Answers to Common Questions Asked By People With IRS Problems

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Episode Transcription

DARRIN T. MISH: Welcome, this is your host, Darrin T. Mish at IRS solution attorney show. I’m here again today with Katrina Madewell, my cohost.

KATRINA MADEWELL: Welcome.

DARRIN T. MISH: We’re actually live today. Doesn’t always happen so if you have questions you want to call in, the number is 727-441-3000, that’s 727-441-3000.

KATRINA MADEWELL: Just in case you’re driving, 727-441-3000.

DARRIN T. MISH: Or we could throw you a curve ball, you can call toll free at 866-826-1340, 866-826-1340. So, I thought we’d talk about some common questions today that people generally have. Prospects/Clients have questions about IRS matters and owing the IRS and IRS problems in general and I thought we’d start off with that today.

KATRINA MADEWELL: Sounds good. FAQ’s are always good, right?  The ones you get every day that you could answer on a regular basis in your day to day operation.

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DARRIN T. MISH: Yeah, I’m sure that’s going to be a traffic…

KATRINA MADEWELL: Debacle.

 

DARRIN T. MISH: So part of my mission as educating the public on what all this stuff means, every industry has its own jargon and mine is no different. I actually have jargon upon jargon, right?  Because the lawyer jargon and then you have the tax jargon, so part of the goal is to simplify this a little bit so people understand what’s going on.

 

The first thing I wanted to tackle was “What are levies?”  We use that term quite a bit and it gets confused with levies versus liens so we’re going to probably talk about both of those today. A levy is simply a seizure. It’s not like an epileptic seizure, it’s like a seizure or a taking where the IRS wants to seize either your bank account or your wages. Another way to look at it is a wage garnishment. I think that’s probably, don’t you think a wage garnishment is probably the more typical term that a regular layperson would use?

 

KATRINA MADEWELL: I think so. Because most people get what a wage garnishment is because they probably experienced it from one form or another. Whether it’s debunk credit card or child support or whatever the reason an employer would garnish wages, right?

 

DARRIN T. MISH: Well, thank goodness my experience with garnishments aren’t on a personal level but only on a professional level. I hope that not most people would have had a garnishment.

 

KATRINA MADEWELL: I’m saying like the general conversation as far as the layperson probably know what that is because either they or someone they know has experienced that for one reason or another.

 

DARRIN T. MISH: I agree. I agree. A levy is really just a seizure. It’s when the IRS wants to take something from you. Some money. Because you haven’t paid. It’s important to note that this is…I mean I have clients that come in almost every day virtually trembling. I had one yesterday. The gentleman was very upset. He was afraid. He stayed up a couple nights waiting to get to his appointment with us. He couldn’t sleep because he was convinced that they were going to immediately levy all of his bank accounts and his paycheck and he would be living under a bridge with his kids.

 

KATRINA MADEWELL: So that meeting day with you probably couldn’t come soon enough.

 

DARRIN T. MISH: Yeah. It turned out pretty good for him. I hope he slept better last night. He was pre-assessment which means there wasn’t even legally a tax due yet. He was just kind of worrying in advance and I think that’s something we have to make sure that people don’t do.

 

KATRINA MADEWELL: What is that look like when you say pre-assessment?  What would that letter, because it’s usually a letter right?  What does that letter look like if you were to get it from the IRS?  What would the header say?

 

DARRIN T. MISH: Ok, so there’s a letter, I don’t know what the header says, but the identifying number is a CP-2000 and really it says something like this: Well, we’ve taken a look at your tax return and we’ve noticed that you left out this big chunk of income and we went ahead and computed the new tax with interest and penalties for you as a courtesy and if you agree, do nothing. So, that’s kind of a challenging thing, right?

 

KATRINA MADEWELL: It’s like that double negative, right?  They’re trying to prompt people to actually take action.

 

DARRIN T. MISH: So, in his case he had forgotten to put down some proceeds from a 1099-K which is a credit card kind of proceeds, 1099-K, from PayPal actually.

 

KATRINA MADEWELL: So is that income he received from PayPal that he didn’t claim?

 

DARRIN T. MISH: Well, we’re going to call it revenue. We’re going to call it revenue because it’s additional income…

 

KATRINA MADEWELL: Well, it’s additional money that came into him some way or another.

 

DARRIN T. MISH: Yeah, for sure. He was doing like a side business where he was buying used stuff and selling used stuff on eBay and basically being paid by PayPal. And a number of years ago, maybe 5 or 10 years ago, you could probably get away with that because that internet income kind of stuff wasn’t really tired in to the IRS. But over the last, I’d say five years, that’s really gotten tightened up and so PayPal is really…We don’t think a lot about this, but PayPal is really just a bank. It’s just a bank that facilitates online commerce. So in his case, he’s going to have to report that income, but he has cost of goods sold. What that means is he has the cost of what the merchandise he was selling that he gets to deduct, so he only has to pay tax on the difference, the profit. A lot of these transactions, there was no profit at all. So the IRS is proposing a different assessment of like 11,500 dollars, but I think this gentleman’s profit margin was only about ten percent, so he’s probably only going to have to pay tax on about three or four thousand dollars when it’s all said and done. So hopefully…

 

KATRINA MADEWELL: And that’s the amount he’s paying taxes on. That’s not even what he’s paying.

 

DARRIN T. MISH: Right, that’s not even the tax bill, that’s just the amount he’s going to have to pay tax on. So I think that that problem’s really largely going to go away. But the letters that the IRS sends are intentionally scary and it puts some people into orbit. So it’s really good that just kind of relax. I told him, you know I want to put you at ease so you can sleep because you look like, you know, not very good. But I still want you to take action to cure the problem. So that’s really what a levy is. A levy is just a seizure and it’s just when the IRS wants to take something.

 

KATRINA MADEWELL: So what about a lien?  What’s a lien?

 

DARRIN T. MISH: I think because those two words start with L’s they get used interchangeably a lot. A lien is basically a claim and public notice to the world that the taxpayer owes the money. So when a notice of federal tax lien gets filed, it’s public notice that there’s a debt that’s owed to the IRS and it’s kind of like a mechanics lien on real property. A mechanic’s lien, now I got to explain that, right?

 

KATRINA MADEWELL: I can jump in on that one if you want.

 

DARRIN T. MISH: A mechanic’s lien…go ahead jump in.

 

KATRINA MADEWELL: So a mechanic’s lien from a real estate world is if you have someone come to work on your property and you don’t pay them, they can put a mechanic’s lien on your home. Because if you think about it like this, if you take your car to the mechanic, they can keep your care and hold it hostage until you pay them. When it’s a house, they can’t exactly keep your house, but they will place a mechanic’s lien, which is for work done on the property.

 

DARRIN T. MISH: Right, so the notice of federal tax lien, once it gets filed in the county that the real estate is located in, that lien attaches to that real estate. Technically it attaches to all of the taxpayers property, wherever it might be. Whether it’s real estate…

 

KATRINA MADEWELL: Anything tangible, personal, or otherwise. Right?

 

DARRIN T. MISH: Yeah, so literally this pen I’m holding in my hand, technically if I had a tax lien on me, this pen would have a lien against it.

 

KATRINA MADEWELL: Brutal.

 

DARRIN T. MISH: What does it do as a practical matter?  What’s the consequences of having a tax lien filed against you?  Well, there’s a few. First of all, it’s going to hit your credit score. It’s probably going to knock the score down probably fifty to seventy-five points. Pretty good hit, typically.

 

KATRINA MADEWELL: If it’s personal, there’s a difference between personal and corporate, right?

 

DARRIN T. MISH: For sure. Obviously if it’s against the corporation and not against the particular shareholder or officer, that’s a different thing. We’re talking about, I want to talk about at least personal for right now. You introduce the corporate stuff and we start to spin out of control pretty fast here.

 

KATRINA MADEWELL: But it could be one or the other, right?

 

DARRIN T. MISH: Sure it could be. For sure. So the lien attaches to the real property, attaches to the personal property, it impacts the credit score, it’s going to prevent the closing of a house. You’re going to prevent conveyance of real property which means the sale or transfer of real property because it’s going to stick in that closing when the title work gets done it’s going to show up and then they’re either going to have to pay it or…

 

KATRINA MADEWELL: So the lien’s kind of like any lien. Like whether it’s a mortgage lien or any lien, it kind of stays stagnant on there until something’s done.

 

DARRIN T. MISH: Yeah, it’s not necessarily…well the reason that they file the lien, the IRS, is to protect their interest, right?

 

KATRINA MADEWELL:  Right. Just like a mortgager. They file a mortgage lien to protect their interest.

 

DARRIN T. MISH: Exactly. In our state, in Florida, we’re a race state as far as recording it, so if that lien is recorded before the next lien, then that takes priority…

 

KATRINA MADEWELL: That’s the lien line. Whoever gets to the courthouse first.

 

DARRIN T. MISH: Exactly. Not all states are like that by the way.

 

KATRINA MADEWELL: So the lien, does that, as far as the pecking order, does the lien come first and the levy’s next?

 

DARRIN T. MISH: Not always. I believe that the standard operating procedure is for the IRS to file that lien once the debt hits a threshold amount. It’s usually $25,000 or above, I believe. They can file it if it’s $10,000 or above but you don’t see that all that often. So, a caveat to that is if you already had a lien filed and then you filed another tax return with say $3,000 due, they’re probably file another lien for that $3,000 because you’ve already reached whatever that threshold amount is. In the Fresh Start Initiative which was something that was passed by the IRS in the last few years, there was actually kind of an exciting program where if the taxpayer owes $25,000 or less, enters into an installment agreement that’s a direct debit installment agreement, meaning the payments are automatically withdrawn from some account. After they’ve made three payments, the IRS will actually withdraw the tax lien, which is really neat. It’s better than a release. The withdraw is kind of like it never was there.

 

KATRINA MADEWELL: So it disappears from credit too?

 

DARRIN T. MISH: It disappears from the credit report as well. On the withdraw.

 

KATRINA MADEWELL: So is it filed on public records?

 

DARRIN T. MISH: The credit?

 

KATRINA MADEWELL: No, the lien.

 

DARRIN T. MISH: Oh, absolutely, it’s filed in the county, in Florida at least, it’s filed in the county clerk’s office.

 

KATRINA MADEWELL: It’s probably not going to go away from credit unless you intentionally try to take that off.

 

DARRIN T. MISH: Well, my understanding is, the withdraw is better than the release. The withdraw is like oops, were versus the release is it’s satisfied.

 

KATRINA MADEWELL: Yeah. Well, it’s like anything else when it hits credit, withdraw means we made an error we’re going to take it off. Satisfied means it’s there, but we’re going to show a zero balance.

 

DARRIN T. MISH: Ok, so there you go. On a lot of our clients we’re trying to do withdraws instead of releases.

 

KATRINA MADEWELL: Which is better because you can get it removed from the credit.

 

DARRIN T. MISH: Yeah, so whenever possible we’re trying to do that on these liens for sure.

 

KATRINA MADEWELL: So, what about dissipated assets? What’s a dissipated asset? I don’t think I’ve ever heard us talk about that term.

 

DARRIN T. MISH: A dissipated asset is when…ok, this is going to take a little while.

 

KATRINA MADEWELL: Ok.

 

DARRIN T. MISH: We’re talking…

 

KATRINA MADEWELL: We got a little while, Darrin. I think we’ve got, according to my calculations maybe roughly a little less than 45 minutes.

 

DARRIN T. MISH: Ok, so when a taxpayer files an offer in compromise, an offer and compromise is like a, it’s a program that allows you to make a deal to settle for less with the IRS. It’s based upon a fairly simple math equation, we’ve talked about this a number of times on this show. The math equation goes like this: Monthly disposable income times twelve plus the assets equals the amount of the offer. So for illustrative purposes, let’s say tax payer had $100 a month in monthly disposable income.

 

KATRINA MADEWELL: That’s what’s left over.

 

DARRIN T. MISH: It’s what’s left over after…

 

KATRINA MADEWELL: Allowable bills.

 

DARRIN T. MISH: …their allowable expenses are taken out. And allowable is pretty important word here. Allowable means according to the IRS standards what the taxpayer is allowed to spend money on for purposes of this calculation. If the monthly disposable income was $100, $100 times 12 is $1200. Let’s assume for just a moment that there’s no assets, well then the taxpayer can make an offer for $1200. It doesn’t matter so much how much they owe, it matters much more how much they can afford to pay. If they owed $250,000, if we can successfully show that the monthly disposable income is $100, there’s no assets, the offer’s 1200 bucks, that’s going to go through 99 times out of 100. Now a dissipated asset situation comes up in this kind of bizarre situation. I haven’t seen it as often in the last few years as I used to see it, but what happens is the IRS has a look back period, kind of like in a bankruptcy, where they can look back up to ten years.

 

KATRINA MADEWELL: Wow.

 

DARRIN T. MISH: On a taxpayers record, so to speak, and if they see any large asset that was dissipated when they had a tax debt or had reason to know they were going to have a tax debt, then the IRS is going to have…

 

KATRINA MADEWELL: So they’re looking to see if they sold some stuff. If there’s some big swings or amounts going through those bank statements, right?  They’re looking at bank statements I would presume.

 

DARRIN T. MISH: Not always, but in the bankruptcy world, we would call that a fraudulent transfer. In the IRS world, we just call it a dissipated asset. It’s not so often with the bank statements although sometimes. What happens a lot is vehicle titles.

 

KATRINA MADEWELL: So they’ll look at VIN’s to see if you had anything in your name.

 

DARRIN T. MISH: Somehow they have some way to tap into state databases so that they can run I guess…I don’t know how they do it. It’s probably a name D.O.B. in the social security number and they can run these state databases. I get questions all the time like, hey whatever happened to that 1992 Nissan Pulsar?  And typically what the answer for my clients are, well, it’s out back with weeds growing out of it.

 

KATRINA MADEWELL: You want it?

 

DARRIN T. MISH: Yeah, right.

 

KATRINA MADEWELL: Come get it, it might cost you more to tow it.

 

DARRIN T. MISH: Occasionally I’ve had clients who have accidentally forgot to include boats they sold three years ago and things like that.

 

KATRINA MADEWELL: Well if you haven’t had it for three years, I can imagine why they wouldn’t think about it.

 

DARRIN T. MISH: Exactly. I didn’t mean to be flippant when I said accidentally forgot.

 

KATRINA MADEWELL: Well, you know, I know how your personality is so I just had to make a remark on that.

 

DARRIN T. MISH: Sometimes people do forget about assets they’ve dissipated in the past. It doesn’t seem like it’s coming up as often, but that’s what a dissipated asset is. It’s something where you intentionally sold the asset so that you would not have the ability to pay your tax bill.

 

KATRINA MADEWELL: Or show an asset that could be used for that. So, amended taxes, I think most people know what an amended tax return is, but how does it relate to what you do.

 

DARRIN T. MISH: An amended tax return is just simply a corrected tax return that can be filed up to three years, sometimes only two years. It’s like a corrected tax return, it goes on form 1040-x and a lot of people think the IRS has to accept that amended return. Nuh-uhn.

 

KATRINA MADEWELL: Really?

 

DARRIN T. MISH: They don’t have to accept it.

 

KATRINA MADEWELL: I didn’t know that. So they can say, no, we’re just rejecting this?

 

DARRIN T. MISH: I have a couple right now we’re working on right now where the issue is…

 

KATRINA MADEWELL: What grounds do they have to actually reject the tax return, just out of curiosity?

 

DARRIN T. MISH: I’ll tell you a couple we’re working on right now.

 

KATRINA MADEWELL: I’m always putting the cart before the horse.

 

DARRIN T. MISH: We’re not going lose these. When a taxpayer has a cancelled debt like they have a short sale on their house for example and the bank, let’s say they owed 300 grand on the house and the bank forecloses and they sell it for 250. Well, there’s a deficiency of that 50 thousand dollars, right? So technically that deficiency when that debt gets canceled…

 

KATRINA MADEWELL: When the bank writes it off.

 

DARRIN T. MISH: Yeah, when the bank writes it off, which, this is really bizarre, I don’t know why congress passed this law, but that 50 thousand dollars gets issued on a 1099-c and then the taxpayer is supposed to pay tax on that 50,000 dollars of debt that was quote cancelled.

 

KATRINA MADEWELL: Like it was income.

 

DARRIN T. MISH: Like income that they never got. It makes no sense to me, but there’s two really huge exceptions to this rule and that is number one if they wiped out the debt in a bankruptcy, then it doesn’t apply, right?  That would make no sense. That would mean bankruptcy just mean, every bankruptcy generated a gigantic tax bill. So that kind of makes sense that that’s there. The second one is if the taxpayer was insolvent at the time of the cancellation of debt, then the debt has to …

 

KATRINA MADEWELL: Which means you have a hardship and a lot of people that have a short sale do.

 

DARRIN T. MISH: Right, so I’ve seen very few people, I have seen some. But I’ve seen very few people who have lost a house when they were not insolvent. There are always the people who make a conscious decision to go ahead and walk away from homes. Usually investors if they have 8 or 10.

 

KATRINA MADEWELL: They call those strategic defaults.

 

DARRIN T. MISH: Right, they just walk away from those. And those people, you know, that’s their decision and I don’t fault them for that.

 

KATRINA MADEWELL: But you still owe the money.

 

DARRIN T. MISH: Right, you still have a cancellation issue, potentially. So right now I’m dealing with two where they were…actually one of these cases, Bank of America simply cancelled a second mortgage that was being paid on and everything for no apparent reason. They just cancelled it, they wrote it off. Turns out my client was insolvent at the time anyway, she didn’t know so she filed her own return.

 

KATRINA MADEWELL: They had some kind of thing awhile back, it was something that happened with the bail out money, that they wiped out some of these loans. We had that come up in a client that was doing a short sale. Had a first and a second and the second was Bank of America, then when they found out the second lien was wiped out, they just forgave it, satisfied it, that changed the picture of them being able to keep the house.

 

DARRIN T. MISH: Fantastic, that’s probably a great thing.

 

KATRINA MADEWELL: So it worked out for them.

 

DARRIN T. MISH: In this particular case, she filed her own returns, she didn’t know how to deal with the cancellation of debt, she writes it up as it’s going to be taxable income because that’s what the software told her, so she comes to us and she wants to know how I can help her. I’m like, oh, we can just amend the return and characterize that the fact that you were insolvent and we can wipe that tax out. Well the IRS has now rejected that amended return and they’re basically saying I don’t have any appeal rights. But you remember, I always have appeal rights so I’m still appealing it and we’re going to win that case because they’re actually wrong.

 

KATRINA MADEWELL: What grounds do they have to reject it?  What do they say? What do they mail out?

 

DARRIN T. MISH: It was just like an Alice in Wonderland rejection letter that said, we disagree, we’re not really saying why and you have no appeal rights. The only thing you can do is pay the tax and then you can file suit in district court. And it’s like – wrong. That’s not how we’re going to do it. You can imagine if you were just Joe Schmo, regular taxpayer who doesn’t know what’s going on and you get this scary letter from the IRS that says, you lose, what do you think most people do? They just kind of go well, I guess I lose. I guess I better pay the piper.

 

KATRINA MADEWELL: Yeah. Most people would say, I’m not fighting with the IRS. I’m not going to do that.

 

DARRIN T. MISH: Right, well when we fight with them, remember we don’t fight nasty. We fight…

 

KATRINA MADEWELL: Well, you know the rules. It’s different when you fight and you know the rules, right?  That’s why you hire attorneys because they know the rules.

 

DARRIN T. MISH: It’s funny in my personal life I’m not really a sore loser at all, but in my professional life, it’s like nuh-uhn, we’re not losing that one. I’m not letting that little old lady eat 30,000 dollars in taxes. Not on my watch.

 

KATRINA MADEWELL: It’s about the principle at that point.

 

DARRIN T. MISH: Yeah, actually. If I have to spend a few extra hours to win that case for her. Absolutely, it’s a done deal. That’s what we’re going to do.

 

KATRINA MADEWELL: So what about penalty abatement?

 

DARRIN T. MISH: We always talk about that fancy word, right?

 

KATRINA MADEWELL: Penalty abatement. That’s an IRS word.

 

DARRIN T. MISH: Abatement. Actually, the IRS train wreck of the week in our last segment is going to be all about abatement.

 

KATRINA MADEWELL: Penalty abatement sounds like a little trap, doesn’t it?  Like a little trap to get you in there.

 

DARRIN T. MISH: I can kind of imagine like a raccoon trap.

 

KATRINA MADEWELL: Yeah, that’s what I’m picturing in my head.

 

DARRIN T. MISH: An abatement is just an elimination of penalties. So it could be an abatement of tax too. But abatement just means a reduction or elimination. So penalty abatement, really what’s working right now very well is first time penalty abatement. In a nutshell, taxpayers are entitled to a first time penalty abatement if during the prior three years they didn’t have any penalties. So this is a gold mind for lots of people and you just have to keep that in mind. The other type of penalty abatement that we think about most often is based on what we call reasonable cause. That sounds like a lawyer phrase, right?

 

KATRINA MADEWELL: What does that mean? Reasonable cause.

 

DARRIN T. MISH: I swear we spend a whole year in law school talking about the word reasonable. What does reasonable actually mean?  That’s how the law professor used to say it. That’s like deeply ingrained in my psyche.

 

KATRINA MADEWELL: And yet you have a whole room full of attorneys that can argue what reasonable means.

 

DARRIN T. MISH: What is reasonable?  It’s kind of like when you see it. In this context, reasonable cause means a very darn good reason why you didn’t file your taxes or you didn’t pay your taxes on time.

 

KATRINA MADEWELL: Like, what?

 

DARRIN T. MISH: I would say…

 

KATRINA MADEWELL: What’s a good reason that you see?

 

DARRIN T. MISH: Death, fire, divorce, hurricane, flood, pestilence, things like that.

 

KATRINA MADEWELL: Where your data’s wiped out or you don’t have access to it or you couldn’t do it.

 

DARRIN T. MISH: Interestingly, I don’t think I’ve ever seen a case where many years strung together qualified for reasonable cause. What I mean is…I had a case one time where…

 

KATRINA MADEWELL: It’s a temporary hiccup where something happened in a year or two.

 

DARRIN T. MISH: Right, it’s usually one, two, maybe three years. But after that, there isn’t reasonable cause for not filing.

 

KATRINA MADEWELL: It’s intentional after three years, right?

 

DARRIN T. MISH: Well, we’re not going to call it intentional.

 

KATRINA MADEWELL: I’m just saying it kind of seems like it’s a little intentional. I’m not the attorney here, remember. I can say stuff like that.

 

DARRIN T. MISH: We’re not going to call it intentional, we’re going to just say perhaps negligent, right?

 

KATRINA MADEWELL: Definitely negligent.

 

DARRIN T. MISH: There’s lots of people out there, I think, they’re self-employed, they just don’t know what to do in terms of filing their tax returns and if they just had some more education and made a decision to do it then they would file their returns and they would get caught up with the IRS. It’s so scary, it’s so anxiety ridden for most people to deal with the non-filing taxes that I don’t want to call it intentional. It sounds like harsh, you know?

 

KATRINA MADEWELL: Well, I mean, it’s overwhelming I think to some people. Most people are not that C-type of personality that loves the numbers and the Excel spreadsheet and all that so when you think about whatever happened to them, whether it was a fire or a flood or whatever, loss of data, who knows. I can see why that task would be overwhelming. I’ve been there.

 

DARRIN T. MISH: It’s kind of like your kids when they have a project that’s due in thirty days…

 

KATRINA MADEWELL: And they wait until the night before to do it.

 

DARRIN T. MISH: They wait until day 28 or something and on day 28 something happens, day 29 something happens and on day 30 they want to go to the teacher…this was me when I was a kid by the way…go to the teacher…

 

KATRINA MADEWELL: Oh, I thought you were talking about my kids.

 

DARRIN T. MISH: Go to the teacher and you’re like, ok, here’s what happened. First the dog ate the homework and then the house burned down and then there was a flood and then you know that hurricane came through and now we have a snow warning, so I can’t get my homework done. So if taxpayers do that too where it’s like well, in tax year 2011 I had this happen, in 12 that happened, in 13 that happened and in 14 that happened, you sort of string those stories together and it doesn’t work so well.

 

KATRINA MADEWELL: Eventually it’s just a procrastination excuse, really.

 

DARRIN T. MISH: And I’m the first one to say that getting organized and being organized and getting the tax returns done is really not a lot of fun, but it’s just something that has to be done. Just like you have to pay your mortgage or your rent.

 

KATRINA MADEWELL: Hire a bookkeeper for a few bucks. Just get it done.

 

DARRIN T. MISH: Yeah, for sure. And if you’re in business and you’re doing your own payroll, like through QuickBooks payroll or something like that. By all means, you need to hire a payroll company. Some of these business owners are tripping over pennies to save dollars, or other way around.

 

KATRINA MADEWELL: Yeah, we know what you mean. We got it. We are live in the studio today, we have to take a quick break because we’re at the bottom of the hour, but 727-441-3000. Call in with your IRS questions and Mr. Darrin Mish will answer them. 727-441-3000. We’ll be back in a minute.

 

(Commercial Break)

 

DARRIN T. MISH: Welcome back, this is Darrin Mish, the IRS solution attorney show. With Katrina Madewell.

 

KATRINA MADEWELL: I’m your cohost, welcome back to the show. Just in case you missed it, we are answering some of those FAQ’s you might have or someone you might know that may have an issue or little hiccup with the IRS or have gotten a letter or a notice and we can answer those for you on today’s show because we are live in the studio. 727-441-3000. If you’re driving, pull over and then you can put it in your phone and call us. 727-441-3000.

 

DARRIN T. MISH: Is dialing the phone illegal now?  While you’re driving?

 

KATRINA MADEWELL: I don’t think so.

 

DARRIN T. MISH: I don’t think so.

 

KATRINA MADEWELL: I don’t think it is. Hopefully you’re on Bluetooth though, or something.

 

DARRIN T. MISH: Yeah, I have a headset. I have a headset when I drive.

 

KATRINA MADEWELL: So continue with our FAQ’s I know this one, you probably see a lot because I’m sure a lot of people have seen this or heard or know someone that’s had it. When the IRS sends a notice of Intent to Levy.

 

DARRIN T. MISH: Yeah, there are couple different kinds.

 

KATRINA MADEWELL: That’s a pre-levy, right?

 

DARRIN T. MISH: Yeah, there’s a couple different notices that get issued to taxpayers that talk about notice of intent to levy. So I’m going to talk about the differences right now. There’s one that’s scary, but you shouldn’t be too afraid of it. And there’s one that’s scary and you should be afraid of it.

 

KATRINA MADEWELL: Ok, do tell.

 

DARRIN T. MISH: So the first one is IRS letter CP-504. Now you can find the IRS letter notices, or the numbers, in the upper right hand corner of the notice. So if it says CP-504 in the upper right hand corner, it’s a notice of intent to levy, but if you read it closely, it says it’s their notice that they intend to levy your state tax refund. So we’re sitting here in Florida, we don’t have a state income tax, there’s several other states that don’t as well. If we’re in Florida and you get CP-504, whatever, it’s not that important. It does tell you, it does actually increase the penalty rate. Ok, but if we’re not going to pay because we’re going to do an offer and compromise or something, it doesn’t matter that much.

 

KATRINA MADEWELL: So this is specifically to levy a tax refund?

 

DARRIN T. MISH: A state tax refund.

 

KATRINA MADEWELL: Ok.

 

DARRIN T. MISH: But also it’s an indication of where you are in the collections cycle. So if you get a CP-504, your account is definitely in collections and more will eventually happen. So that’s what I use it for when I’m looking at a client’s file, I look at a CP-504, ok, we haven’t gotten to the point to an actual levy yet, but we’re headed down that road and we’re going to have to do something relatively soon. The second kind of notice of intent to levy is called a final notice of intent to levy and just in the past couple years, the IRS is really changed how this form looks. It used to be very distinctive, it used to look a lot different than the rest of the collection notices, it said final notice in real big letters on it. It used to be a letter 1058. About two years ago, the IRS started using a letter LT-11 and it looks just like every other collection letter. Literally. It looks exactly the same.

 

KATRINA MADEWELL: Why do you think they did that?

 

DARRIN T. MISH: I think they did that because there’s too many appeals being filed. You can file an appeal, which is called a request for a collection due process hearing, from an LT-11 or a 1058. A final notice of intent to levy, you can actually appeal. You cannot file an appeal on a CP-504 because it’s not ripe yet. You haven’t gotten far enough.

 

KATRINA MADEWELL: It’s just an intent to do it.

 

DARRIN T. MISH: Yeah, well, see intent to levy the state tax refund, and like I said in most states, it’s just not a big deal. Even if you lived in some other state and you had 500 bucks coming, it’s not typically the end of the world like a real levy could be the end of the world almost. Or at least it could feel like that, right?

 

KATRINA MADEWELL: Right.

 

DARRIN T. MISH: So if they levy your bank account, they take all your money that you have in the bank and you go to swipe the debit card down at the grocery store and it gets declined. How are you going to pay for groceries?  That qualifies as the end of the world just about, in my book.

 

KATRINA MADEWELL: Pretty much, yes. Especially if you have little ones. So what’s a levy source information?  How do they get this to know that they’re going to levy something?

 

DARRIN T. MISH: Let’s go back real quick to the LT-11, the final notice of intent to levy.

 

KATRINA MADEWELL: Ok.

 

DARRIN T. MISH: You get one of those letters, you have the right to file a timely filed appeal within 30 day s of the date on the letter. Interestingly, ignore the date you got the letter, it doesn’t mean anything. What’s important is the date on the letter. And they postdate and pre-date stuff all the time.

 

KATRINA MADEWELL: So how do you verify what day you actually got it?

 

DARRIN T. MISH: Well, it doesn’t matter.

 

KATRINA MADEWELL: Is that debatable?

 

DARRIN T. MISH: It doesn’t matter really what day you got it, it matters what date is on the letter. So I will often get IRS correspondence on behalf of clients that’s dated in the future. It’s just sort of interesting, right?

 

KATRINA MADEWELL: So the postmark on the envelope does not matter?

 

DARRIN T. MISH: There usually isn’t even a postmark. But that’s interesting that you said that. The final notice of intent to levy has to come certified mail. It cannot come regular mail, so if you have a tax problem or you have a tax debt and you get that little orange thing that the post office leaves in your mailbox at home that says come by and pick this up or sign for it here, or whatever. Don’t ignore that. This would be a very bad idea to ignore it. Routinely clients tell me I just ignored it, I blew it off. Well, just because you blow it off doesn’t mean it isn’t there. So you should definitely sign for it and you should definitely read it so you can see what’s going on. You can file a timely filed appeal within 30 days of the final notice. That becomes a collection due process hearing. Due process is in the constitution, it basically means the government has to follow a certain set of procedural rules so you have an opportunity to complain about some action that they’re going to take. This appeal gives you due process rights. If you blow that 30 days, it’s kind of cool because there’s a way to file a late appeal from day 31 to date 365.

 

KATRINA MADEWELL: Oo, that’s a lot of extra time.

 

DARRIN T. MISH: In the past, I’ve been doing this so long that you used to be able to file what’s called an equivalent hearing, so it’s a late filed appeal. We had an unlimited amount of time to file a late appeal and equivalent hearing so we used to routinely file equivalent hearing requests on cases where the final notice was issued like eight years ago.

 

KATRINA MADEWELL: The IRS was like un-uhn, we got to put a timeline on this.

 

DARRIN T. MISH: I think it was guys like me that actually causes the IRS to finally change the rules because we find the chink in the armor, we find the weakness and then we exploit the heck out of the weakness knowing that the government’s going to eventually close it. But you have to get as many people through the chink in the wall as you can.

 

KATRINA MADEWELL: Run while it’s open. Run.

 

DARRIN T. MISH: And there’s some other fine distinctions between the collection due process hearing and the equivalent hearing. The first and most important is if you want to appeal from the decision in a collection due process hearing, you can actually appeal to tax court. It doesn’t happen that often, but you can appeal to tax court. The burden of proof, or the burden persuasion is actually abuse of discretion. In that appeal, you have to assert and prove that the IRS abused the discretion in your collection due process hearing. It’s a pretty high hurdle. I’ve seen it, but it doesn’t happen that often.

 

The other thing is the collection due process stops the collection statute of limitations from running. Let’s explain that real quick. There is a ten year statute of limitations from the time a tax is billed or assessed against the taxpayer, the IRS only has ten years to collect that tax, right? So if you file a collection due process hearing, a timely appeal, it actually tolls, which means stops the statute of limitations from running. That’s usually not a good thing.

 

KATRINA MADEWELL: I was going to say, it kind of freezes time on you.

 

DARRIN T. MISH: But it’s kind of the tradeoff. Because the collection due process hearing request gives you ironclad protection, at least with regard to those tax years, that the IRS cannot take any further collection action against you. So you get the collection hold, the IRS gets the toll on the collection statute. On the equivalent hearing, it’s a little bit different. What happens that there’s no tolling of the collection statute, but there’s no technical collection hold that’s mandatory. The IRS can decide to go ahead and give you a collection hold. By the way, they usually do. They don’t have to do it, but the statute continues to run. So what do we do in these cases where we have less than a year?

 

KATRINA MADEWELL: Wait, so when you say give you a collection hold, you mean that the ten years of freezing that?

 

DARRIN T. MISH: They’ll usually just put a hold on all collection activity.

 

KATRINA MADEWELL: So they won’t pursue it.

 

DARRIN T. MISH: They’re not going to levy, they’re not going to hassle you while the appeal is pending, but it’s not stopping the collection statute from running. In some cases, if the statute is short. Let’s say there’s a year left on the collection statute, I don’t really want to stop that. That would be bad. If you got a year, we’re just trying to run the clock out. We’re just trying to keep the balls in the air so when we get to the finish line, we’re going to win. So sometimes we’ll actually file a late appeal on purpose, knowing that the IRS is probably going to give us that collection hold, informal hold, where they’re not going to hassle us. The collection statute is going to continue to run. Some of these appeals take three months, six months, seven months, eight months.

 

KATRINA MADEWELL: So in the meantime, some of these clocks can be running out where they can actually even collect taxes.

 

DARRIN T. MISH: Yeah, and I’ve never publicly said that. Anywhere.

 

KATRINA MADEWELL: I just said that. Not you.

 

DARRIN T. MISH: I’ve never publicly said that I’ve filed late appeals on purpose on occasion.

 

KATRINA MADEWELL: Sometimes it happens anyway, like stuff gets dropped in your lap late, I’m sure.

 

DARRIN T. MISH: Well, the only time that would happen is if a client brought it in on day 33 and there’s nothing I can do about it. The other trade-off on the equivalent hearing is it doesn’t stop the collection statute of limitations, but there’s no appeal past that equivalent hearing, you can’t go to tax court, you’re just kind of done. So that’s the big difference. The question you asked is; where does the IRS get the information from the levy source.

 

KATRINA MADEWELL: Yeah, like how do they know?

 

DARRIN T. MISH: Well, I don’t think I’ve ever read this anywhere but it’s using common sense I’ve come up with some theories. When you have a W-2 that’s issued, where do you think that goes?

 

KATRINA MADEWELL: Well, they get a copy.

 

DARRIN T. MISH: Yeah, they get a copy, so they know where you work. Whether you file a return or not. If there’s a W-2 there, they know ok, he worked there.

 

KATRINA MADEWELL: He worked there at some point.

 

DARRIN T. MISH: Yeah, he worked there at least last year and so they have that information. If there’s a 1099, and lots of people get one 1099, they just work for one sort of contractor.

 

KATRINA MADEWELL: Contractor for a temporary time.

 

DARRIN T. MISH: Or there’s other people that have multiple 1099’s, right?  They might, they’re really a contractor and…

 

KATRINA MADEWELL: If it’s over whatever that amount is that you’re paying. I think it’s six or seven hundred bucks. Something like that.

 

DARRIN T. MISH: I think it’s 600 dollars. So lots of people would have multiple 1099’s. So they’re going to get the information from the W-2’s and 1099’s. But also, think about it, they’re going to get it from the banks. If you file a tax return and you have interest then that’s going to be reported on a 1099 also, INT. Then that’s going to show up. So that’s where they figure out where you’re banking. If you’ve ever written them a check, there’s a copy of it, so they know where you were banking at least when that check was written. So I don’t think it’s all that high tech.

 

KATRINA MADEWELL: They track whatever little thing. They have the routing number and stuff most of the time anyway on your taxes.

 

DARRIN T. MISH: If you’re paying.

 

KATRINA MADEWELL: Yeah, if you’re getting money back.

 

DARRIN T. MISH: Or if you’re getting money back I guess. I don’t think I’ve ever done that. I like the check. It’s got like a rainbow color on it.

 

KATRINA MADEWELL: I don’t know if they do that anymore, do they?

 

DARRIN T. MISH: I got a check this year.

 

KATRINA MADEWELL: Did you?

 

DARRIN T. MISH: Yeah, for sure.

 

 

KATRINA MADEWELL: I thought they liked to wire everything now.

 

DARRIN T. MISH: I’m sure they do like to do it, but you know, hey.

 

KATRINA MADEWELL: Then they get your info.

 

DARRIN T. MISH: So that’s really where they get that information. If you’re working in the black market economy, you’re working underground for cash. The IRS doesn’t know where that money is coming from so it’s not going to be easy to levy. I’m not encouraging anybody to work for cash in an underground economy.

 

KATRINA MADEWELL: No, but that was just my question, like where’s the source.

 

DARRIN T. MISH: If you’re a guy that’s mowing lawns door to door or something like that and people are paying you cash, the IRS is not easily going to be able to levy that for sure.

 

KATRINA MADEWELL: So how long is the bank required to wait before the frozen account is actually released to the IRS?

 

DARRIN T. MISH: A lot of people use that terminology of frozen bank account. I guess it’s only frozen for one day.

 

KATRINA MADEWELL: It’s still frozen. You can’t get to what’s in there when you want it. That’s a pretty helpless people.

 

DARRIN T. MISH: Well, on levy day, right. I guess it’s frozen on the day that the levy is processed by the bank. Here’s how it works.

 

KATRINA MADEWELL: It’s enough to scare people to not want to put any more money in the bank, I’m sure.

 

DARRIN T. MISH: Yeah, that’s for sure. The levy, the bank levy is served on the bank of the taxpayer and then the bank has to hold that money for 21 days. That’s to allow the taxpayer to have due process. To communicate with the IRS, try to get the IRS to release, or issue a levy release to the bank so the bank can release the funds back to the taxpayer. But the bank account is not frozen forevermore. It’s only frozen on the day that the levy is received. On day two, you can go put some more money in there and you can continue to use your bank account. The bank levy is not continuous.

 

KATRINA MADEWELL: How often can they do that, though? Can they do that again? Like do you see that?

 

DARRIN T. MISH: Well, the internal revenue manual says that they’re not supposed to do in a consecutive bank levies and it also says they’re not supposed to be punitive in nature. We used that word the other day.

 

KATRINA MADEWELL: Yeah, but what does that mean, that’s an attorney word.

 

DARRIN T. MISH: Punitive means they should not be punishing the taxpayer. None of this collection action is supposed to be about punishment anymore after the reforms that passed in 1998. It’s all supposed to be about collecting the money. I have seen revenue officers who are IRS employees who are like the field people who go collect the money. I’ve seen a few over my career act in punitive ways where it really had become personal, but it’s really not all that typical.

 

A bank levy is supposed to be kind of isolated. The most frequently I’ve ever seen it is every month and I think that was punitive. I think that revenue officer…

 

KATRINA MADEWELL: That could be, you could almost not really retaliate, it’s a wrong word, but you could appeal that in some way or another.

 

DARRIN T. MISH: Yeah, you would speak to management at that point and you could probably get them to stop doing that because it’ snot reasonable, ok? Really the point of the bank levy is to collect some money for sure, but it’s also to get the taxpayers attention, so that you pay attention and you start to take some steps to deal with the situation.

 

KATRINA MADEWELL: What kind of steps do you take to actually get that levy removed? So let’s say someone had ten, fifteen, twenty grand maybe more in their account at that time, they levied and they either, do they freeze it or swoop it or whatever they’re doing on the day of that levy?

 

DARRIN T. MISH: A lot of times, you can’t get the levy released and I’ll tell you why. One of the requirements to getting a release of a levy typically, is you have to have all your missing returns done. So let’s say you’re a non-filer. I have lots of people that are non-filers, haven’t filed in ten, twenty, thirty years, right? So the general rule is that they file the last six tax year’s returns. But let’s say they have six years of returns to do and they just took the twenty grand like you were talking about on the bank account. Now, number one they probably don’t have any records and number two, now they don’t have any money to hire representation to try to help them to do that. I would say your typical person on the street is incapable of preparing and filing six years’ worth of tax returns with zero resources.

 

KATRINA MADEWELL: Absolutely.

 

DARRIN T. MISH: They’re not going to have the best records and whatnot and the paperwork burden for a self-employed person becomes pretty burdensome in one year, can you imagine the burden of trying to do six years?

 

KATRINA MADEWELL: So you’re saying most of the time you cannot get that released? They’re just going to swoop it and keep the money?

 

DARRIN T. MISH: A lot of times, we can’t get it released. If we can show that it’s truly an economic hardship, that they’re going to not have a place to live, they’re not going to be able to afford to buy food and medicine and stuff, we can often, I would say even typically get a partial release. But many many many bank levies are just really small amounts of money. So unless they hit you, for the average working person, unless they hit you on payday or within a couple days after payday, there’s probably not all that much money in your checking account.

 

KATRINA MADEWELL: But that could be your mortgage or whatever, getting ready to draft.

 

DARRIN T. MISH: Could be, for sure. Bank levies are really problematic. What I would say is…

 

KATRINA MADEWELL: Yeah, because you could have written a check to your bank to write your mortgage and then if it bounces, that’s a whole snowball effect of problems.

 

DARRIN T. MISH: What I would say is, don’t wait until you get a bank levy to try to deal with your problem with the IRS because what happens is you end up in a situation where you have absolutely zero leverage and all your rep, all I can do for you is call and beg somebody to do the nice thing.

 

KATRINA MADEWELL: Depends on who you get on what day, right?

 

DARRIN T. MISH: Right.

 

KATRINA MADEWELL: But if you have a good explanation do you find that sometimes they cooperate?

 

Darrin T. Mish: Sometimes, especially if it’s only a year or two and you have a pretty good reason why that happened, that you might be able to get a partial release of the bank levy, or you might get a whole release of the bank levy. It’s kind of dependent on the facts and circumstances. But it reminds me of that old cartoon where the guy wanted to pay for the cheeseburger, next Thursday. Don’t wait until you’re absolutely flat broke and then look for help because it’s harder to get it.

 

KATRINA MADEWELL: it’s harder to get it.

 

DARRIN T. MISH: You have to have somebody who trusts you that you’re going to pay when you can and there’s not a lot of people out there that are going to want to do that for the dozens of people or whatever.

 

KATRINA MADEWELL: What about the scenario that you just gave where someone has not paid their tax returns I think I heard you say thirty years a minute ago. What does somebody like that do if they have not filed a return in they don’t know how many years. Where the heck does somebody like that start?

 

DARRIN T. MISH: Well, you’re going to have to call probably somebody like me so we can get a power of attorney, so we can communicate with the IRS on your behalf and get records from the government. One of the things we can do is we can get the records, usually going back about ten years, of all the wage and income that was happening in that taxpayers life. Not the cash, the cash if you’re working in largely cash, there’s not going to be any records there. But if you received W-2’s or 1099’s or 1098’s, those kinds of things, those records are going to be at the IRS so that can be the starting point of preparing returns. Your average person that comes to see me with these kinds of problems, literally almost 100% of the time, there’s a fire, flood, hurricane story. I’m not denigrating anybody, there’s just some reason why this kind of fell of the radar and just didn’t get done.

 

KATRINA MADEWELL: So how far back do they actually have to file? Didn’t you say they look back ten years?

 

DARRIN T. MISH: there’s a policy at the IRS that says that you only have to go back six years, so that’s really good news.

 

KATRINA MADEWELL: So anything before that, really they kind of get a clean slate, they just have to file the prior six years.

 

DARRIN T. MISH: Yeah, not to encourage anybody to do this. But you could probably get away with it.

 

KATRINA MADEWELL: No, but I’m just saying if someone’s listening and maybe they haven’t filed in twenty years and they want to file.

 

DARRIN T. MISH: Yeah, it’s super common and it’s super common for reps to give bad advice and say well, you know, you have to file all of your tax returns. No, they don’t. They only have to file the past six years.

 

KATRINA MADEWELL: When does that actually start?  For example, we’re in November now, do they go by the April deadline. I’m just curious, what if someone is listening to the show and they’re going wow, that’s me. I haven’t filed my returns in 20 years, it’s really been bothering me for years and years and years. I can’t sleep so I’m going to start seeing where I can get help to file the last six years back, but if you’re getting really close to where they’ll wipe out a year, when’s a good time to do that?

 

DARRIN T. MISH: Well, that’s a good question because here we are in the fall.

 

KATRINA MADEWELL: It’s a legitimate question.

 

DARRIN T. MISH: My interpretation of the law or the rule or the policy is that for right now, you’d have to go back to 2009, right? So we’re in 2015 right now, so you’d have to fill out 2009, 2010, 2011, 2012, 2013, 2014. That would be your last six years. But in my opinion, as soon as we hit January first, baby, 2009’s off the table because now you can theoretically file 15, right? Because the tax year’s over. For some people, this could be, without going into too much detail, that could be a real benefit.

 

KATRINA MADEWELL: If it were me, I would want to try to start somewhere. I’m sure there’s people that haven’t filed for a long time.

 

DARRIN T. MISH: I see on a pretty regular basis, I see taxpayers who use different reps and their reps had them file the last twelve years or whatever. Make no mistake, if you file a return that’s older than six years and there’s a tax due on there and it can be assessed, the IRS is going to assess it. You can’t un-ring that bell. That bell has done rung at that point. You don’t want to make that mistake.

 

KATRINA MADEWELL: So as soon as you contact them, it’s going to get moving. Basically.

 

DARRIN T. MISH: Right, there are some rare occasions why you might want to go back beyond six years that are kind of beyond the scope of what we’re talking about. But remember, if the IRS has prepared a return for you in the past, which is called a substitute for return, then you always have a right to file an original return that substantially changes that return. So that’s often a good idea, but not always mandatory.

 

KATRINA MADEWELL: How does somebody find out? Do they have to go through someone like you and then you file that authorization to talk to them to see if they filed anything?

 

DARRIN T. MISH: Well, frankly, they can call the IRS on their own and ask for this information, they certainly can. They can call on their own.

 

KATRINA MADEWELL: But that’s probably going to spark some collection, wouldn’t you think?

 

DARRIN T. MISH: It can, for sure it can.

 

KATRINA MADEWELL: if it’s been dormant and there’s been no activity for who knows how many years.

 

DARRIN T. MISH: That’s one of the nice things I think about having a rep, is we very discreetly file a power of attorney and the machine just sort of picks it up, puts it on the file and I’ve never seen a direct correlation between the filing of the power of attorney and the institution of immediate collection action.

 

KATRINA MADEWELL: That’s kind of nice.

 

DARRIN T. MISH: I’ve seen powers of attorney sit there for a year and a half, two years on people that owe a million dollars and nothing ever happens. So I don’t think there’s a correlation between the filing of power of attorney and collection action. I think it would be a bit of a scandal if there was. If taxpayers are trying to do the right thing, hiring somebody to help them, hiring representation and then the IRS decides they’re going to clamp down only on people who have representation, there’d be hell to pay.

 

KATRINA MADEWELL: Yeah, attorneys would retaliate on that in a minute, I’m sure.

 

DARRIN T. MISH: There’d be hell to pay.

 

KATRINA MADEWELL: That’s the last person you want to pick a fight with, it’s like the big dog in the room.

 

DARRIN T. MISH: I’ve never really thought about that. But there would definitely be hell to pay and we’d be screaming and we’d all be in congress testifying.

 

KATRINA MADEWELL: Yeah, they don’t want that.

 

DARRIN T. MISH: So, that’s probably not going to happen. A Taxpayer can call the IRs, can get these same transcripts that I can get. It comes into an experience thing too. I’ve handled thousands of cases.

 

KATRINA MADEWELL: Well, you kick the hornets without a bee’s keeper suit on, you know? What about the person that has actually paid a tax bill late? Then the IRS sends this letter going you’re late, we’re going to assess you all of these penalties and interest and just all of that snowball of stuff. So they filed it, they did it, it just got there late. What can they do about that? Anything?

 

DARRIN T. MISH: Well, if you can prove it wasn’t late, then that’s the best of all worlds. If you have electronic filing receipt.

 

KATRINA MADEWELL: What if you mailed it?

 

DARRIN T. MISH: If you mailed it, if you sent it certified mail…I’ve told this story before, I’ll tell it again real quickly. One time I filed my return with paper and I filed it certified mail. I filed it on like April 14t, so it got to the IRS sometime like April 20th or something like that. I get this love letter from them that says hey congratulations, you filed a return late, you owe us 500 bucks. I don’t even know why I did this because I know better. I called them up and I said Hey, what’s up with that?  I filed this thing on the 14th, it was timely filed and you’re dinging me for 500 dollars and the lady was really really nasty. She says, well, the only way that you can prove it is if you filed it certified mail and you can show us the receipt. I said, well, as a matter of fact, where do you want me to fax that?

 

KATRINA MADEWELL: Is this like where someone keeps copy of the front of the…envelop?

 

DARRIN T. MISH: The little green slip, when you go to the post office, they usually round stamp it with like, it’s an old fashioned like cancellation and they also run it through the computer. Nowadays we have tracking.

 

KATRINA MADEWELL: So you can copy that or take a picture of it?

 

DARRIN T. MISH: Yeah, you can copy it or take a picture of it or whatever and send it to the IRS.

 

KATRINA MADEWELL: Well, smartphones that’s easy.

 

DARRIN T. MISH: And that saved me 500 bucks. So the way I look at it, that saved me 100 years of certified mailings on my tax returns. That’s one way. The other way is from the first time penalty abatement that we talked about. So if this is an isolated thing, you filed your tax return late and now you have a big penalty because you filed it late, but in the prior 3 years you didn’t owe them any penalties, you were a good boy or girl, then you’re just going to have to call them and ask them to abate the penalties on the late filing, it’s going to go pretty smoothly. Or if you had a really good reasonable cause. Sometimes there’s fires in different parts of the country, they delay filing, or hurricanes and that kind of thing. Those are often geographical. If you’re in a flood area…

 

KATRINA MADEWELL: Everybody in that region.

 

DARRIN T. MISH: Yeah, you get a little extra time. Katrina, I think they got like, hurricane Katrina, I think they got an extra year.

 

KATRINA MADEWELL: Not me specifically, but you know, we do a little damage.

 

DARRIN T. MISH: You are a hurricane on occasion.

 

KATRINA MADEWELL: So, it’s about that time, we’re a little late.

 

(Train Whistle)

 

DARRIN T. MISH: We’ve got two or three minutes to talk about the IRS Train Wreck of the Week.

 

KATRINA MADEWELL: We got to get it in there.

 

DARRIN T. MISH: This was a really cool one that happened this week actually. I guess it was late last week. I had a client that was a dentist and he got a tax bill from the IRS for $150,799.90. How’s that for being exact, right? I can’t go too much into the details, but I knew that I could demonstrate categorically to the IRS that he did not owe this money. At all. For a very reasonable fee, I got involved and I actually complained to the taxpayer advocate. We’ve really never talked about the taxpayer advocate.

 

KATRINA MADEWELL: No, we haven’t. We’ll have to add that to another show.

 

DARRIN T. MISH: The taxpayer advocate is an independent branch of the IRS, whatever that means. They’re an independent branch of the IRS that is there to help and assist taxpayers who have problems, bureaucratic snarls, that kind of thing. When I say problems, I don’t mean like problems like I handle. Just really obvious things…

 

KATRINA MADEWELL: Something internal.

 

DARRIN T. MISH: …the bureaucracy has caused. I mean that’s how I use them at least. My philosophy on using the taxpayer advocate is if I can explain it so simply and obviously that I win that my child can understand, then that’s the way you fill out the form 911, the 911 form you file to use the taxpayer advocate. Now the people at the taxpayer advocate are really nice. They’re very professional, they follow-up when they say they’re going to, they generally do what they say they’re going to do.

 

KATRINA MADEWELL: That’s nice.

 

DARRIN T. MISH: Yeah, it’s kind of rare in the government, actually. So I employed the assistance of the taxpayer advocate in this particular case. I very simply explained why we were right in this instance, and within about 45 days, 60 days, the IRS agreed and they wiped out over 150,000 dollars from this particular client’s tax bill. He was pretty stoked, actually. He was really really happy.

 

KATRINA MADEWELL: I guess so.

 

DARRIN T. MISH: I was really happy too because whenever you stick your neck out professionally like that where you say, listen, we can take care of this, it’s always a little bit scary, but you’ve got to go and do the hard stuff if you want the accolades.

 

KATRINA MADEWELL: Absolutely. We got some questions on Twitter and it’s a little late to answer them, but feel free to hit us up at darrin underscore mish. Again on twitter, that’s at darrin underscore mish. We promise we’ll get back to you and we will answer them next week.

 

DARRIN T. MISH: Don’t forget to visit the website at getirshelp.com. We’re out.

 

KATRINA MADEWELL: Yeah, that was your job. Bye.

 

 

 

 

 

 

 

 

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