   You know some people listening might just want that general information you know and they will refer their friend that has the big hairy scary tax issue.

DARRIN T. MISH:   For sure and when people call and say you know I have a $4000 problem we just don’t like kick them to the curb we help them, we tell them what to do it’s just we don’t want to take fee’s from people where it is uneconomical or it just doesn’t make sense.

KATRINA MADEWELL:  They can just do it on their own.

DARRIN T. MISH:   Because one of my life’s goals is to try to make sure every client is happy.  Now are their people that cannot be made happy, yes there are some people that can’t be made happy and I just have to deal with those folks to.  The best option is for me to just weed them out if they can’t be happy no matter what then we probably can’t do business again.

KATRINA MADEWELL:   Not a good match.

DARRIN T. MISH:   But you know I work really hard to make sure that everybody that I come in contact with if I can help them I do and some people I can do business with and some people I just can’t because they just don’t have a big enough problem.

KATRINA MADEWELL:   So we have our second tip for 4 Tips for Filing a Tax Extension are penalties and possible criminal action. I will let you chime in on that.

DARRIN T. MISH:  Yeah you know you need to file an extension. If in doubt go ahead and file the extension because…

KATRINA MADEWELL:   If in doubt file it out.

DARRIN T. MISH:   Yeah because it’s going to help you on the penalties for late filing for sure.  Did I ever tell you the story about one time sent in an extension and the IRS said that I hadn’t?

KATRINA MADEWELL:  No I don’t think I heard that one.

DARRIN T. MISH:  So here is what happened is one year I filed an extension, and I did it by paper I mean this is how old I am there are mostly done electronically now, but I filed it in paper and I think it’s form 4868 and I filled it out and I sent it in certified mail. It was like $5-6 you know and I sent it in certified mail.  I sent it in April 15th or 14th I don’t  remember, it was really close to  the deadline, I just knew I wasn’t, I’m worried about other people’s tax returns you know not mine and about a month later I got a letter, you know a nasty gram that said I owed them $500 and change and I don’t know what happened but I had like a brain lapse and I called them and I talked to a lady that wasn’t really that nice and she said you didn’t file on time you know that’s the end of the story unless you can show us the green slip that was dated by the post office, you know dated before or on the 15th then you are going to have to pay us the penalty.  I said as a matter of fact I have that right here in my hands so then I sent it to them and they eliminated the penalty but that’s the joke is that would cost me $5 and it saved me $500 so I paid for a hundred years’ worth of extensions you know.  I don’t think I have a hundred years left to….

KATRINA MADEWELL:   They always go certified?

DARRIN T. MISH:   If you are going to file it in writing yeah you should send it certified because otherwise they are going to say they got it after the due date therefore it wasn’t timely filed.

KATRINA MADEWELL:   Ouch. Brutal.

DARRIN T. MISH:   So remember the airport post office in Tampa you know was actually open 24 hours a day and you could get those things.

PAT GEORGE:  Remember the days, and there is that music.  Remember the days when I used to line everybody up and everybody went in that big long train, doesn’t happen anymore…

KATRINA MADEWELL:   I thought they still do…

DARRIN T. MISH:   It used to be blocks long car after car and there used to be postal employees out there taking it for you.  It’s really interesting.

KATRINA MADEWELL:   Like the drive thru at Chick Fil A at the post office.

DARRIN T. MISH:   Yet another thing that the Internet has killed is the tradition of being in your car at 11:30 pm wondering if you are going to get if filed on time.

KATRINA MADEWELL:   You are listening to the IRS Solution Attorney show we are having fun this morning.  Call us we will take your question 888-404-1010, 888-404-1010 today’s topic is 4 Tips for Filing a Tax Extension we will be back in just a minute.

 

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PAT GEORGE:   I hope he’s not going on 3am.

KATRINA MADEWELL:   No it’s later.

PAT GEORGE:    Later than 3 am?

KATRINA MADEWELL:   No it’s later in the evening but not quite 3 am so…

DARRIN T. MISH:   Welcome back to the IRS Solution Attorney show.

KATRINA MADEWELL:   This is indeed the IRS Solution Attorney show with Mr. Darrin T. Mish.

DARRIN T. MISH:   You sound like a country music….

PAT GEORGE:   Some people thought they were listening to QYK…

DARRIN T. MISH:   Yeah for sure.

KATRINA MADEWELL:   Well you know it’s all in the family there with the music.

PAT GEORGE:   You are right it’s only 2 doors down from us.

KATRINA MADEWELL:   But that is Don Gates and company and they will be at the Brass Mug tomorrow if you want to hear them, check them out, family friendly event, CD release party.

DARRIN T. MISH:   Music probably sounds even better on….

KATRINA MADEWELL:   We are trying to get Darrin Mish out there so that you can talk to him.

DARRIN T. MISH:   Wow I think there is about a 60% chance of me being there at the Brass Mug tomorrow night.  If you buy me a beer I will answer all your tax questions all night long.

KATRINA MADEWELL:   We can buy you a couple of beers, he is actually fun when you buy him a couple of beers.

DARRIN T. MISH:   Yeah I’ve been known to have a few.  So tip number 3 leads me to a kind of interesting situation.  If you are right now currently under Audit you are going to want to file an extension for 2015 and let me tell you why?

KATRINA MADEWELL:   So make no effort to file on time.

DARRIN T. MISH:   Make zero effort.  The IRS Auditor cannot what’s the word I’m trying, can’t pressure you basically to file on time, you have an automatic ride to an extension until October 15, 2016.  You remember the days when you had to file 2 extensions to get to October, the law used to be you file, your automatic extension got you to August 15th and then you had to file like a discretionary you know extension request to get all the way to October.  A few years back I would say within the past 10 years they went ahead and made it all October because I think all of us….

KATRINA MADEWELL:   It’s so funny I don’t even think I realized that until a couple of shows ago and you mentioned that and I was like Uh Oh I didn’t know that.

DARRIN T. MISH:    Yeah all of us used to just ask for 2 extensions and I think they just decided it was too much paperwork and it wasn’t really worth it.  But yeah you are going to want to file that extension if you are under audit because what they are going to try to do is for example they are auditing you know tax year 13, 2013-2014 they are going to try and suck 2015 into the audit particularly if you took the same sort of positions on your 2015 return as you took on the ones under Audit you know it’s almost a 100% certainty that you are going to be under audit for 2015 as well.

KATRINA MADEWELL:   It’s like a jackpot for them if you file on time.  You don’t get any brownie points.

DARRIN T. MISH:   Right now it’s really odd we have so many audits coming into the office. I’d say over the past 2 weeks over 80% of my consults have been audits.

KATRINA MADEWELL:   Why so many Audits?

DARRIN T. MISH:   My theory is, well number 1 people can take a really aggressive you know almost impossible positions to defend on their tax returns.

KATRINA MADEWELL:   Can you give an example just so that the person listening knows what that means.

DARRIN T. MISH:   So you know you can write off mileage right, there is a mileage rate I think it’s around .56 cents a mile right now but I’m not really sure but I know it’s in that neighborhood  and there are some people who will write off $45, $50, $70,000 in mileage and when you think about it depending on the occupation right if you are a truck driver that can kind of make sense right cause you are driving, that is your occupation but…..

PAT GEORGE:   Or an astronaut.

DARRIN T. MISH:   Astronauts actually rack up the miles I wonder how that works out with the frequent flier miles you probably get a lot especially if you go to the moon.

KATRINA MADEWELL:   Only you two.

DARRIN T. MISH:  Anyway so if you are in an occupation that isn’t by definition driving I mean you are not going to rack up that many miles you are going to rack up some miles and mileage can be really hard to defend in an audit’s because the law literally says you need a contemporaneous written log of your mileage.

KATRINA MADEWELL:   I’m sure there is an app for that.

DARRIN T. MISH:   There is an app for that, it’s the one that I actually recommend it’s called Mile IQ and it’s on Android and Apple, it’s kind of expensive it’s $50 or $60 a year but it’s really cool because what it does is it actually logs every single trip you take in a car.  I think it could just figure out if you are traveling at 25 mph you are  not on a bike, at least I’m not on a bike and you are not walking.

PAT GEORGE:   Does it do it automatically or do you have to program something in?

DARRIN T. MISH:   No it does it automatically.

PAT GEORGE:   That would be a good app to give your kids.

DARRIN T. MISH:   Yeah, yeah it would actually.

PAT GEORGE:   Put that on their phone.

DARRIN T. MISH:   Yeah ok good.  I’ve got a couple years but good idea.  My truck actually has a there’s a setting on it for an alternate driver that you  can actually limit the speed and what not.

PAT GEORGE:   Oh I like that.

DARRIN T. MISH:  Yeah it’s pretty cool too.

PAT GEORGE:   I wish there was a setting on there that you could figure out what radio station they could listen to because some of the stuff my son listens to when he gets in my truck and I get in and turn on the key and it blasts me out the door.

DARRIN T. MISH:   Just lock that station to 1010 money talk and it’s all good.

KATRINA MADEWELL:   Yeah we have that fight between…

PAT GEORGE:   My son does listen to money talk he enjoys this station, he is 19, he listens to this then he goes crazy every now and then.

KATRINA MADEWELL:   Oh he’s gonna be smart, how many 19-year-olds listen to talk radio.

PAT GEORGE:   His goal is he wants to be President of the United States.

DARRIN T. MISH:   That’s a very lofty goal I like it, I like it a lot.  You know if you don’t set goals you are not going to reach them.

PAT GEORGE:   And set them crazy because you will get closer to what you really want then.

DARRIN T. MISH:   Yeah there’s an Acronym BHAG, Big Hairy Audacious Goals.  That’s what you need to do is set Big Hairy Audacious Goals and that way if  you fall short you only, you know if he if his  goal is to become President of the United States and he only becomes a Senator, wow that’s a failure right.

KATRINA MADEWELL:   Make an improvement in the system he would be doing great.

DARRIN T. MISH:   Yeah so back to tip number 3 if you are currently under Audit you are going to want to go ahead and file an extension. You just need to push that thing out hopefully that Audit gets done before that return is filed.  So don’t take the same crazy position that you took that got you Audited.  If you are under audit try to figure out why, what are the issues that caused you to be audited? The IRS is usually pretty helpful in this regard because they send you a letter and they say we want documentation for this and that.

KATRINA MADEWELL:   That’s how it starts is that written correspondence audit?

DARRIN T. MISH:   You get a letter that says, we want to know about your mileage, we want to know, your schedule C mileage, travel, you know automobile expenses and we want to know  about whatever the other issue is, sometimes it’s other expenses and then you look at those and you are like oh yeah.  Well I will give you an example, I talked to a guy this week and um his business model is he buys old cars, right so he will buy an old junk car for say $300, he will go pick it up and then he takes it to a scrap yard and will get paid $400 so he made $100 you know good for him.  Actually like the business model it’s simple and he is getting old clunker cars out of yards and stuff like that, I like that. But one of the, he is under audit, and one of the expenses under other expenses was wash and polish and it was like 3 grand, and so I’m like maybe I’m not understanding your business here like why do you have to wash and polish cars that are going to the scrap yard, he says “I have no idea, my accountant just put that on there”.  Now do I necessarily believe a 100% that the accountant you know unilaterally put that on there?

PAT GEORGE:   Maybe.

DARRIN T. MISH:   It’s a 50/50 possibility.  There’s lots of tax preparer’s, usually in lower income neighborhoods that their reputation is staked upon getting the biggest refund or owing the least and so what happens is there becomes something of a competition you know amongst that sort of class of tax preparer to get people the biggest refunds, well what’s one of the easiest way to get somebody a biggest refund?  Lie.

KATRINA MADEWELL:   Add some more deductions, add some more whatever.

DARRIN T. MISH:  Add some more deductions, but what happens folks, what happens is if a certain percentage of that tax preparers returns come under audit just sort of organically.  Once they exceed some predetermined threshold every single one of that preparers returns, for that last several years will be audited and that puts the guy out of business.

KATRINA MADEWELL:   So my question is since we are talking about this if that happens, say someone did fudge on something like mileage we will use that for an example or whatever it was, and they send you this correspondent or letter or they show up or whatever to do the audit, how is that usually fixed so let’s say they are like oops you are busted, you lied on your mileage or you did this or you did that. Is it worse than what the tax penalty would have been?  Like how does that all play out?

DARRIN T. MISH:  Good question, yeah typically if you got under audit, what most people are afraid of quite frankly when they come to see me and you know they are like I don’t want to go to prison.  Well the odds of you going to prison you know if you come under audit are pretty low.  I’ve had some really egregious stuff that’s happened over the years and nobody has even been threatened with prison.  So that’s not likely to happen but what does happen in almost every case is there is a 25% accuracy penalty added to whatever  tax is added to the tax year.

KATRINA MADEWELL:   So if they owed a thousand bucks there are going to put a $250 penalty on it?

DARRIN T. MISH:   Yeah and there’s going to be interest and penalty, there’s going to be interest on that both.

KATRINA MADEWELL:   The thousand? Oh gosh.

DARRIN T. MISH:   And then there’s going to be you know late payment on both and so it can spiral out of control.

KATRINA MADEWELL:   Now do you pay for the auditor to come audit you?

DARRIN T. MISH:   That would be a terrible system no.  The taxes in a way pay for the auditor’s job but they generate a lot of revenue and it’s kind of funny Congress is mad at the IRS for all kinds of political reasons and so they’ve cut their budget which you know I am an anti-tax guy but it doesn’t make a lot of sense because the IRS actually I think they are willfully inefficient but as inefficient as they are they still raise an incredible amount of money for every dollar that we give them.

KATRINA MADEWELL:   They keep that system flowing.

DARRIN T. MISH:   Yeah so it’s a little bit short sighted to cut back on the IRS’s resources because it just makes everyone’s life more miserable and they are going to collect less money so I think that in the long run that’s kind of a good thing.

DARRIN T. MISH:  Tip number 4 is?

KATRINA MADEWELL:   This is 4 Tips for Filing a Tax Extension.

DARRIN T. MISH:   Yeah it’s a little esoteric you know.  An extension can be useful if you are waiting for a private letter ruling on a certain tax position with the IRS.

KATRINA MADEWELL:   Wait what does that mean, back up what did you say?

DARRIN T. MISH:   A private letter ruling is where you have such unique situation, tax situation that you actually write into the IRS and you say, you give them that fact pattern, you ask for an advisory opinion on how you handle that issue.

KATRINA MADEWELL:   What’s an example of that because I have no idea what you are talking about?

DARRIN T. MISH:   It would usually be for a much more sophisticated taxpayer, somebody who has lots of trusts and things like that going on.

KATRINA MADEWELL:   So someone say hey I know I probably owe all these taxes but I have all these trusts and I am trying to figure this out and.

DARRIN T. MISH:   Yeah usually what happens is your lawyer or your tax attorney would go ahead and do, request a private letter ruling and prepare all that and that’s because he doesn’t know how you know what you’ve created and an extension can be useful cause you need a little bit more time or the really heavy penalty clock is not ticking.  That’s one of the biggest advantages to an extension is it keeps the most erroneous heavy penalties from even beginning and so you want to go ahead and do that.  I thought of another tip since us…

KATRINA MADEWELL:   We are live in the studio as well and we do get some calls during the break but’s it’s 888-404-1010 if you don’t want to talk you don’t have to talk on the air you can ask Pat a question or ask us and we will just repeat it on the air 888-404-1010, go ahead Darrin and we will jump in with what that question was.

DARRIN T. MISH:  I thought of another tip and that is that we have been talking about mailing an extension using certified mail and that’s kind of old school.  You could actually go online and just Google IRS Extension filing electronically and there’s a lot of companies that actually offer free tax returns and even if it’s not free to file this extension with a particular vendor that I found over the break it was a dollar to go ahead and file an electronic extension…

KATRINA MADEWELL:   Wow.  Is that an app or just…

DARRIN T. MISH:   No that’s just online, it’s just a website and just go ahead and Google that and you can file, there is a number of providers that will let you e-File extensions for free.

KATRINA MADEWELL:   Well you are listening to the IRS Solution Attorney show, we are live in the studio today talking about that tax filing deadline, we will answer some of those questions you have 888-404-1010, 888-404-1010 we did get a call from someone that didn’t want to leave their name and we will go over what the question is after we come back from the break.  Back in a minute.

 

(commercial break)

 

KATRINA MADEWELL:   CD release party if you like the music tomorrow at the Brass Mug Friday the 15th.

DARRIN T. MISH:   What’s the name of that song? That song rocks.

KATRINA MADEWELL:   That one is Gracious of an Eagle. I know it is good that is my favorite one.

DARRIN T. MISH:   Kind of reminds me of like a modern day Johnny Cash right?

KATRINA MADEWELL:   Yeah mix with a little bit of ghost rider in there.

DARRIN T. MISH:   Yeah I mean that is a good song.  I’m almost a 100% ready to commit to being at the party tomorrow night at the Brass Mug.

KATRINA MADEWELL:   It’s going to be fun. But you always have fun you don’t hang out that much but when you do we have fun.

DARRIN T. MISH:   Yeah that’s for sure.

KATRINA MADEWELL:   And Heather’s cool too so bring her.

DARRIN T. MISH:   Yeah my wife is lovely, best person in the world.

KATRINA MADEWELL:   That’s why she is your wife.

DARRIN T. MISH:   Yep absolutely.

KATRINA MADEWELL:   So we are in studio today and our call in line is 888-404-1010 we are going to answer some questions that we got over the break. 888-404-1010 we got about 8 minutes left still to answer some of your questions but our anonymous caller wants to know if they have the money to actually pay the taxes but  want to spend it on something else for the time being will an extension make that possible?  They probably missed the earlier part of the show.

DARRIN T. MISH:   I’m kind of bummed that she didn’t get on the phone cause I would have asked her some follow-up questions but I would say depends on how much money.

KATRINA MADEWELL:   Right.  I didn’t get any of that information.

DARRIN T. MISH:   If it’s some amount of money that you are going to have no way no how going to have a problem coming up with in October yeah go ahead and spend it on something else it’s fine with me, you are just going to have to think about the fact that you are going to pay the interest from April 18th this year to October 15th it’s depends on how much you owe if you don’t owe much the interest bill is not going to be much but if you owe a lot I don’t think you should use it for something else because I have heard many stories, dozens if not a hundred stories about people who quote borrow their tax money and they invested it in a can’t lose situation and they lost it all.

KATRINA MADEWELL:   Don’t get me started.

DARRIN T. MISH:   And then now they owe the IRS 100 grand or 200 grand or whatever the number is and now life is really kind of a challenge unless they come talk to me and we work out a deal.  But I can’t say that I can fix every case because I can’t.

KATRINA MADEWELL:   You will give it a 100% I can tell you that.

DARRIN T. MISH:   Yeah for sure if I can I will do it.  But some situations don’t work out that well so I would say just keep in mind if you are going to borrow your tax money just make sure you can pay it back and make sure you understand the risks if it’s not much I don’t think it’s a big deal, 1000 bucks whatever you know it’s not going to be that hard to pay it back if it’s 50,000 bucks you probably shouldn’t borrow that money.

KATRINA MADEWELL:   The steeper the amount the bigger the problem.

DARRIN T. MISH:   Yep the bigger the vig, that is a get nice gambling term right you are going to pay the vig to the IRS for borrowing that money from them.  They are very expensive lender despite the fact that the interest rates are really low right now.

KATRINA MADEWELL:  We are answering your tax IRS related questions this morning in the studio on the IRS Solution Attorney show 888-404-1010, 888-404-1010 if you have an IRS tax related question.  Susan wants to know what will happen to my grandma’s tax debt after she passes away?  She is leaving me her house and I kind of want to keep it should I be worried?  That’s a pretty good question.  Thanks, Susan.

DARRIN T. MISH: That’s a great question. So this boils down to whether or not the IRS has filed a tax lien or not.  And if they have filed a tax lien is it in the same county as grandma’s house?  If there is a tax lien then when grandma passes the house is going to become a part of her estate right and then when the estate is probated that lien will make sure that the IRS tax debt gets paid.  It doesn’t mean the house necessarily has to be sold particularly if you know if Susan is living in grandma’s house at that point in time and she is living in Florida and its homesteaded and what not and she is using it as her primary residence probably not going to have to pay the tax debt the statute of limitations will just continue on but if that  house if you intend for that house to be an income property or something like that or if you intend to sell grandma’s house to get the money it depends on whether there’s a tax lien filed.

KATRINA MADEWELL:   Gotcha.  Alright so we are going to a call from Shari?  Is that right?  Hi, Shari welcome to the show.

DARRIN T. MISH:   Shirley.

KATRINA MADEWELL:   Shirley.

SHIRLEY:   Thank you, thank you so I need to hold onto my tax returns for several years, we have several rental properties that eventually that will get sold.  I want to know if it’s ok to have so many documents if it’s ok to scan them all in and just keep them on discs for records or if I need to keep the paper copies.

DARRIN T. MISH:   The virtual copies are fine so I think that’s actually a really good idea.  What I would do is I would have a hard copy like on a thumb drive or DVD or Cd or something that like in a fire proof safe but then I would also upload all that documentation to one of the cloud sharing services.  Whichever one you think is the most secure and store them there too.

SHIRLEY:   I didn’t think about that.

DARRIN T. MISH:   Yeah because if you do that and you lose your actual thumb drive or what not then you still know that I put it up on dropbox.  Me being as paranoid as I am and being in this business I would probably put it up in 2 or 3 different places but that’s probably a little bit overkill.

KATRINA MADEWELL:  Just because you have seen all of that stuff.

DARRIN T. MISH:  Yeah I have seen everything that has gone wrong in other tax payers’ lives that you can imagine.  One of the things that Shirley you kind of bring up another point and that is never give your original documents to your tax preparer ever and this is not a knock on the tax preparer it’s just the fact tax preparers are human beings so they die, their buildings burn down, things happen so in our office we won’t even take originals because it is just really a bad idea.

SHIRLEY:   Right ok.

DARRIN T. MISH:   Thanks for the call.

SHIRLEY:   Well I have another quick question if I may?

KATRINA MADEWELL:    Of course.

DARRIN T. MISH:   Sure.

SHIRLEY:   So I used a tax preparer about 4 years ago when I was in California and it didn’t seem right at the time there was some things that hadn’t been correct and then a couple of years later or it could of been the following year I realized there was a couple of discrepancies things that they forgot to include actually it was the depreciation of 2 houses so it’s kind of a big deal in the return so if it I don’t know if it’s worth going back and doing an amendment, I don’t know how complicated that is, if it’s something that I can do myself, if it’s something I should take to a tax preparer here or if it’s not even financially really worth it because that is the only from what I can see that was the only thing that was missing, it was the depreciation of the rental house.

KATRINA MADEWELL:  Alright try and answer that real quick Darrin because we have less than a minute.

DARRIN T. MISH:  Yeah you are probably going to want to go ahead and bring that back to a tax preparer.  I’m not so worried about the additional refund that you are going to get but I’m worried about the fact that the depreciation has to carry on year after year and if there is a gap that is going to be a problem.  I want you to listen to our show next week Thursday at 9am because we are going to talk all about Amended returns actually so I think you should…

SHIRLEY:    Ok.

KATRINA MADEWELL:   We will dive into your question a little bit more, we will actually start the show with that and then you can call Darrin’s office at 888-get-mish to further answer your question.

DARRIN T. MISH:    Thanks for calling.

SHIRLEY:   Ok sounds good thank you.

KATRINA MADEWELL:   Well you are listening to the IRS Solution Attorney show we are glad to have you this week.  We ran out of time for the train wreck.

DARRIN T. MISH:   Oh man it was a good train wreck.

KATRINA MADEWELL:   We will do a double train wreck next week and with parting adieu. Thanks for joining us this week we will be back next week to answer your questions thanks for the call in guys we really appreciate it, we always enjoy talking to you.  Thanks for having the nerve to talk to us actually Shirley on the show, the other two did not want to talk so thank you.   Have a great weekend you guys we are out.

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