DARRIN T. MISH: Good morning and welcome to the IRS Solution Attorney show and I am the IRS Solution Attorney Darrin T. Mish and I’m here today with my lovely and talented co-host and always… Click here to watch or read more information on IRS Back Taxes.
KATRINA MADEWELL: That would be me Katrina Madewell. Welcome to the show.
DARRIN T. MISH: How are you today?
KATRINA MADEWELL: I’m doing fantastic no complaints.
DARRIN T. MISH: Are you fired up to talk about IRS Problems?
KATRINA MADEWELL: Oh yes, you know I make this conversation fun you know, cause you know. I always have to talk like he’s a boring attorney.
DARRIN T. MISH: And you are not shy about taking credit for that are you right?
KATRINA MADEWELL: No and plus I can say stuff that attorneys can’t so that is the beauty of the show.
DARRIN T. MISH: That is in fact one of the beauties of the show is that there are things that I can’t say because I can get in trouble for things when I exercise my free speech rights, unlike most Americans. So the topic…
KATRINA MADEWELL: When you are an attorney just file like that which by the way you are listening to the IRS Solution Attorney and we forget Darrin this might be the first time that someone has ever chimed into the show.
DARRIN T. MISH: Wow.
KATRINA MADEWELL: And so if it’s your first time ever we want to say welcome thank you for listening on Money Talk 1010 thank you for listening to the IRS Solution Attorney show and I promise you the shows will bring you some value.
DARRIN T. MISH: Let’s talk about alone for just a second about why I am the IRS Solution Attorney. I’m a tax attorney and I’ve been helping people solve IRS tax problems for right about 16 years and it’s really my passion is the IRS can really throw you for a loop and can ruin your life if you don’t deal with them correctly and what I do is I help make problems disappear when I can you know.
DARRIN T. MISH: So the topic for today’s show is 5 facts about IRS problems that keep you up at night.
KATRINA MADEWELL: Yeah we won’t say that will…
DARRIN T. MISH: That will yeah it’s not 5 IRS problems that will that will keep you up at night it’s 5 problems that do keep you up at night.
KATRINA MADEWELL: That currently do yeah.
DARRIN T. MISH: Yeah.
KATRINA MADEWELL: Darrin’s going to help you fix those.
DARRIN T. MISH: So the biggest one that I think is the really the pain point for most folks is…
KATRINA MADEWELL: Going to the slammer baby.
DARRIN T. MISH: Yeah they’re worried about going to prison and I don’t think that is an unreasonable fear, it is after you are kind of educated about what’s going on.
KATRINA MADEWELL: Well think about this Darrin like you have to step out of the attorney box for a minute and go ok this client that’s coming into my office they owe $50,000-$100,000 half a million dollars in back taxes they haven’t filed in 20 years, of course they are scared they’re going to go to jail.
DARRIN T. MISH: Yeah like I’m saying I don’t think it’s an unreasonable fear it’s just not something that most people that I come in contact with don’t need to be worried about. Just this week I actually lunch with an attorney he used to be counsel for Department of Justice he worked in the tax division and we talked about why do people get prosecuted for tax crimes and why don’t more people get prosecuted for tax crimes.
KATRINA MADEWELL: How did that conversation go that probably should have been an on air lunch.
DARRIN T. MISH: Well he actually may be a guest in the future, we talked about having him on the show because you know I think he can impart a lot value to our listeners, to our audience but one of the things we talked about is there is just so many non-filers out there that there’s no way that the US Government has the resources to prosecute them all so a non-filer is just somebody frankly who hasn’t filed a tax return…
KATRINA MADEWELL: In a year or more.
DARRIN T. MISH: In any given year and typically folks that come into my office they haven’t filed a tax return in 5…
KATRINA MADEWELL: Your average client is 5 years?
DARRIN T. MISH: 5, 20
KATRINA MADEWELL: Like have you ever done the averages like every time you get them.
DARRIN T. MISH: It’s usually about 6 years so you know there is probably people listening right now and they are like oh my goodness they haven’t filed a tax return in 6 years.
KATRINA MADEWELL: Like I know how can I get away with that? We are not endorsing that.
DARRIN T. MISH: Not we are definitely not endorsing the failure to file tax returns for sure but let me go back and tell that short story that I love so much of the gentleman who came into the office and he was an older guy and he was trembling and one of the things that I like to do is I really like to put people at ease because it really hurts me to see people that are upset or are in pain or anything like that. So he’s trembling he’s so nervous I said ok so what’s the problem he say’s well I haven’t filed a tax return in a long time. I got a big smile on my face cause I know I can fix that and there’s a lot of things in the practice of law that are relative right so he say’s I haven’t filed a tax return in a long time so I’m thinking this could be anything from you know a year to like forever and I said ok and how long has it been and he said well since 1960 when I got out of the Army and I kind of smiled and I probably laughed because I was born in the late 60’s.
KATRINA MADEWELL: You weren’t born then.
DARRIN T. MISH: So I got really fired up and excited cause I knew there was a way that I could help this gentleman, there’s a statute of limitations for the misdemeanor offense of failure to file a tax return and that happens to be 6 years so we just had to file 6 years tax returns for this gentleman and we ended up getting it worked out. He was thrilled because he spent the better part of his life you know freaking out, stressing, having high anxiety that the IRS was going to show up and throw him in jail. Now listen if that guy who didn’t file a tax return from 1960-2005 or whatever didn’t go to jail the odds of you as a non-filer who’s missed 2,3,5 years whatever probably not going to happen.
KATRINA MADEWELL: Well the important part is like you know only 6 years back is all they go so if it’s been 10-20 years it doesn’t matter they are going to wipe all that away. So I’ve seen, I had a client actually she bought a property in her daughter’s name because her mom hadn’t filed tax returns in 20 years and she was a W-2 wage earner employee and really she should be getting a refund.
DARRIN T. MISH: Yeah I have had a lot of W-2 wage earner type folks who were entitled to refunds and not filed. One guy actually….
KATRINA MADEWELL: Do you think, how do you think that started like do you think they were self-employed or something at one point and owed some money for something and then just got scared and never filed?
DARRIN T. MISH: Well I will tell you the story of my friend I’m thinking about right now, he works at one of the bigger boat supply places here in town and he’s a W-2 wage earner, he has worked there forever and we got to talking one day and he said you know I’m a non-filer, I just don’t like the IRS, I just don’t like the government I just don’t want them knowing about my business. I’m like dude you are getting a W-2 they already know everything. All you are doing is leaving money on the table cause people don’t realize this but there is actually a 3 year statute of limitations for refunds so what that means is if you file your return more than 3 years late and you are entitled to a refund you are not getting the refund so you are just leaving money on the table.
KATRINA MADEWELL: Roxanne actually talked about that before the show she was saying how she read an article or report where people leave a lot of money on the table every year which is exactly what we are talking about.
ROXANNE: That’s true so that it makes you wonder what the government doing with all that money has left on the table.
DARRIN T. MISH: Oh they are definitely spending it that’s the answer to what they are doing with the money that is left on the table. See the government is only going to hassle you for non-filing if they think you owe them money. They can tell almost as easily that they don’t owe you money.
KATRINA MADEWELL: So they really don’t care if you are getting money and not filing right?
DARRIN T. MISH: Yeah they’re not going to you know knock your door down trying to get you to file a return when there is a refund due particularly if it’s been less than 3 years.
KATRINA MADEWELL: And they usually know, they have an idea if you don’t get a refund or not.
DARRIN T. MISH: Yeah I think so, If you are making $40,000 as a wage earner and you got you know a lot of money withheld and they can kind of tell if you are going to get a refund or not, they are not going to bother you about it.
KATRINA MADEWELL: So out of all the people you’ve represented all these years since this is the first part of the topic is imprisonment have any of them went to jail?
DARRIN T. MISH: No not one has gone to jail.
KATRINA MADEWELL: Not one client that’s owed a lot of money to the IRS has went to jail?
DARRIN T. MISH: Now on rare occasions and this is not lawful, none of my clients have ever gone to jail, none of my clients have ever been seriously threatened with going to jail. I’ve had a couple of clients that didn’t obey you know administrative summons which is like a revenue officer who’s like a bill collector with the IRS sends a summons to the tax payer saying come into my office and bring your papers. Ok that’s a summons. I’ve had a couple well more than a couple over the years threatened with going to court and potentially being thrown in jail for not obeying the summons. You see the distinction?
KATRINA MADEWELL: Right. It’s almost like getting subpoenaed to court and you ignore the request and you don’t show up.
DARRIN T. MISH: Yeah and Federal judges take a very dim view of people who just you know ignore the summons because really if you are a tax payer who is ignoring a summons what you are doing sort of thumbing your nose at the court itself and judges don’t play.
KATRINA MADEWELL: What’s the likelihood that they just don’t open any mail from the IRS, I’m just saying.
DARRIN T. MISH: Happens all the time.
KATRINA MADEWELL: So then they have a summons just mixed in there.
DARRIN T. MISH: So we have somebody else in the studio, one of your assistance and she just raised her hand like she is one of those people that doesn’t open the mail from the IRS but the story is or actually the truth is ok maybe there is bad news in that envelope but it’s worse to not know about the bad news.
KATRINA MADEWELL: Well you know what the bad part is now like honestly I really almost don’t even open any mail because the kids get it, I don’t have any bills, what I do have is electronically paid and I really just don’t get mail its all junk.
DARRIN T. MISH: Well these Millennials….
KATRINA MADEWELL: They definitely don’t look at it.
DARRIN T. MISH: They just don’t know what mail it it’s like…
KATRINA MADEWELL: Email is that what you mean?
DARRIN T. MISH: There’s like papers that get delivered to the house?
KATRINA MADEWELL: And people pay money to do that?
DARRIN T. MISH: Exactly so you know none of my clients have ever actually been threatened with prison. When I was talking to the gentleman who used to be the tax division attorney what he said is you know prosecutors aren’t really in the business of prosecuting people for misdemeanor’s because it’s not really interesting, it’s not dramatic, it’s not really that fun. So the crime for failure to file a tax return which is the most common crime that I see in my practice, that’s really not something that they’re going to prosecute that person for unless it’s part of some larger criminal conspiracy. So you a drug dealer yeah you might get popped for not failure in filing a tax returns, you actually might get popped for filing a fraudulent tax return, that’s actually filing fraudulent tax returns is a felony, not filing is a misdemeanor just like these big high profile cases that you see not necessarily tax cases but like Martha Stewart, what did she get in trouble for?
KATRINA MADEWELL: I don’t even remember.
DARRIN T. MISH: Lying to the FBI.
KATRINA MADEWELL: Was that what it was.
DARRIN T. MISH: You know what is Hillary Clinton very likely to be charged with? Not all this email stuff, she is going to be interviewed if she hasn’t already by the FBI and they are going to get her for lying because there is no way try not to be overly political here but she’s probably going to be caught in some misrepresentation at some point in time.
KATRINA MADEWELL: And on that note it’s about that time it’s real good time for a break you are listening to the IRS Solution Attorney show with Mr. Darrin T. Mish and I’m your co-host Katrina Madewell when we come back we are going to talk about number 2 which is wage garnishments.
Back in a minute.
DARRIN T. MISH: Scary.
KATRINA MADEWELL: We are back you are listening to the IRS Solution Attorney show.
DARRIN T. MISH: With Mr. Darrin T. Mish the IRS Solution Attorney, love to refer myself in the third person.
KATRINA MADEWELL: Yes I know I like it to well when people are listening to the podcast it works out. I’m Katrina Madewell I am not the attorney of the show but I will be the one here keeping it real and keeping it fun and saying the stuff the Attorneys can’t.
DARRIN T. MISH: But did you sleep at the Holiday Inn Express last night that’s the question? Probably not.
KATRINA MADEWELL: I don’t think so.
DARRIN T. MISH: Probably slept at your own house right?
KATRINA MADEWELL: Probably get in trouble if I slept at a Holiday Inn Express last night. I’m just saying.
DARRIN T. MISH: So number 2 on our on our show today the topic of the show is 5 facts about IRS problems that keep you up at night. The second one that we are going to talk about today is wage garnishment I mean technically the technical legal term is an IRS wage levy.
KATRINA MADEWELL: That’s the same thing.
DARRIN T. MISH: Yeah levy and a garnishment are the same thing, you just have to remember that a levy is different than a lean and a lot of people use those 2 terms interchangeably we are going to talk about.
KATRINA MADEWELL: They sound the same.
DARRIN T. MISH: And they both start with a LE right so actually one starts with an LI but anyway they both start with an L and so people get them confused but levy means a seizure ok so if it’s a wage levy then it’s a wage seizure right not a seizure like an epileptic seizure but like a seizure like you…
KATRINA MADEWELL: Come take.
DARRIN T. MISH: Yeah you are supposed to get your paycheck and low and behold there is no paycheck or theirs a dramatically reduced paycheck. A lot of people don’t realize how dramatic it can be if you get a wage levy.
KATRINA MADEWELL: Like seizure don’t they, do they actually ever really come get stuff out of your house when they threatened to do that?
DARRIN T. MISH: Well that is actually I think number 5 that we will talk about.
KATRINA MADEWELL: Oh it is ok so don’t skip it.
DARRIN T. MISH: We will talk about it. It does happen it’s kind of rare but it does happen but in this context a wage garnishment can be really Draconian, that’s a fancy word, it’s really serious and severe. So I’m going to give you an example: you can actually look if you are worried that you might get a wage levy or a wage garnishment from the IRS you can actually download publication 1494 from the IRS’s website and what that is it’s a chart to tell you how much of your paycheck is exempt from the levy ok so here is what this means, I’m going to give you an example:
KATRINA MADEWELL: I was going to say a lot of people like me are listening to this and going redo…
DARRIN T. MISH: Probably most people get paid twice a month right that’s semi-monthly…
KATRINA MADEWELL: Let’s say 15th and 30th.
DARRIN T. MISH: Yeah so it’s semi-monthly and if you are a single person and got paid twice a month, you get to keep $431.25. Doesn’t matter how much you make that’s how much you get to keep if there’s an IRS wage levy in place.
KATRINA MADEWELL: That’s not even enough to fill up your F150 Darrin.
DARRIN T. MISH: Well it’s a 350 but anyway you know…..
KATRINA MADEWELL: Big truck. Like that couldn’t get you gas for the month is my point.
DARRIN T. MISH: Yeah so it’s $431.25 that you get to keep as a single person if you have an IRS levy.
KATRINA MADEWELL: That’s for everything, for food, shelter, clothing……
DARRIN T. MISH: And so really most of the time an IRS wage levy is not so much to get the money, it’s actually what the IRS is doing sort of figuratively is imagine them grabbing you by the shoulders and shaking you…
KATRINA MADEWELL: Wake up.
DARRIN T. MISH: Kind of like the shaken baby thing but to you as an adult. All they are trying to do is get your attention it’s like hey we are serious and we don’t play and so 9 times out of 10 if you have a tax payer who has just been like AWOL and the IRS can’t get in touch with them, they are trying, you know the IRS is trying to contact them but the tax payer won’t get in touch with them they will go ahead and do the wage levy and they will figuratively shake them and that will generate a phone call almost guaranteed right because at that point…..
KATRINA MADEWELL: That is the frantic calls you get most of the time.
DARRIN T. MISH: Yeah and actually they are my least favorite to be honest because if you have let your case get to the point where there is an IRS wage levy and you haven’t filed returns for example, we don’t have a lot of leverage because I can’t get the levy released until we file your returns, kind of makes sense if that’s the policy right. What does the IRS want? They want you in the system, they want you fully compliant, they want all the missing returns at least 6 years say filed and that is what they are going to require that you file those missing returns before they release the wage levy, that’s like point of negotiation number one. So if you waited until to call me for example until you’ve got a wage levy and you have unfiled returns and you have no money saved then we’ve got a problem because you are going to ask me to go ahead and do all this work on the front end to take care of you and….
KATRINA MADEWELL: To represent you.
DARRIN T. MISH: And at this point it’s not all about me but I’m taking all the risk that you are actually going to follow thru with your obligation to take care of your financial obligation to me and how do you think that works out?
KATRINA MADEWELL: I mean I don’t know I would be saying can you sign a mortgage maybe.
DARRIN T. MISH: Yeah it doesn’t really work out because when you put somebody in that kind of desperation mode they are going to make promises that may be in their heart intend to keep but they don’t keep. So it really creates some friction between attorney and client at that point.
KATRINA MADEWELL: But at that point like if you’ve let it get to that place you need to sell something. I’m just saying it’s time to sell something.
DARRIN T. MISH: Maybe.
KATRINA MADEWELL: You should be selling something so you can pay your attorney so they can get you out of that hole.
DARRIN T. MISH: Yes so the IRS can go ahead and garnish your wages without first getting a judgement like in most states like any other creditor they have to go to court, they have to get a judgement in order to collect on the judgement. But the IRS is actually exempt from those laws. They do have to follow some laws, they have to send you by certified mail to your last known address it’s important. They have to send a final notice of intent to levy to your last known address.
KATRINA MADEWELL: And I imagine a lot of times they get it back right?
DARRIN T. MISH: Well if you haven’t filed a tax return in 10 years and you don’t live in the same place that you lived at last time what are the odds you are going to get that notice. I mean you are not going to get that notice cause they don’t know where you live particularly in Florida we have a very, very transient population that’s good for you as a real estate agent right we move around a lot there’s other states…
KATRINA MADEWELL: A lot of Relo’s and people get bored with where they live.
DARRIN T. MISH: Like California for example people don’t move there’s a proposition 13 there where your property taxes are grandfathered in like for life but if you move they recalculate and they explode, they go through the roof so in California nobody moves.
KATRINA MADEWELL: They do that here too but we have portability and you can take that with you.
DARRIN T. MISH: Yeah they don’t have portability there because…
KATRINA MADEWELL: We just got that like when the housing market was bad and well actually let me rephrase it, when it was good and it was on the upswing a lot of people did not want to move for that reason because their taxes would be too high. So they created the portability exemption that’s still there.
DARRIN T. MISH: So the IRS has to send the tax payer a final notice of intent to levy, they changed the letter numbers on these all the time right now it’s an LT11, it used to be a letter 1058 but now it’s an LT11 and it gives you appeal rights. You have 30 days to appeal if you do not appeal then you are subject to potentially being levied. Either a wage levy or a bank levy which we haven’t talked about yet but those things are potentially going to happen to you and so it’s important if you get a final notice of intent to levy that you either appeal, contact an attorney or you do something about it otherwise it’s very likely when you go to look at your bank account on payday you know you are supposed to get the direct deposit, you have $431 instead of whatever you are supposed to make.
KATRINA MADEWELL: What’s the difference between the wage garnishment and the bank levy?
DARRIN T. MISH: Ok so a bank levy is when the IRS again sent you a final notice of intent to levy, you did not appeal then the IRS can levy your bank account they can seize your bank account.
KATRINA MADEWELL: They do both usually you think they can swoop your bank account and garnish your wages?
DARRIN T. MISH: It’s extremely common to do both at one time again they are trying to grab you by the shoulders and shake you like hello.
KATRINA MADEWELL: But at that point they are not going to want to put any more money back into the bank which is another good point cause I would think if they swoop my account I would be scared to put anything in there.
DARRIN T. MISH: Yeah well bank levies are kind of interesting a lot of people think that your bank account is frozen I hear that term all the time almost every time a bank levy comes up someone says my accounts frozen well yes and no it’s frozen for that day that the levy is processed by the next day it’s no longer frozen you can still put money in the account. The IRS is not supposed to do successive bank levies so they are not supposed to levy you on Monday and then levy you on Tuesday and then Wednesday, they are not supposed to do that. I’ve only seen it happen once where a revenue officer did it every couple of weeks or every month and we got that taken care of eventually but the scary thing about bank levies is they don’t want to give that money back.
KATRINA MADEWELL: I imagine not they already got it why would they.
DARRIN T. MISH: So the IRS has to wait 21 days while the bank holds the money to give the tax payer the right to try to get the money back.
KATRINA MADEWELL: So they don’t actually get it the bank is just holding onto it.
DARRIN T. MISH: The bank holds it for 21 days and then if you can’t convince the IRS to release the bank levy then the IRS gets the money. Now again 9 times out of 10 when a client or prospect gets a bank levy I say ok they are all upset and rightfully so but I say how much money was in the bank and 9 times out of 10 I mean we had a client this week that was $166.00 and she’s you know upset and freaking out about it and we are like its $166 I mean it’s going to cost more for us to go fight over $166 then the money’s worth so that’s fine so I usually tell people that have tax problems, big liabilities and there potentially could be levied I tell them to keep minimum money in the bank until we can get some kind of stabilized situation going on here so we can get this worked out.
KATRINA MADEWELL: And so we are going to move onto number 3 but it’s going to be a longer conversation so we really can’t start it yet. You are listening to the IRS Solution Attorney show and with Mr. Darrin T. Mish if you want to reach him or any of this topic has sparked your interest, you have some questions you can reach him at 888-get-mish,888-get-mish.
DARRIN T. MISH: 888-438-6474, that’s 888-438-6474 if you don’t like to spell out words on your phone like me or you can visit our website at getirshelp.com, the recordings to the show are also there on the website or you can find them on ITunes as well.
KATRINA MADEWELL: Just look for the IRS Solution Attorney show and he’s on Twitter @darrin_mish.
DARRIN T. MISH: And we just found out that our Android app for the show just got approved and the Apple ITunes app is coming any day now.
KATRINA MADEWELL: Awesome. We will be back in just a minute stick around.
KATRINA MADEWELL: Welcome back you are listening to the IRS Solution Attorney show with Mr. Darrin T. Mish.
DARRIN T. MISH: That would be me.
KATRINA MADEWELL: I’m your co-host Katrina Madewell.
DARRIN T. MISH: So today we are talking about 5 Facts about IRS problems that keep you up at night then we just got done with wage levy’s and bank levy’s, this is all kind of in order of severeness.
KATRINA MADEWELL: The number 1 fear is imprisonment.
DARRIN T. MISH: Yeah the first thing we talked about was imprisonment, the second thing we talked about is losing your paycheck, losing your money I mean that’s pretty serious.
KATRINA MADEWELL: Swiping your bank account.
DARRIN T. MISH: Have you ever thought about this, if you were a bad guy, if you were a dictator who was actually ruling the United States how would you deal with a population, how would you enslave a population? Well I’ve thought about this a lot because apparently I have a lot of free time and…
KATRINA MADEWELL: I was going to say I’ve never thought of that question.
DARRIN T. MISH: The way that I would do it instead of going on trying to round people up and throwing them in camps or whatever I would use the IRS, I would cause if you take somebody’s money then you take away their ability to you know shelter themselves, feed their family, that kind of thing.
KATRINA MADEWELL: At least for our society and our culture because we are not third world.
DARRIN T. MISH: Exactly, exactly and there’s to many people and to many guns in this country to like actually kind of forcibly take it over that’s not going to happen but you could in fact use the IRS if you were so inclined. I’m not accusing anybody of doing this at this point ok but it could easily be done as you would just go ahead and sic the IRS on your enemies you know or an entire political class of people.
KATRINA MADEWELL: How many revenue officers and IRS people would quit their job?
DARRIN T. MISH: I don’t think that many honestly, I don’t because I think that and boy I’m going to get some hate mail for that but I think that if it was explained in a palatable sort of way to the rank and file I just think they would go ahead and go along with it. You know they have a pretty good gig, they get paid pretty well, they didn’t use to but they get paid pretty well and if you count their benefits and everything else they are doing very well, they are doing above average for an American worker so I don’t know when you start to ask different employees to do the right thing versus you know feed their own families it might be a pretty hard choice for some people I don’t know.
KATRINA MADEWELL: Imagine that.
DARRIN T. MISH: We kind of got off on a tangent but penalties and interest is what we are supposed to be talking about.
KATRINA MADEWELL: Yes we are getting there.
DARRIN T. MISH: Instead just still being American society.
KATRINA MADEWELL: We get a couple extra minutes of work out.
DARRIN T. MISH: So you know most of the time what I hear from clients that come in they say you know Darrin I would like to pay the tax bill but it’s the penalties and interest that are killing me you know. That is what they say and then I say ok well your entire bill is 50 grand the tax is 25 penalties and interest are 25 are you ready or even prepared to write a check today to the government for 25,000 and I usually get this blank stare like what are you an idiot you know so people say their problem is with the penalties and interest and I agree they have a problem with the penalty and interest but it’s not the only problem.
KATRINA MADEWELL: But the other part to and we’ve talked about this on the show and this is why I mentioned it earlier in the show, if you are getting a tax refund you don’t even have that. Right.
DARRIN T. MISH: Right so if you are getting a refund then there is no penalty for late filing. I mean there’s obviously no penalty for failure to pay.
KATRINA MADEWELL: They are not going to pay you interest.
DARRIN T. MISH: Right, right well there are some rare circumstances but not if it’s your fault that you haven’t filed a return you know if you filed an amended return later and you have a larger refund then you probably already get some interest but that’s a different story. So as a general rule interest, IRS interest and penalties actually double about every 6 and a half years or so. One of the things people don’t realize is that you know the interest….
KATRINA MADEWELL: If you have to try to catch up for the prior 6 years in case then when you start filing.
DARRIN T. MISH: Well I think it’s just again to create a tax system that there is so much incentive to file and pay on time that you know a larger percentage of the population will actually do it.
KATRINA MADEWELL: Good because of the reality of it is without you know the IRS and paying the money to the government we wouldn’t have the government that we have.
DARRIN T. MISH: That’s true.
KATRINA MADEWELL: Like our whole society and genetic makeup as a country would not work as it is.
DARRIN T. MISH: And never mind that might be a good thing that we don’t have all the government that we have now but that’s not….
KATRINA MADEWELL: That’s not the topic of the show.
DARRIN T. MISH: That’s not what we were talking about. So one of the things is interest rates are really low right now right and even the IRS interest rate is 3% and that sounds very reasonable right I mean what’s an average mortgage loan right now going for a little over low 4’s high 3’s something like that. So the IRS interest rate is only 3% that looks really pretty attractive and it doesn’t look that Draconian but it’s compounded daily. Oops.
KATRINA MADEWELL: Your compound interest is where rich people get richer.
DARRIN T. MISH: Yeah so the interest is 3% right now compounded daily and penalties are compounding daily and so your penalties…..
KATRINA MADEWELL: Mortgages by the way are simple interest they are not compound interest anymore.
DARRIN T. MISH: So you are paying you know you are paying penalties that you had yesterday you know so on and so forth, You can actually max out the penalties at some point an it’s relatively early in the process so what happens is the penalties spike at the beginning of a tax problem then they sort of level off. So that’s good news I think. There are ways to get rid of penalties, there’s not really ways to get rid of interest there are some, one of the ways to get rid of interest come to think of it is if you relied upon erroneous written advice from the IRS then you can have interest abated.
KATRINA MADEWELL: What does that mean?
DARRIN T. MISH: It means written advice from the IRS that is actually wrong and then you are relied upon to your detriment ok.
KATRINA MADEWELL: So that might be a letter that you find in the pile of rubble that you’ve ignored.
DARRIN T. MISH: No it’s actually even more unlikely, this is a situation that you’ve written to the IRS and you’ve asked them for an opinion on your particular situation and they’ve written you an opinion letter that says ok you can take a certain position on your taxes and then they renege and change their mind.
KATRINA MADEWELL: Ok.
DARRIN T. MISH: This is exceptionally rare.
KATRINA MADEWELL: See that ever really.
DARRIN T. MISH: It’s so rare that we don’t even talk about the elimination of interest.
KATRINA MADEWELL: It’s one of those things you can’t say never but really pretty much virtually never happens.
DARRIN T. MISH: Right remember you are talking to a lawyer here so I have to offer all the exceptions and stuff.
KATRINA MADEWELL: Always something.
DARRIN T. MISH: All the exceptions and stuff. But penalties can be a bated, fancy word for eliminated.
KATRINA MADEWELL: Waived.
DARRIN T. MISH: Yeah penalties can be waived in certain situations. One of the ones that is kind of cool that’s going on right now is there is something called first time penalty abatement.
KATRINA MADEWELL: So that’s the if you have all these penalties that have stacked up and you’ve never asked them for any forgiveness they say ok yep we will forgive you, is that what you are saying?
DARRIN T. MISH: Kind of. So in first time penalty abatement it’s actually not the first time in your life it’s just the first time in the last 3 years.
KATRINA MADEWELL: Ok.
DARRIN T. MISH: Ok so if you have 3 years prior to the year in question where you were fined, you filed and you paid and you owed less than $100 in penalties then they will go ahead and waive that third year penalty and just wipe it out and all the interest that was on the penalty will also go.
KATRINA MADEWELL: Go with it.
DARRIN T. MISH: So and this is really a good deal and it’s for my clientele it’s kind of rare cause I tend to represent self-employed, small business owners and they you know chronically have a problem you know filing a payment on time. But if you find yourself in that situation it can be really cool. I actually had a client where he had been he had a stellar personal filing track record and he ended up owing a penalty of like 45 grand for this one year and he asked me if I could take care of it, I told him about the first time penalty abatement situation he said well I still want you to handle it, we called the IRS and we got them to waive it so it’s pretty neat.
KATRINA MADEWELL: That’s awesome. Number 4 is time or do you have something else to share on that point.
DARRIN T. MISH: Real quick we are going to talk about reasonable cause for penalty abatement as well so reasonable cause means the tax payer had a darn good reason that they didn’t file or pay on time or whatever.
KATRINA MADEWELL: What’s a good example of a good reason and an example of a not good reason?
DARRIN T. MISH: A not good reason is actually easier because it covers most people. A not good reason is I didn’t have the money you know.
KATRINA MADEWELL: That sounds like a pretty good reason to me. I guess the IRS doesn’t think so.
DARRIN T. MISH: That’s the typical reason but I usually say fire, theft, flood, hurricane, drug addiction, divorce, alcohol addiction, gambling problem, it’s got to be or deaths sometimes can be not that the death of a taxpayer but the death of a family member close to the tax payer but really what happens is a lot of times people will have this sort of catalyst event this big thing that happens, let’s say a death of a child…
KATRINA MADEWELL: Yeah that is a big deal.
DARRIN T. MISH: So that’s going to send let’s say the parents into like a tail spin right it’s going to take them awhile to get over that and the IRS is going to be willing to forgive one year but what can happen is that one year of non-filing or late filing kind of sends off this track record or this habit of either non-filing or super late filing and not paying whatever. So you can see the catalyst happen in year one but the problem went on for 10 years the IRS is not going to forgive the penalties.
KATRINA MADEWELL: So you are saying sometimes it’s a late event unfortunately created this chain of events.
DARRIN T. MISH: Yeah so it’s really sad cause a lot of times what happens is the IRS so the person doesn’t file a tax return let’s say and the IRS doesn’t really do anything about it before you know it you are in here too and then the person is like well I didn’t file in year one so I don’t know what to do..
KATRINA MADEWELL: Life goes by fast.
DARRIN T. MISH: Yeah before you know it it’s year 8 and you know you owe hundred grand to the IRS and now it’s a problem. So the IRS is not going to abate a penalty typically for multiple years in a row because there is really not that many reasons that are good enough that will put you in a multiple year you know non-compliant…
KATRINA MADEWELL: Right it’s going to be one and that’s it.
DARRIN T. MISH: I think that there are things that could put you in that situation but the government doesn’t happen to think the same way that I do.
DARRIN T. MISH: Yeah so tax liens are pretty serious for a lot of people. I was just talking to a gentleman yesterday that actually has a government security clearance and he was telling me Darrin if I get a tax lien I’m going to lose my clearance then I’m going to lose my job and my lively hood is going to be you know the end of the world.
KATRINA MADEWELL: We’ve seen it with short sales to they can’t have any deficiency or anything like that.
DARRIN T. MISH: Yeah so tax lien is it’s a document that is filed usually in the clerk’s office of your state it’s recorded just like a mortgage or a deed or you know…..
KATRINA MADEWELL: Public record.
DARRIN T. MISH: Public record and what it does legally is it attaches to all of your property real and personal wherever it may be. So that was lawyer jargon right so it attaches to your real property which means real estate and it attaches to your personal property which is everything else. So it literally attaches to socks in your underwear drawer you know all the stuff that you own is attached by that tax lien. There’s also a situation where all of your after acquired property also gets attached to the tax lien.
KATRINA MADEWELL: Wait what was that?
DARRIN T. MISH: So let’s say IRS files a tax lien on January 1 and you buy a car free and clear on February 1 well now the lien is attached to your car that you just tried to buy or you did buy but all you did is you took one asset which was the cash and you turned it into a different form of an asset you know so you got to think about those things if you have a tax lien that’s attached you know that is filed or recorded. A lot of people think that the tax lien only attaches to the address that’s on it. I hear this all the time oh well that lien is only on the house at 123 main street, no that’s the last known address it’s 123 main street is on the lien but it attaches to that house that you live over on Jones Blvd. too.
KATRINA MADEWELL: So a tax lien is a tax lien that’s like a lien on you.
DARRIN T. MISH: Yeah there is one exception and that is real property, so real estate the lien has to be filed in the county in which the real estate is located otherwise it does not effectively attach.
KATRINA MADEWELL: Interesting little tip.
DARRIN T. MISH: And I think that makes sense cause otherwise if you are doing a title search you would have to search every single county in the country in order for that to not be the case so very intelligent course throughout the years have decided that it has to be in the right county and we see this a lot where the person might live in Pascal county but they record the lien in Sarasota county for some reason and they just kind of screw up and that ends up befitting the tax payer.
KATRINA MADEWELL: Well you are listening to the IRS Solution Attorney show we are right in the process of talking about 5 facts about IRS problems that will keep you up at night when we come back we will dive into number 5 back in a minute.
KATRINA MADEWELL: Welcome back you are listening to the IRS Solution Attorney show.
DARRIN T. MISH: That would be me I’m Darrin T. Mish the IRS Solution Attorney.
KATRINA MADEWELL: And I’m your co-host Katrina Madewell thanks so much for sticking with us through the break. You miss any part of the show it is available in its entirety in a podcast there’s a lot of really great stuff in this show.
DARRIN T. MISH: Yeah a lot of details in this one. I mean we are not like shooting the bull like we do a lot of times. Today we are talking about the 5 facts about IRS problems that keep you up at night and we are actually on number 5. We talked about you know the first one was imprisonment a lot of people are worried about that the second was is a wage levy or a bank levy those are garnishments of your wages or your bank account the third was penalties and interest the fourth are tax liens, tax liens can be a real killer they also take about 50 points off your credit report.
KATRINA MADEWELL: Probably more than that.
DARRIN T. MISH: Yeah you know it could be really detrimental you are not going to be able to buy a house if you have a tax lien and if you want to sell your house and you have a tax lien you are probably going to have to pay it off.
KATRINA MADEWELL: Yes and all those points and more will be on the podcast in its entirety.
DARRIN T. MISH: Exactly so now we are on number 5 which is property seizures and you asked me about this early on in the show. The IRS can actually seize property so I had a case one time where I was representing a gentleman that was a sole shareholder of a corporation that was defunct but it had a tax bill and I asked the gentleman what assets where left in the corporation and he says only one and it’s really important to me ok tell me what it is, well it’s a red corvette and it’s paid for, it’s free and clear and the revenue officer in this case is dying to bring out the tow truck and hook it up and take it away. I actually thought, think to this day that the revenue officer was dying cause he was going to get to drive it you know and so we ended up working out a deal so that this gentleman’s corvette which was his baby wasn’t going to get seized by the IRS and hauled away.
KATRINA MADEWELL: So property seizure could mean a car but I’m thinking real estate like a house.
DARRIN T. MISH: It can happen primary resident seizures fall under some different guidelines and rules, they actually have to be signed off on by a Federal judge which is not a huge, huge step you know to get a Federal judge to sign off on like a tax protester who doesn’t pay his taxes and they own their house free and clear, but it is fairly rare. Primary resident seizures are not real popular in the public and if it gets out in the news, you know how we always talk about how the IRS prosecutes people so they can make a splash so that it scares us all and then we get compliant well the reverse can be true if they take somebody’s house so I’ve actually had a couple of little old lady type scenarios where the IRS was threatening to take the house and first thing I did was go to the media because like I’ve got you.
KATRINA MADEWELL: Yes you don’t want that.
DARRIN T. MISH: No if you are the IRS you don’t want to see that so it’s pretty rare, it’s usually resolved or reserved for really abusive situations protestor type people that don’t believe in the constitution or the legality of taxes and stuff and they’ve…
KATRINA MADEWELL: It’s almost like a point.
DARRIN T. MISH: They are trying to make an example out of you so other people don’t do it. A lot of time people particular here in Florida get their homestead exemption mixed up right they say well Florida law says that a creditor can’t seize my house. Yeah that is what Florida law says that’s true except we are not talking about Florida law we are talking about Federal law here right so there is something that supremacy clause that constitution which something in the constitution called the Supremacy clause that stands for the proposition that when federal law and state law conflict guess who wins?
KATRINA MADEWELL: The trump card is going to be the Federal Government.
DARRIN T. MISH: That was a good card very nice.
KATRINA MADEWELL: Good to get the trump card.
DARRIN T. MISH: So yeah Federal law is going to supersede state law in that situation and so the IRS is going to be able to seize your house, it’s unusual you know if you are the run of the mill non-filer you know it’s probably not going to happen but it’s theoretically possible.
KATRINA MADEWELL: And so since this is the IRS Solution Attorney show we know that many people listening Darrin they don’t actually like to call in so we get a lot of questions on Facebook and Twitter @darrin_mish and we will answer those on the show so that you can remain anonymous, feel free to tweet or Facebook or email questions getirshelp.com also you can leave them there. John had a question he wanted to know I am a current client of yours and I followed your advice and started to pay myself as an employee to help stay current on my tax withholdings this year, given I still owe the IRS a lot of money should I be concerned with them slapping a garnishment on my paycheck?
DARRIN T. MISH: Well remember going to back to the last segment I think it was if you haven’t received a final notice of intent to levy then they cannot garnish your paycheck, so if that has happened then potentially there could be some problems or things that we have to worry about but if not then you don’t have anything to worry about. So I would suggest that if you are working with us then we are going to do what we got to do to protect you so you don’t get garnished.
KATRINA MADEWELL: Well thank you for listening to the show John but call Darrin he already represents you.
DARRIN T. MISH: John really narrows it down. I probably only have like 50 Johns on in the database so yeah I would like to talk to you about it.
KATRINA MADEWELL: So you want to talk about our news story real quick we got like less than a minute to do that before the train wreck but Trump’s campaign releasing the letter confirming the IRS audit?
DARRIN T. MISH: Yeah so Donald Trump apparently is chronically under audit and a lot of people make a big deal out of this, I’m not necessarily a big Trump guy but I don’t think there is anything unusual about a billionaires you know someone whose business is being under audit cause larger businesses tend to be audited more frequently, it’s almost for some it’s almost like a perpetual deal.
KATRINA MADEWELL: It’s all relative.
DARRIN T. MISH: Yeah so I don’t really put a lot of stock in that he is under an IRS audit I don’t think this is politically motivated. I think there have been some audits in some situations in the last 7-8 years that have been politically motivated this one I just don’t happen to think that’s the case.
KATRINA MADEWELL: Well it’s about that time.
DARRIN T. MISH: You mean time for the IRS train wreck of the week?
KATRINA MADEWELL: That’s it.
DARRIN T. MISH: Ok this is a fun one. I represented this gentleman of and on for about 6-7 years, when he first came to me he owed about a half million dollars I think and we identified that because of some other situations and circumstances in his financial life the really best thing for him to do was to go and file a bankruptcy and we talk about on the show that the bankruptcy can discharge taxes under certain circumstances…
KATRINA MADEWELL: I don’t think we’ve talked about that one in a while.
DARRIN T. MISH: We haven’t talked about it in a while, he went through a bankruptcy with another attorney, someone that I referred him to and wiped out about 300 grand I think of the tax debt that he owed which is good but he owed like a half mill so he still owed like a couple hundred thousand in fact I wrote it down here he owed $207,358.90 just to be exact.
KATRINA MADEWELL: I don’t think he is writing a check for that.
DARRIN T. MISH: No so and actually he and his wife used to live in the Tampa Bay area and they ended up moving up to the Villages which is a really cool actually retirement community you know north of Tampa…
KATRINA MADEWELL: Just don’t have sex with anybody there. Sorry I had to do it.
DARRIN T. MISH: Yeah thanks for putting that in my show that’s just out there floating around now but anyway Google it…
KATRINA MADEWELL: Just Google it.
DARRIN T. MISH: The Villages are a really kind of a cool place and they moved up there and the wife in this case was not liable for the taxes it was only the husband and so what we did was we filed an Offer in Compromise which is a you know it’s a program that the IRS has where you can settle for less and we ended up offering right around $5000 keep in mind a $207,000 liability and we went back and forth just a little bit and the IRS agreed to accept $9,150.00 and so that’s a pretty good deal, that is about 4 or 5 cents on the dollar something like that.
KATRINA MADEWELL: Percentage of what is owed is low.
DARRIN T. MISH: Yeah so the nice thing is I actually follow these folks on Facebook and it’s really cool obviously retirement age cause they are living in the Villages right and so it’s neat I get to vicariously enjoy their retirement with them, they go on cruises and they are living you know living the normal sort of well-adjusted retirement life which would not have been entirely possible if he still owed 207 grand to the IRS so happy ending. Always a happy ending to the IRS train wreck of the week.
KATRINA MADEWELL: We love the train wreck of the week. Well you are listening to the IRS Solution Attorney show. It was so great having you this week.
DARRIN T. MISH: Thanks guys, enjoyed it, a lot of fun we are out.