Are You Going To Lose Your Home Over Unpaid IRS Taxes?

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DARRIN T. MISH: Welcome and good morning. This is your IRS solution attorney, Darrin T. Mish and I’m joined by my beautiful co-host, Katrina Madewell.  Click here to watch or read more information on IRS Back Taxes.

KRISTINA MADEWELL: That’s me. Welcome to the show this morning. You may have heard Darrin on my show last week, Tampa Home Talk on Fridays at 9am. Darrin has been doing his show for a while now and decided that we were going to migrate over to Money Talk.

DARRIN T. MISH: I’ve got to tell you, I’m super excited to be here. This is such a great home. Money Talk, 10:10 am is just perfect for our show or my show and what we’re talking about here which is IRS problems and how they start, how to prevent them and more importantly I think, how to solve them because, you know, Katrina, these are really some peoples very biggest problem in their life. They come in to the office and sometimes, I’m not exaggerating here, they’re trembling. They have physical manifestations of their stress and it breaks my heart because so often it’s just really unnecessary. To me, the solution seems simple, to them, because you don’t know, it can seem insurmountable.

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KRISTINA MADEWELL: Oh, I’m sure, for the person listening right now that has an IRS issue. We talked about this before on the show, it goes in waves. You’ll have people that are like, yeah, I have this but it’s been going on for years so it’s not a big deal. And then right around the time that April rolls around, that stress level starts to rise a little bit more, right? And you start to see an influx of people coming in to your office.

DARRIN T. MISH: For sure. IRS problems obviously last 365 days a year and can last for decades actually. But it is this time of year, tax season when there’s more media talking about it, there’s more stress injected and we do see an influx of people at least deciding to try to solve their problem. January is also a pretty good time of year because people are making New Year resolutions about how they want to change their lives and what they want to do to improve their lives and oftentimes if you have a ten year…

KRISTINA MADEWELL: That one little nagging thing in the back of your head, you want to get it out of your mind.

DARRIN T. MISH: Yeah, you know if you have a ten year long IRS problem and it’s unresolved. A lot of times, the beginning of the year, January, is a good time to think about it and make a plan and get it done.

KRISTINA MADEWELL: So the IRS problem usually follows the tax return or the unfiled tax return or something along those lines and so obviously people have a heightened awareness around that because like you said, the buzz on the news and in the media and on radio and everywhere, you see the line at the post office April 15th at midnight, people waiting to get their envelope stamped, but is there a certain of year that the IRS…I would imagine at this time of the year they’re bottlenecked with doing all the other stuff and you would think there’d be  a different month that they actively pursue IRS debits. Is that a right word for it, Darrin?

DARRIN T. MISH: I can’t think of a time of year when they’re more active. I can think of some times of year when they’re not. For example, it seems like, no offense to any IRS employees that are listening. It seems like half the IRS or most of the IRS takes the second half of December off and for years and years now there’s been an unofficial moratorium on levies and seizures and things around Christmastime because it just seems Un-American. It just seems particularly mean even for the IRS.

KRISTINA MADEWELL: I would think if you have a tax problem, it might be the ideal time to call them up. Maybe they’re in a jolly happy good mood.

DARRIN T. MISH: Years ago when I was a criminal defense attorney, I haven’t done that work in a long long time. I used to be in front of a particular judge every day all day and so I knew him really well. He was an older gentleman. Christmastime was the clearance season. If you were a bad guy that deserved to go to prison, you’re getting probation if I could get the case just pushed off enough to get the plea entered around Christmastime.

KRISTINA MADEWELL: Just after Thanksgiving.

DARRIN T. MISH: Yeah, exactly. Any time between Thanksgiving and Christmas was a good time. I think that’s one of the things, or one of the attributes of a really good lawyer, a really good advocate is predictability, that’s what people are really looking for a lot of times. I think a client can accept the bad news when appropriate, they want the lawyer to look into the crystal ball and try to predict what’s going to happen so they can emotionally plan for it.

KRISTINA MADEWELL: It’s like with any business, if you’re the expert in that field or in that topic, it’s not how much the other person knows, it’s that you know the rules, you know how to play the game and you play the game to win and that’s what matters.

DARRIN T. MISH: Yeah, you know, you’re trying to get the very best outcome for your client. That’s what’s important to remember when you’re trying to deal with an IRS, who do you think that guy works for? Who do you think he’s advocating for? Sometimes it’s for himself because he doesn’t want to do a lot of work. But quite frankly, the IRS has a lot of employees that are looking out for their interest, for the government’s interest and it just makes sense to me to have somebody on your side that’s been through this more than once.

KRISTINA MADEWELL: Yeah. We talked last week when I had you on my show about one of the common questions you get is, am I going to go to jail for my tax problem? We talk about that often on this show. But what about another common one, which is obviously near and dear to my heart, being my business, people ask, am I going to lose my home over these unpaid taxes?

DARRIN T. MISH: We’re based here in Florida. Florida has something called a really strong homestead exemption law. What that means…there’s actually two definitions. One has to do with a tax break that you get for homesteading your real estate. That’s not really what we’re talking about here. What we’re talking about is the exemption that Florida residents have on their primary residence and that’s called their homestead and that’s exempt from almost all creditors. Here’s what that means in simple terms. If you have a lawsuit, for example, and the other side gets a judgment against the homeowner, they cannot force the homeowner to sell that house to pay the judgment off. That’s why O.J. Simpson, frankly, moved to Florida from California was because…

KRISTINA MADEWELL: The property rights are very protective in the state of Florida.

DARRIN T. MISH: Absolutely. And it’s unlimited. There’s a couple other examples. There’s a gentleman that I used to know that lived in Avalon, very high-end community in Tampa and he lived in a mansion that was over 36,000 square feet. One of the reasons why he lived there and had such a valuable ostentatious sort of property was it made it hard for creditors to get at that. Now that I’ve explained that, the IRS is not subject to the Florida exemption statute because of what’s called the supremacy clause in the constitution.

KRISTINA MADEWELL: I was going to say because they’re exempt from all the rules, but maybe not.

DARRIN T. MISH: Well, sometimes they act like they’re exempt from all the rules. They’re not exempt from Federal laws, but they are exempt from state laws because of the supremacy clause of the constitution, which basically stands for the proposition, when there’s a conflict between state law and federal law, then federal law is going to reign supreme. So technically the answer is…kind of a long-winded answer, right?

KRISTINA MADEWELL: But it’s not really a cut and dried question.

DARRIN T. MISH: Yeah, so technically the answer is, yeah, you can lose your house to the IRS over tax debt. Now, the good news is, it’s really pretty rare.

KRISTINA MADEWELL: The likelihood is slim?

DARRIN T. MISH: Yeah, knock on wood. I don’t know if there’s any wood in the studio here or not.

KRISTINA MADEWELL: I don’t think so, I think it’s all Formica.

DARRIN T. MISH: Just knock on my head here. I’ve not had a client even be faced really with the proposition of losing their house and I’ve represented thousands of people over the last couple decades. But I have seen that happen and it primarily seems to occur with the folks that we call tax protestors. I say that, and it’s not a pejorative term, in my mind, they take it that way. Tax protestors are folks that don’t believe that the income tax is constitutional, maybe it wasn’t ratified correctly or some of the arguments are really crazy. Like the U.S. government is really a foreign corporation, or the IRS is a foreign corporation, I can’t keep track of all the arguments. And I’m not even running down the arguments here, I’m just saying I don’t subscribe to them, I don’t believe those are correct. So when those folks file 500 pages or 1,000 pages of documents with the IRS over five or ten years, eventually what happens is somebody at the IRS finally says, all right, you’ve forced me to do this, I’m going to do the extra work and I’m going to make your life a living hell. Those are the folks that I’ve seen, in my experience, are usually faced with the prospect of losing their home. Otherwise, it’s very seldom.

KRISTINA MADEWELL: It’s probably more likely that they would lien the home and that’s completely different than forcing a sale.

DARRIN T. MISH: That’s a great point. The other thing is is the public doesn’t really understand the difference between the terms lien and levy. People use those interchangeably all the time and they really mean different things. Levy is the really bad one. Levy means seizure. Seizure in my…I can’t think of a good use of the term seizure. Either epileptic seizure or you know taking my stuff. Seizure sounds really bad to me. A lien is actually in this context a federal tax lien is when the IRS files a piece of paper at the clerk’s office and gives the world formal notice that you owe the debt to the IRS. It shows up on your credit report, so it dings your credit usually by about 50 points and it also attaches to all of your property, real or personal, wherever that may be. What that means is, technically, the lien attaches to the socks in the underwear drawer.

KRISTINA MADEWELL: Anything you’re selling on Craigslist.

DARRIN T. MISH: Anything you got, including your house.

KRISTINA MADEWELL: Normally, people are not going to see any type of movement or change at least in our experience, unless they try to refinance, sell the house, do some type of cash out, do anything with the home other than pay it off. Florida has a lien line, and we’ve talked about that before, IRS tax liens fall pretty heavy on the lien line.

DARRIN T. MISH: Yeah, they’re a pretty high priority.

KRISTINA MADEWELL: Yep. Oh, gosh, that’s a little loud coming in there, Pat. This is Katrina Madewell, I’m your co-host and you are listening to the IRS Solution Attorney show with your host Darrin T. Mish. We have enjoyed having you this morning. We have to take a real quick first break, but we’re around. We’re live in the studio so if you want to call in and ask Mr. Darrin Mish a question, 888-404-1010, I’m sure you have that saved in your phone by now. But it’s 888-404-1010. Darrin will be happy to answer your questions this morning. Back in a minute.

Commercial break

KRISTINA MADEWELL: Welcome back. You’re listening to the IRS Solution Attorney show and I am your cohost here with Mr. Darrin T. Mish.

DARRIN T. MISH: That’d be me.

KRISTINA MADEWELL: We had some calls that came in over the break. Thanks for sticking around during the commercial. Let’s go ahead and grab the first one. We have Brandon.

Brandon: Hi

KRISTINA MADEWELL: Welcome to the show.

Brandon: Me and my wife filed our taxes online with the Turbo Tax and we forgotten that last year we cashed out her 401(k) when we had our first child because she wasn’t going to go back to work.


Brandon: We received the 1099 afterwards.


Brandon: I’m looking into something like filing a uh…

DARRIN T. MISH: Amended return. Thanks for calling in, Brandon, I appreciate it. I can answer that pretty easily. That’s pretty common is that you might get a 1099 or you might remember something after you’ve filed the return because a lot of people get kind of in a rush to file their return to get the refund that they’re anticipating that they’re thinking about and in your case, it was like, oops, forgot about that one. You just have to file an amended return, that’s a 1040x and get that thing sent in. So you have up to three years, but what will happen is if you don’t file that amended return pretty quickly, reasonably quickly, what will happen is you will get a letter from the IRS called a CP-2000 and they will – quote – correct that error for you. The problem with waiting for the CP-2000 is there’s going to be a 25% accuracy penalty on there, so you really don’t want to do that. You want to go ahead and get the amended return in as fast as you can.

Brandon: Ok, now is there a specific place I can find the form for that?

DARRIN T. MISH: Great question. The best way to get that form would be to go on the IRS website, that’s and there’s a link on there called Forms and Publications and they go way back, 10-15 years, so definitely that form will be there on the website.

Brandon: Ok, thank you.

DARRIN T. MISH: You’re welcome. My pleasure.

KRISTINA MADEWELL: Have a good day, Brandon.

DARRIN T. MISH: Looks like we have one other caller. George, are you there?

George: Yes

DARRIN T. MISH: Hey, George.

George: Hi. I don’t have a computer to order tax forms online and I’ve spent hours and hours and hours on hold trying to get them by mail. Is there another source that you can get 1040 forms?

DARRIN T. MISH: You know, George, back in the day we used to be able to go to the post office and the library and the IRS and all these different places but now we’re now a super-computer centric society. So that’s a really good question. Where do you live, George?

George: Ruskin.

KRISTINA MADEWELL: Can you still purchase those at Office Depot and Staples? I knew they had that available forever? Did they finally get rid of those?

DARRIN T. MISH: I don’t think so. I tell you what, I would go down to the public library and use their computer and print it out. And if that doesn’t work for you, you can always come by my office, I’ll print them out for you. But my office is not close to Ruskin. In full disclosure. I’m actually in the North Tampa area, so that’s not going to be real convenient, but I know that the Tampa Hillsborough County library system has internet access and that’s probably going to be the best way to go. I was just in the IRS in Tampa not too long ago and as I recall, there are no forms there anymore.

KRISTINA MADEWELL: Not even the main lobby of the IRS? No forms?

DARRIN T. MISH: In the interest of providing better customer service, the IRS decided to cut back on customer service. I think the library is probably going to be the best way to go. There’s probably a library in there that can help you if you don’t understand if you’re not computer savvy and don’t know how to do it, there’s someone there that’ll do it for you or that will help you.

George: I don’t even know how to turn one on.

DARRIN T. MISH: Well, God bless you, that’s probably a good thing.

George: (laughs)

KRISTINA MADEWELL: In this day and age it can be. We’re all super connected.

George: Ok, so there’s no alternative?

DARRIN T. MISH: I don’t think so. Oh, there is one alternative, I just thought of one. You can call 1-800-829-1040, that’s 1-800-829-1040 and tell the IRS person who answers the phone what forms you need and you’ll mail them to you.

KRISTINA MADEWELL: I think he said he was on hold for a long time. Didn’t you say that, George?

George: Yes, but I’m not sure that’s the number I called. It may have been.

DARRIN T. MISH: I’ll tell you a little secret. I’m going to tell the whole world a little secret now. Call them right at 8am. Don’t wait until 10, don’t wait until 9. Call them right at 8:00 and you’ll get through right away.

George: Well, bless your heart, ok. 1-800-829-1040.

DARRIN T. MISH: Yes, sir.

George: Thank you, you were very nice.

DARRIN T. MISH: It’s my pleasure, take care.

George: Bye.

KRISTINA MADEWELL: Thanks for the call, George. Have a good day.

DARRIN T. MISH: Going back to, are you going to lose your home over unpaid taxes? There was something called the taxpayer bill of rights and it essentially discourages the IRS from seizing primary residences, so in those instances where the IRS is going to seize a primary residence because you’ve just pushed them too far or you just really owe them a lot of money and they’ve decided to do that. They cannot just unilaterally do it. They actually have to file a lawsuit and they have to have a district court sign off on it. There’s a whole process and procedures and it’s pretty rare. It’s not real fast, either.

KRISTINA MADEWELL: That homestead exemption, by the way, just to chime in on the real estate side of it, Darrin. That $50,000 exemption does a lot more than just give you a $50,000 exemption. Not only does it cap your taxes, but it proves that it is actually your primary residence. Which is a good point, right, because we talked about them actually seizing other homes. Like vacation homes or investment properties is a lot more likely than a primary residence.

DARRIN T. MISH: I’m pretty sure that homestead stuff was on the bar exam, but I think I took the bar exam in 1993 so, forgive me if I don’t remember that. But yeah, that’s absolutely true. They can and do seize other rental properties, vacation homes, and that kind of thing. There’s just a really strong bias against throwing people out of their primary residences and that’s one government policy that I really strongly believe in. I think that’s a good idea. There’s lot of reasons why we shouldn’t throw people out of their homes. If they’re older and they die for some reason and there’s a tax lien filed there then potentially the IRS can get involved in the state probate proceedings. They can get paid that way.

KRISTINA MADEWELL: If they got that lien, I’m pretty sure they’re getting the money.

DARRIN T. MISH: Probably.

KRISTINA MADEWELL: That’s usually how that works.

DARRIN T. MISH: Well, it depends.

KRISTINA MADEWELL: Do you settle those, ever, for less than the amount? Don’t they accrue interest and stuff?

DARRIN T. MISH: You mean for…

KRISTINA MADEWELL: If they file an IRS lien on the house. Let’s say it’s there and they want to sell it, refinance it, somebody dies and it’s in probate…whatever the situation is…don’t those usually accrue penalties and interest once they file the lien and do you settle those for less?

DARRIN T. MISH: I’ve never done a probate case where the lien survived the death of the person of the taxpayer and the house didn’t go to the spouse. That’s what normally happens here, right?

KRISTINA MADEWELL: It depends on how they’re in title now.

DARRIN T. MISH: Most married people I think title their properties tendency by their entireties, which means…

KRISTINA MADEWELL: Husband and wife.

DARRIN T. MISH: …husband and wife. In one pre-deceases, the other one gets the house and there’s no probate or tax implications. That’s a lot more common. I have not been asked by…that would probably be an estate and trust probate lawyer that would ask me to do that. And that hasn’t come up.

KRISTINA MADEWELL: I guess one lawyer doesn’t know all the law questions.

DARRIN T. MISH: That’s for sure.

KRISTINA MADEWELL: You’re really good at the IRS stuff. If you do have questions, we’ll continue to take calls throughout the show. 888-404-1010. 888-404-1010. What is the tax payer advocate service, Darrin? What is that? You hear that, but what does that mean?

DARRIN T. MISH: The taxpayer advocate service is an independent branch of the IRS whose job is essentially to help unravel bureaucratic snarls. Snafoos. Nothing’s getting done, you’re just like locked up in a mess. What I use the IRS, the taxpayer advocate service for, is instances where I know that I can solve the problem or the IRS has done something inappropriate, illegal, that kind of thing, but I just can’t make the bureaucracy do what I want it to do then I’ll use the taxpayer advocate service to help.

KRISTINA MADEWELL: But those people are still government employees, right? Like how far…I guess my real question is, how far do you really get with the taxpayer advocate service? Is that a joke?

DARRIN T. MISH: It’s a really good question. Analogous back to when I was a public defender. I was a public defender and got a check from the state or the county.

KRISTINA MADEWELL: Yes, very similar question.

DARRIN T. MISH: So every morning a whole bunch of guys in shackles would get brought into the courtroom, and a lot of those guys would say things to me like I don’t want you Mr. Public Defender because you get paid by the government. You’re not interested in helping me, and that kind of thing. It’s very similar with the taxpayer advocate. Yes, they get a check from the treasury, but they’re really there to help taxpayers. They actually can and do act as the advocate for the taxpayer, hence the name.

KRISTINA MADEWELL: Probably more of a liaison, wouldn’t you say?

DARRIN T. MISH: Yeah, I think liaison is a much better word.

KRISTINA MADEWELL: I think of an advocate, I think of somebody like you that’s actually truly looking out for someone else’s interest that’s not paid by the government. To me, in my mind, that’s an advocate.

DARRIN T. MISH: Yeah, then there’s a national taxpayer advocate and that’s a person appointed by Congress. Right now her name is Nina Olsen. She’s been in office for a long time. She does something that’s really interesting and valuable every year. She puts out an annual report to congress where she outlines all of the problems that she sees dealing with the Internal Revenue Service and what her proposed solutions are. So those of us who are in this business where we help solve IRS problems on a daily basis, when that thing comes out, we read it. We typically agree with her and we want to help move the needle towards fixing those problems. There’s some systemic problems that occur at the IRS, where it’s the same problem over and over. I’ll give you an example. We do a lot of offers and compromise and Offer in Compromise is where you make a deal to settle for less. One of the prerequisites for an Offer in Compromise  is you have to have all of your tax returns that haven’t been filed, they have to be filed with the IRS. (Music playing) We’ll get back to that on the other side of the break.

KRISTINA MADEWELL: Yeah. Hold that thought. You can call us 888-404-1010 or you can reach Darrin on Twitter @Darrin_Mish. We’ll be back in just a minute. Stick around.

(Commercial break)

 KRISTINA MADEWELL: Welcome back. You’re listening to the IRS Solution Attorney show. Thank you so much for listening to us this morning on your drive to wherever you’re going. By the way, Brandon and George, you’re going to be entered, registered to win two tickets. They do a drawing at the end of the month for Financial Peace University scholarship, so thanks so much for calling in with your questions. Both of you. Even you, George. Thanks for calling. So where we left off, we were talking about an Offer in Compromise, you were just getting ready to explain that.

DARRIN T. MISH: First, I’ve got to get used to the new breaks and what not. I also have to learn what the music means. Anyway, I’m not a professional radio guy here, I’m just the IRS Solution Attorney, you know.

KRISTINA MADEWELL: Yeah, his real job is the IRS problems which, that’s a good thing.

DARRIN T. MISH: I’ll get better. I was talking about the Offer in Compromise. But really I was talking about systemic problems. Systemic problems are things that continue to happen to lots of taxpayers across the country within the IRS. An example of a systemic problem would be, when you file an Offer in Compromise, you’re supposed to have all of your unfiled tax returns filed and prepared. A lot of times what we’ll do is we’ll file…for example if we were going to file one right now, we would prepare and file 2015, even though it’s early in the filing season and we would send it in with the offer. What happens is the IRS won’t include it in the offer. They’re supposed to stop all collection action while the offer is pending. That’s going to take six months or a year. So you want everything to just stop. Kind of like a bankruptcy almost where all the creditor stuff has to stop when you file for bankruptcy.

KRISTINA MADEWELL: See, you could have not filed for ten or thirty years and you just have to file one year and send that in with your offer? Is that what you’re saying?

DARRIN T. MISH: No, that’s a really good question. You have to file all of your missing tax returns. If you’re a chronic non-filer, for example, you haven’t filed for the last ten years or so, then you’re only going to have to file the last six. But in my example…

KRISTINA MADEWELL: That’s like…I’m listening to that, Darrin, imagining someone that has not filed returns in ten, twenty, thirty years. That’s like overload. How the heck do you…If they’re W-2 employee, probably pretty simple. But I would imagine a lot of the people that have not filed are self-employed. So they’re thinking, expenses, mileage, income, I got to gather all that stuff, they’re probably not very good bookkeepers and then they’re like…whoosh.

DARRIN T. MISH: That’s what happens. I’m sorry, I just blew right past like how somebody could end up not filing returns for ten years. My favorite story is the gentleman that hadn’t filed for more years than I’ve been alive on the planet and we got him worked out, so that wasn’t the end of the world. What happens to these self-employed folks, the people that get 1099’s typically. They’re good at what they do, they’re good at cutting lawns, or they’re good at plumbing, or they’re a good lawyer or a good doctor and they’re getting a 1099.

KRISTINA MADEWELL: Or a good real estate agent. You like to throw them under the bus. Don’t leave them out.

DARRIN T. MISH: I forgot about you guys.

KRISTINA MADEWELL: We’re your favorite clients.

DARRIN T. MISH: You guys are like chronic with the problems with the IRS. So that’s what happens is you’re busy trying to put food on the table and send your kids to school and stuff all this bookkeeping stuff just gets overwhelming and what happens is after the first year comes and goes and you didn’t file and nothing really tragic or urgent happens then it kind of just lulls you in to this quiet…

KRISTINA MADEWELL: I’ll get to it later?

DARRIN T. MISH: …slumber. Yeah. Or you’re going to deal with it later. I do believe that 99.9% of my clients do and did intend to get around to filing their tax returns.

KRISTINA MADEWELL: Well, when you look at…I mean just thinking about the whole bookkeeping mess, like in the personality profiles as C’s, so you’re bookkeepers, accounts, analytical, engineers, that’s less than 20% of the population so that is likely not the person listening.

DARRIN T. MISH: And believe it or not, that’s not me either.


DARRIN T. MISH: People think, tax attorney, they think oh, numbers guy. No, my background was as a criminal defense attorney so what I did when I became a tax attorney was I read the rules and then I learned how to apply the rules to my client’s specific circumstances and I know the rules better than the IRS employees that I typically work with now. So we just make sure that those rules get applied to the client’s circumstances.

KRISTINA MADEWELL: If you’re in a position, Darrin can take your call this morning. You’re not the only one that hasn’t filed for twenty years. 888-404-1010. Again, 888-404-1010. We did have a question from another listening and people can hit Darrin up on Twitter @Darrin_Mish or on Facebook and across the web. We get questions a lot of times like that that we’ll bring in to the show. One of the ones you had was a contractor failed to send me a 1099 for work I performed for him in 2004. He just now mailed it to me a year later. Right? Tis the season, everybody’s mailing these sucker’s out. The income went unreported on my taxes last year. Should I just add them to this year’s tax?

DARRIN T. MISH: It’s kind of a variation on the first caller that we had today. That was Brandon, I think. Very similar. This always kind of makes me laugh. When it’s a $2,000 1099 and you’re earning, the revenue is $200,000. I get it, I can see how you forgot. But when it’s your primary income source and you forgot to put it on your 1040, that’s probably not a good thing. So the answer is not to put the income on this year, for sure. What’s going to happen is when the IRS gets that 1099, we have to presume that the sender of the 1099 sent it not only to you, but sent it to the IRS too, so when the IRS gets that 1099, they’re going to attempt to match that income up on your form 1040, right? If there’s not a match, then you’re going to get one of those letters I was talking about earlier, the CP-2000 and they’re going to fix that mistake for you and then they’re going to add an accuracy penalty of 25% typically and then there’s going to be interest and penalties on that. So if this happens to you, do not wait. You want to file an amended return as immediately as you possibly can and just get it in there so you don’t get whacked with that penalty for sure.

KRISTINA MADEWELL: By the way, if you’re listening to the IRS Solution Attorney in the car, I just want to mention that you can pick us up on 99.5 too if you have HD radio in your car. Many people have it and don’t even know. That’s one I personally listen on, Pat, and it’s extremely clear, it’s like better than FM radio, because it is FM radio, right?

DARRIN T. MISH: It’s a super strong signal. It’s like 100,000 watts and it goes all the way over to Orlando, I think.

KRISTINA MADEWELL: I think the static, the buzz you might get on 1010, just flip on over. Ask your dealer, the next time you’re in to get an oil change. Say hey, do I have HD in my car? You might be surprised you do.

DARRIN T. MISH: My radio in my truck, it’s automatic you don’t even know. It just sounds better. Sounds better than FM for sure.

KRISTINA MADEWELL: So the IRS changed something this year where you can start filing early, didn’t they? It was as of January 19th you could file?

DARRIN T. MISH: Yeah, they turned on e-filing on January 19th this year. It was a little bit later than normal. Interestingly, just yesterday there was a giant snaffoo, some computer hardware at the IRS failed yesterday and so all the e-filing for the whole country went down, including e-services, which is one of the ways that we obtain records for our clients. So I’m glad it wasn’t just me because yesterday, literally, I was banging my head against the wall, why I couldn’t get this information on two or three clients. I was blaming our internet in the office, our vendor, you know, everything.

KRISTINA MADEWELL: So what happens, it just freezes so the page doesn’t load or you get a 404 error, or what?

DARRIN T. MISH: You just get like, nothing. It just doesn’t work. You can see it trying to log on and then you just get these weird computer looking error messages that I couldn’t interpret, I didn’t know what that meant. But I saw on the news today…

KRISTINA MADEWELL: You get, “aw, snap”. I forget which browser does that. I think it’s chrome. One of them says “aw, snap.”

DARRIN T. MISH: I think it is Chrome. That sounds like google.

KRISTINA MADEWELL: Little fun quirkiness.

DARRIN T. MISH: Apparently, it was literally one piece of hardware and the IRS is like, we don’t know when it will be fixed, we’re going to try and get it soon. There’s a lot people out there depending on their refunds and they want them fast.

KRISTINA MADEWELL: Yeah, that’s usually going to be the first filers. The ones that are getting a refund.

DARRIN T. MISH: For sure. It’s not my clients typically.

KRISTINA MADEWELL: By the way, you’re giving the IRS an interest free loan. Not a good recommendation. You should probably change the withholdings, but you can ask your CPA about that. What about the Obamacare stuff? I forget when open enrollment is scheduled to close, but I think it’s close. Have you seen a lot of people actually getting these…and you’ll have to forgive me because I don’t remember the exact word…but the penalty if you don’t have insurance or get Obamacare or whatever. Related to that whole insurance world now.

DARRIN T. MISH: I love this. It’s just like the book by George Orwell, 1984. We can’t just call it the Obamacare penalty because that would have his name on it.

KRISTINA MADEWELL: But everybody relates it to that. What’s the real name of it?

DARRIN T. MISH: The real the name is a Shared Responsibility Payment.

KRISTINA MADEWELL: There you go. Shared Responsibility Payment. Like I’m supposed to remember that.

DARRIN T. MISH: It was funny, I’m in this business, I look at IRS notices literally every single day. The very first one I saw, it said you have a fine of whatever, a few hundred bucks, for the Shared Responsibility Payment. I was scratching my head.

KRISTINA MADEWELL: How much was that fine?

DARRIN T. MISH: It was a few hundred dollars in this case. But it can range from 50 bucks to 5,000. I forget exactly what the ratio or what the formula is, but there’s a formula for…

KRISTINA MADEWELL: So it’s not a percentage of income, it’s a crazy formula.

DARRIN T. MISH: It has to do with your ability to pay and how much of a discount you got on your policy and things like that. I think there’s better alternatives, frankly, to health insurance, for most people. The people that don’t have the pre-existing condition stuff, for most people there’s going to be better options than Obamacare.

KRISTINA MADEWELL: The problem is there were certain people that were looking forward to that because healthcare would be available to everyone but what they didn’t realize was the cost of healthcare went up and many people lost their doctors and some of the stuff they weren’t quite expecting. When would you typically see these start rolling around again, Darrin? It’s just a notice they send, right? Like you owe tax notice?

DARRIN T. MISH: I would say 30-60 days after filing of the return.

KRISTINA MADEWELL: So whenever they file, whether it’s early or late.

DARRIN T. MISH: Right. I have a tax preparer at the office who does tax returns all day every day of the year. Because we’re so busy and we have so many old returns that we do. He went to a refresher seminar this year for the current tax year changes and all that stuff and he said they spent an entire 8 hour day on just Obamacare and what it has to do with the 1040 stuff. Since it hasn’t risen to the level of real problem yet, I’m not as up to date on it as I probably should be. There’s interesting thing about the Shared Responsibility Payment, though, and that is it’s actually not levy-able. So what’s that mean?

KRISTINA MADEWELL: Yeah, what does that mean? You’ve gotta break that down.

DARRIN T. MISH: It’s kind of a quasi-penalty. It’s a real penalty, but if you’re not going to just pay it, then they can only offset it with future refunds. So that’s bizarre too. It’s like, ok, so it’s a penalty that you should pay…

KRISTINA MADEWELL: We’re going to take it from what you would get in the future.

DARRIN T. MISH: I think the reason congress did that is they did that so the IRS…

KRISTINA MADEWELL: It’s a lacksy-daisy penalty?

DARRIN T. MISH: If somebody owed $1200 or something over a couple of years, the IRS didn’t rush in, lien them and start hassling them over these relatively small penalties.

KRISTINA MADEWELL: How do they know to assess that? Did they change something in the tax line or whatever that shows if you have insurance, you don’t have…like what changed?

DARRIN T. MISH: Basically you’re proving that you had appropriate healthcare that covers certain things. Most of the policies I think when the law changed, most of the policies, I know mind did, it changed to include and cover certain things like pregnancy for men.

KRISTINA MADEWELL: What? Pregnancy for men? Oh, do explain. This is getting great. See you’re listening to much more than the IRS Solution Attorney show. We have a lot of fun here.

DARRIN T. MISH: In the law, it’s mandated that pregnancy for males has to be covered and it’s a way to make men pay more to cover, to spread the risk out for obviously only women can become pregnant. At least at this point that I’m aware of and it’s a way to spread out that risk and to get the whole pie to pay.

KRISTINA MADEWELL: Surrogate or something like that?

DARRIN T. MISH: It’s not really that, it’s….

KRISTINA MADEWELL: What is it exactly?

DARRIN T. MISH: It’s more to spread the risk out and make everybody pay more to cover the people that need that coverage.

KRISTINA MADEWELL: Gotcha. Pregnancy for men, gotta love it. You’re listening to the IRS Solution Attorney show, I’m your cohost, Katrina Madewell and Darrin T. Mish is your host with the most for the IRS Solution Attorney Show. We will take your calls live. We have a couple more minutes to do that. 888-404-1010. 888-404-1010. If you do call in, Pat George back there will take your name and number and enter you to win two tickets for FPU scholarship at the end of the month. Coming up, don’t miss our Train Wreck of the Week. We’ll be back in a minute.

Commercial break.

KRISTINA MADEWELL: You’re listening to the IRS Solution Attorney show. I’m your cohost, Katrina Madewell with Mr…

DARRIN T. MISH: I am Darrin T. MIsh. Your IRS Solution Attorney.

KRISTINA MADEWELL: We did get some questions also during the break. We’ll read those off to you. You can call Darrin’s office number at 888-GET-MISH.

DARRIN T. MISH: That’s 888-438-6474.

KRISTINA MADEWELL: 888-GET-MISH. Like dish, but mish.

DARRIN T. MISH: I prefer fish.

KRISTINA MADEWELL: Oh, fish, of course. One of the questions, I can probably chime in out the first part of this and obviously you’re way better suited for the last part. One of the questions we got form Angela in Tampa says I’m currently renting a home and I’m looking to buy. The problem is, I owe the IRS over $65,000 in back taxes from 2011. Am I allowed to buy a home when I owe the IRS money or will it just get seized? If you will, I’ll chime in on the earlier part of that since we see this stuff kind of regularly too. The problem is, Florida follows a lien line. The lien line is basically the priority of the lien, so mortgage liens, that’s why first, second, sometimes second mortgages carry a higher interest rate, they fall subsequent or behind a first mortgage lien. What that means is IRS liens are pretty high up on the lien line and since technically they could garnish or levy or swoop money which could potentially hinder your way to make your mortgage payments, what you will find is if you have an IRS issue – really a lot of stuff for that matter, like open collections have to be settled now, like crazy stuff – but I can tell you, Angela, if you owe $65,000 to the IRS, you definitely are going to want to connect with Darrin first because most lenders are not going to give you a loan. We work with private money individuals as well. People that have 40-50% to put down and they will lend in almost any circumstance. But in that case, even they are a bit afraid of that. So I guess if you could get a loan, which is possible, right, to get some money? Do you think they’ll swoop in and seize it?

DARRIN T. MISH: We’ve been doing this show so long together, that I think you actually just nailed that, honestly. There’s no real prohibition, legally, to obtaining the property, but as somebody who has recently gone through the mortgage underwriting process myself, it took about six months. You’re not probably going to get a mortgage.

KRISTINA MADEWELL: You’d be better off trying to put it in a trust or an LLC.

DARRIN T. MISH: It’s not a great idea. I think that’s probably the better answer. It’s not a great idea to owe the IRs money and try to buy a house. Even if you were able to do it, it’s going to make things unnecessarily complicated. I see it a lot, where people owe the IRS and they ultimately get a mortgage and then when we’re trying to do an Offer in Compromise, and we haven’t talked about that much today, that’s where you make a deal to settle for less. Part of the equation is how much equity to you have in assets? Sometimes when you buy a house, if you buy it right, you have built-in equity, right? Now what you’ve done is you’ve turned cash into…or actually you’ve created equity and you’re going to make it harder to settle with the IRS. Do I think they’re going to seize your primary residence? Probably not. It’s very unlikely. But you have probably significantly complicated the resolution part of the tax…

KRISTINA MADEWELL: IF it were me, Angela, I would call Darrin. Get that back tax issues resolved so you can move forward and buy a home. In the meantime, if you come across a deal that’s just too good to pass up, perhaps you could purchase it in someone else’s name until they can transfer it to you or put it in an LLC or a trust.

DARRIN T. MISH: Or if your spouse doesn’t have a tax problem and you do, then maybe you want to go ahead and title it just in your spouse’s name.

KRISTINA MADEWELL: So how does that work when it’s a spouse? Does it carry from one to the other?

DARRIN T. MISH: No, it doesn’t. If they did not file married filing joint tax returns, then the obligations are not joint. What happens a lot is you’ll have two single people, right, there’ll be one of them – usually the guy – he’ll have a tax problem.

KRISTINA MADEWELL: Jeez, at least a realtor is not being thrown under the bus this time.

DARRIN T. MISH: They’ll get married, and that doesn’t suck the wife back into his tax problem vortex, but if they were to file joint returns going forward, it could kind of, in a way…let’s say forward they have refunds coming, it’s going to automatically apply those refunds to his old liability, but there’s a way to fix that too and that’s called an Injured Spouse.

KRISTINA MADEWELL: What about if it’s a business, like carrying over and the other spouse doesn’t have an interest in that business. Does that change the dynamics any?

DARRIN T. MISH: Basically, the only way for a spouse to be liable for another spouse’s tax obligation are if they file married filing joint return.

KRISTINA MADEWELL: So, that would be an instance where someone would file separately.

DARRIN T. MISH: Yeah. We look at that a lot. Most tax preparers just look at saving the people tax money so they’re always going to have a propensity to file joint returns for clients and we will often want them to file separate returns.

DARRIN T. MISH: It’s about that time…new train wreck. Really long audio here.

KRISTINA MADEWELL: We’re going to have to try and find that other train crash music.

DARRIN T. MISH: This is the part of the show where I basically talk about someone that came into the office and they were absolutely an IRS problem train wreck and through the use of our services we resolved their problem. I only have a couple minutes here. Basically I had a gentleman come in and he owed $20,000 to the IRS. There’s a statute of limitations for the collection of tax. It’s ten years from the date the tax was assessed. In this particular case, the gentleman only had 14 months left on the statute of limitations. What that means is the IRS only had 14 months to get the money from this guy. What we were able to do was we got him into an installment agreement of $500/month and it ended after 14 months. That meant that he only had to pay $7,000 of the $20,000 debt and he knew with certainty exactly when it was going to be over.

KRISTINA MADEWELL: So, 20 grand, only had 14 months left and the IRS said, alright you have the ability to pay $500, we’ll take what we can get until the statute’s up. Does that apply if you’ve already entered into an agreement with them?

DARRIN T. MISH: Absolutely. The statute of limitations begins to run when the tax is assessed. There’s only certain things that can stop it from running. The fancy term we use as lawyers is “toll” the statute. That means stop it. So the filing of an Offer in Compromise tolls a statute, the filing of a bankruptcy tolls the statute, certain appeals toll the statute, but in this case, he had done none of these things. He basically had been your typical IRS problem client. Just stuck his head in the sand and did nothing.

KRISTINA MADEWELL: Please go away.

DARRIN T. MISH: But eventually, a revenue officer was assigned to the case and the revenue officer came a-calling personally and wanted to know how my client was prepared to take care of his obligations. He got me involved, we were able to demonstrate to the IRS that he could only pay $500 a month and we knew there was only 14 months left on the statute. That’s called a partial pay installment agreement.

KRISTINA MADEWELL: I imagine the IRS has people a lot like collection agencies that know, look, your pennies on the dollar, time is running out kind of thing. People that just chase just those taxpayers and tax bills due?

DARRIN T. MISH: Yeah, for sure. The revenue officers are the people whose job it is to go out there and get the money. So if you…most taxpayers who owe tax to the IRS deal with what is called ACS. They got a computer basically and the toll free numbers. If you have a revenue officer assigned, you have a special kind of trouble coming.

KRISTINA MADEWELL: Better call Darrin. Darrin’s number is 888-GET-MISH. 888-GET-MISH, like fish, but with an “M”, like Mary.

DARRIN T. MISH: That’s 888-438-6474. It’s been a great show today. Really enjoyed being here.

KRISTINA MADEWELL: Thanks for joining us this morning. We will be back. Same time, same place next week so tune us in to the dial 1010 and also if you have HD radio, 99.5 FM2. We’ll be back next week. I’ll be here tomorrow at 9. Thanks so much for joining us. For this week, we’re out.

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