Most people I talk to about their IRS problem have already built the worst-case scenario in their head. The reality is usually much more manageable. I'm Darrin Mish, and I've been representing taxpayers before the IRS for 32 years. Here's what actually tends to happen.
Tune in and listen to Darrin T. Mish share how not go into a full blown panic attack over your IRS problems.
Not every body that has IRS problems experience those symptoms and it’s why you haven’t mentioned anything about it until this episode.
But a definite percentage of people with IRS problems experience a lot of those symptoms.
Getting behind on your taxes is bad enough. But strapping on anxiety alongside it is avoidable and on this episode I’ll tell you how to do that.
Click here to watch or read more information on IRS Back Taxes.
Episode Transcription
Darrin Mish: Welcome this is your IRS solution attorney Darrin T. Mish. I’m here today live with my co-host Katrina Madewell, how are you doing Katrina?
Katrina Madewell: That’s me, doing good, how are you today?
Darrin Mish: I’m doing pretty good, I have been helping people with their IRS problems as recently as just — like an hour ago, so it’s all good, we are having fun here.
Katrina Madewell: That’s why we are here.
Darrin Mish: We are live and it’s a little bit of a rarity to be live on the show today, so I want to encourage you to call in if you have questions or if you just want to talk about IRS problems. The phone number is 727-441-3000. Don’t be shy; you can give us fake name. Just give us a real scenario so we can help you talk it through and see if we can help you in somewhere.
Katrina Madewell: You could be Sally or Joe, or Billy Bob…
Darrin Mish: Yeah, a couple of weeks ago we had John, and I know John and his name is not really John…
Katrina Madewell: But it works, it works for the purposes of talk radio.
Darrin Mish: It worked out, it helped to keep him from feeling really embarrassed, and just kind of discussed and share with the audience how he felt about having an IRS problem and what not.
Katrina Madewell: Again 727-441-3000, is our studio call-in line.
Darrin Mish: You can’t actually see Katrina because we are doing radio, but she just did that without even looking at the number, so I’m really impressed.
Katrina Madewell: I’m glad I got it right this time, because it doesn’t always happens that way.
Darrin Mish: I could actually see you kind of looking up and trying to recall what the phone number was.
Katrina Madewell: Where is my phone, what was that number again?
Darrin Mish: Well, its 727-441-3000.
Katrina Madewell: There you go, so call us with your IRS questions, you can be anonymous and we’ll answer them live on the show today.
Darrin Mish: Right, so typically on the show we kind of talk about the nuts and bolts about how to solve IRS problems, because quite frankly that’s what I’m really good at, is talking about mechanically how to get tax problems solved. But we did a show a couple of weeks ago that we’ve really got a lot of really positive feedback. And that was when actually when John was here, he called in, and he was talking about what it felt like to have an IRS problem and why he put off calling me and letting me know that he had a IRS problem for so long. John and I had actually done business daily with multiple communications a day, he is very well aware of what I do for a living. And it took him a year to tell me about the fact that he actually owe the IRS six figures. And he shared with us that he — there was some anxiety and some embarrassment and things like that.
Katrina Madewell: It’s probably even a little bit harder in that scenario, because you already have a business relationship with someone, and that’s like the last thing you want to tell him I’m sure. But bad things happen to good people, it can happen.
Darrin Mish: For sure, I mean I’m not shy about telling people that I have had — actually I have had three IRS problems in my career. And at least I knew better for the last one I had. So it can happen, unexpected things come up.
Katrina Madewell: I don’t think there was always a scenario for you though, right? You probably were a lot more — I mean because I remember when I first met you and you came as a guest on my show at the time and you were like, I don’t know if I want to talk about that. And I’m like but wait a minute let’s talk about that, why not. Like what better way to share, I’m an IRS solution attorney because I fix my own problem and now that’s like my niche.
Darrin Mish: Yeah, for sure I guess I was a little bit embarrassed, because like who would want to go to the so called “expert”, who didn’t even know good enough not to get themselves in that problem.
Katrina Madewell: And when you’re “the stuff I can’t say on air” knee deep, then you can relate to them one on one what that experience is like. And you really understand how they feel, so it’s a lot different to give advice from that place where you are and you know in your experience and you can answer in your sleep. And then also give the advice when, hey I have been there, I have been in your shoes, it’s okay, bad stuff can happen to good people. And you don’t learn this stuff in college, so let’s fix this so you don’t do it again.
Darrin Mish: I don’t recall being real shy about it meaning that I had tax problems in the 90s, but for a while there I was pretty shy about it, admitting the fact that I had a tax problem in 2013, when I was one of the nation’s preeminent speakers of how to solve tax problems and what not. It was a little bit embarrassing, I was still trying to work my way through it. Incidentally I did not get a discount on that, because of variety of reasons, but I definitely know the feelings of anxiety and fear frankly that come– that are associated with having a tax problem.
Katrina Madewell: And when you think about it too really, any experts speaker, or people that host the show or anything like that that are experts in their field, that can relate to that or have– maybe they do this or this is their niche, or this is their passion, this is why they do it because of this. It just makes them so much better at what they do.
Darrin Mish: I’ll tell you one thing; there were some self realization that came out of having that problem in 2013. And by that point in my just sort of maturity, I had developed a little bit of cynicism I think. I’d kind of forgotten how it felt to have a tax problem, and how to make bad — how it felt that you are kind of ashamed that you made some decisions that kind of put you in hot water. But that 2013 tax problem really humbles me, it reminded me what that feels like, that border line sheer terror of panic, all that stuff, some shame maybe you don’t want to tell your spouse, and made me a better lawyer and maybe a better person, because it’s like hey, let’s back up a little bit. Like you said, really good people can have these problems.
Things happen, what happened for me is I had a side business that was doing extremely well. And it was actually — I used to do search engine optimization, and Google made some changes, and basically that business which was making a lot of money disappeared virtually overnight. So in my infinite wisdom I was going to just basically pay the tax bill that I knew was coming out of cash flow — there was no more cash flow there. So it was a little bit of a surprise, and kind of a challenge to take care of it, but it’s only good. I understand how people are making decisions right now, today, October 15th 2015.
Katrina Madewell: Today is another d-day, isn’t it?
Darrin Mish: Yeah, today was the — and our producer asked me about this when I walked in and he goes, why is this the second — I forget how he characterized it.
Speaker 3: Tax death day.
Speaker 3: That came from Fred.
Darrin Mish: Okay, so, awesome Fred. Yeah, today is the extension deadline, and if you don’t get it into the mail post marked by today or E-filed with verification today, you are going to be paying a late filing fee. So it’s one of those things you got to get done for sure by October the 15th, otherwise you are going to paying some kind of penalty.
Speaker 3: So what do they do if they’ve got an extension to pay, and they still can’t pay the amount?
Darrin Mish: Well, you still…
Katrina Madewell: Eventually they are going to come see Darrin, I’m just saying.
Darrin Mish: Well, if you’ve got an extension to pay and you do file by the deadline, but you just can’t pay the amount then you are going to be paying — so you are going to be assessed with some late payment penalties. But you don’t want to get that late filing penalty if you can help it, because it’s kind of easy to avoid honestly. Unless you are the kind of the person where you just realized it’s October 15th, your extension is up today, and there’s none of the book keeping done for 2014. And I think you just kind of out of luck yeah.
Katrina Madewell: You’re done. But then don’t forget your point where if you have a refund versus owing, right?
Darrin Mish: Yeah, exactly thanks for bringing that up. If you have a refund coming to you then the extension deadline doesn’t really matter that much. So you just want to make sure that you get that thing filed within three years of April 15th the d-day. So that’s a really good point, if you have a refund coming there’s no way to calculate the penalties and interest because penalties and interest are calculated on tax due, so…
Katrina Madewell: Too bad it doesn’t work the other way round, right?
Darrin Mish: That would be awesome, but everybody would be late all the time.
Katrina Madewell: It wouldn’t really work out the way they planned.
Darrin Mish: So what happens a lot of times and this happened yesterday, and I don’t know if these folks were on the verge of a panic attack. But a lot of people when they think about tax problems or they see an envelope in the mail from the IRS, they basically exhibit symptoms of a full blown panic attack. And if you haven’t had one before it’s pretty scary thing, I mean here are some of the symptoms, shortness of breath, heart palpitations, or a racing heart, chest pain, or discomfort, trembling or shaking, a choking feeling, feeling unreal or detached from your surroundings which actually might be a good thing, sweating, nausea, or upset stomach.
And I’m pretty confident that maybe half of the people that come in to see me in my office and probably talk to me on the phone too, are having some combination of these factors, and that’s really one of their motivations to come in and try to talk it out, and try to figure out how to solve the tax problem.
Katrina Madewell: So I’m looking at this just putting in check going, okay this is a panic attack, well, I’ve not ever heard one of these. But I think my husband has, because I’m looking at these symptoms I’m going okay. It doesn’t take much for this to happen.
Darrin Mish: And for a lot of people it feels like they are having a heart attack or something. They’ve never experienced it, and so they don’t really know what’s going on, and they don’t know what to do about it. So it’s really sad having had the recent experience about thinking within the last few years of having a pretty good size tax liability. It’s really sad that people don’t know what to do, and they dwell on their tax problems to such an extent that it gives them these physical manifestations, these physical symptoms, I mean that’s really sad.
Katrina Madewell: That can turn into the other things too.
Darrin Mish: Yeah, I think I have read that stress actually causes most of these diseases that ultimately kill you. Stress causes — I’m not a doctor and I don’t even play one on the radio. But I think stress can cause cancer, it can cause heart problems, it can cause all kinds of things.
Katrina Madewell: I’ve heard that too, because of it can get into a whole other array of issues.
Darrin Mish: I think that stress ends up causing inflammation in various parts of your body, and inflammation is one of the things that at ultimate times you can do an offer in compromise where you can make — and absolutely smoke a deal to settle for less. Or sometimes it’s just a really manageable installment agreement, they just want you to get back on the train, and you get going and stop ignoring them. I had a couple come in today, very-very nervous, and upset and had a relatively low liability, and the ultimate recommendation was really pretty straight forward and simple.
Katrina Madewell: Now people like, I would imagine a lot of times when they come in, they are just kind of frozen, like you probably see everything from tears to sweating, to trembling…
Darrin Mish: There’s actually a box of tissue in the conference room that we have just for people who cry. I think I would rather see somebody cry and kind of get it out and then try to walk through it, than the person that’s really so scared that they are…
Katrina Madewell: Don’t say anything like hold them in.
Darrin Mish: Well, we get some people that are so scared that even after we start working together, they don’t make any movement they just — they are like in their life, their life is just on hold [crosstalk]. Right, so it’s like hey, we got get your last six years of tax returns done. Two years goes by, crickets, nothing, that’s not good. We got to — whenever we are faced with problems…
Katrina Madewell: So you are just waiting on them to like bring their stuff, is that what the big dealio is?
Darrin Mish: Sometimes we start out gently cajoling and then it ends up being more and more firm. Because there are some people that only respond to firmness.
Katrina Madewell: Right.
Darrin Mish: I have this one really good client, honestly I really like the guy. But he is not always as proactive as I would like him to be, and he tells my staff that he is actually afraid of me, because in the past I’ve had to like…
Katrina Madewell: Darrin’s like hold his arm behind his back, put him in a choke hold.
Darrin Mish: Yeah, I have an awesome resolution lined up for him, but he gets to the point where he just gets so scared, he can’t do anything. So that person is always actually a little bit challenging…
Katrina Madewell: Tell me what’s your problem dude, do we have schedule like a whole day in the office for you to come in here and just like get done.
Darrin Mish: Sometimes that’s what we do, we just get him — not a whole day heaven forbid. But yeah, we get him in there and we just kind of help him talk it through. I’m not qualified to be a psychiatrist by any stretch of the imagination.
Katrina Madewell: That will be the next side bar part of the practice.
Darrin Mish: But I do want to help them solve their problems, so…
Katrina Madewell: The things people worry about the most like you get just kind of the same fears and big worries over and over again which is what put these people on fear to begin with.
Darrin Mish: Yeah, one of the biggest one is I’m going to prison, they are going to show up and hold me off, we’ve talked about this a lot. I have the rock star client who was convinced that the weekend before his appointment that he heard noises outside of the window at night, he was absolutely convinced that that was the IRS; they were like amassing for a raid, to break the door down and hold him off.
Katrina Madewell: When you see the men in black yeah, you just…
Darrin Mish: And we are not laughing at him.
Katrina Madewell: No I’m just laughing at the situation because people like even people like me will come to the same scenario in their head.
Darrin Mish: Yeah, even he and I got a good laugh out of it, even though it’s like no I don’t think having a few years tax returns for most people is going to result in the IRS raiding you, it’s theoretically a crime not to file a tax return, but…
Katrina Madewell: It’s always easier to look back and laugh once it’s done than it is in the moment I’m sure.
Darrin Mish: Oh yeah, well, think about the stress you go through every year just getting your, your tax return done, right? Yeah, I’m in this business, I have an accountant that works on staff full time right, to do my stuff. Once I know he is actually working on it there’s a little stress that runs through me too until it’s done. So we filed — I’ll admit live on air in front of at least dozens of people who are listening. I didn’t file my personal return till October this year; I just didn’t get around to it, not a big deal. It’s just one of those things that you got to make priorities in life to get the things that got to get done, you got to make sure you get them done. It’s kind of like you make sure you pay your mortgage or your rent, or you are going to be living out on the streets.
So you got to get your tax return done. It’s a necessary evil, kind of wish it wasn’t. Another one that people really worry about is they are worried that the IRS is going to come and take everything they own. So I have sometimes– I mean this is not quite as common, but I have people who think that the IRS is going to roll in and like take their baby’s toys and stuff.
Katrina Madewell: Seize levy, freeze whatever they can see, right?
Darrin Mish: That just breaks my heart that people are actually like fixating on that and really not sleeping at night over and stuff like that. For the most part the IRS doesn’t want the stuff in your house. They– I’ve never heard knock on the word; I’ve never heard a seizer of a home or a seizer of any of the contents of a home. Quite frankly the IRS doesn’t want that stuff, if they were to come and take your baby’s toys, I mean what are they going to get for them, pennies.
Katrina Madewell: Irrational value, I mean really…
Darrin Mish: Yeah maybe, so they don’t want your stuff, they really just want you to deal with the problem in some way. If you have missing returns they want those returns filed, or they want you on an installment agreement or get the IRS to agree that you can’t pay, which is called currently not collectable, or they want you to do an offer and compromise, or they want you know they just want you to do something…
Katrina Madewell: Do something…
Darrin Mish: So that you don’t just leave the balance hanging out there and not deal with it. The– another fear is really-really big and this one is actually warranted because it’s fairly disastrous, and that’s what we call an IRS wage garnishment. Another term for that would be a garnish myth, and that’s pretty horrific. That’s when the IRS– you’ve kind of waited a while and the IRS ultimately has to send you what’s called a final notice of intent to levy it comes certified mail, and then they wait 30 days. If you don’t deal with that, the IRS can ultimately come in and garnish your wages and that’s pretty ugly. There is a chart that talks about how much you…
Katrina Madewell: It’s usually people actually take action, right? It’s one of the ones happening?
Darrin Mish: Yeah and its sad, and the reason it’s sad is okay so the IRS levy due to basically to get your attention, and now you don’t have the funds to hire the help that you need because they just took all about 500 bucks off your pay check or something like that. That can be a really bad thing, you don’t want to…
Katrina Madewell: They garnish whatever they want, or are you going to say there a chart that they have to follow.
Darrin Mish: Yeah there’s a chart that they have to follow, I’ll give you an example. It’s publication 1494 from the IRS, let me pull that up real quick. For a single person who gets paid twice a month, if you were just single with no dependents, you only get the keep $396 out of your pay check, that’s after taxes and stuff. That pretty brutal, right?
Katrina Madewell: Yeah that’s not enough to pay most people’s utilities?
Darrin Mish: Yeah, and if you were married let’s say you are married filing joint, and you had you know four kids or three– two kids and a spouse, you only get to keep $1100 out of your pay check every two weeks. You know it’s pretty brutal, it’s not really designed to get the money so much, because there’s not that many people that can survive in that scenario, so what happens is either they call– the tax payer calls the IRS and gets it released to make some kind of deal, or tax payer quits. They quit their jobs so that they can go work some place where they’re not being levied, and there’re some people that just kind of just jump around.
One time I had a truck driver, it’s sort of interesting you know there is a shortage of truck drivers in the United States, and I mentioned to him he had a wage levy and he was really in a pickle. I mentioned to him if you know if you were working for a different company they wouldn’t have a wage levy notice, because the IRS wouldn’t know about this company that you haven’t decided to work for yet. You think you can get another job? He goes yup watch me. He got on the cell phone right then, he called up an old friend, he got offered a job on the phone right there, and then and hang up and he goes okay that’s fixed. Let’s get the problem solved now.
Katrina Madewell: So literally change jobs just to get around the garnishments so they can pay the IRS?
Darrin Mish: Yeah I don’t think most people have that you know flexibility on their life; they’re not in that kind of occupation where they can just switch jobs. Another thing that people are worried about is bank levies you know that’s a bank garnishment. That’s where, this is pretty common where people go to swipe their card, and for groceries or whatever and it gets declined. That’s actually one of my biggest fears quite honestly, it’s like…
Katrina Madewell: Yeah swoop?
Darrin Mish: Yeah you know you try to buy groceries for the kids or whatever and you swipe your card and it doesn’t get through. What can happen is the IRS can levy that bank account, and they’re entitled to all the money that’s in that bank account on the date that the levy is processed, and then they have to hold it, the bank has to hold it for 21 days, and then they give it over to the IRS. There’s one good thing about bank levies is that they’re not continuous, so a big misperception out there is that a bank levy is continuous, so it’s like your account is frozen. Well it’s only frozen for one day, so…
Katrina Madewell: Yeah, but that’s enough to scare people to not want to make any more deposits I would imagine?
Darrin Mish: Yeah exactly, so…
Katrina Madewell: Or if a deposit goes in there they’re like I’m taking it all out?
Darrin Mish: Yeah, sometimes the IRS gets lucky and they get all the money that somebody just deposited from the pay check or whatever into the account, and sometimes they don’t. Quite frankly if the levy gets processed on the wrong day of the month, then there’re 17 bucks in there then we don’t even deal with, it it’s just not a big deal. You know a bank levy is something you want to try to avoid and the way you avoid it is you’ve got to get your old mess and returns caught up, and then you’ve got to do some kind of collection alternative, you’ve got to deal with the problem somehow.
You can’t let those panic attack symptoms or that anxiety or that fear, you just can’t let that wrap you up, and put you in a place where the best of actually can happen. It’s kind of ironic, it’s strange that the fear paralyses people to the point where what they’re actually afraid of is going to come to pass, because they’re so paralyzed. It’s…
Darrin Mish: They’re like stone, just frozen not going to do it, just I think when people don’t know what to do, they just do nothing, like bury their heads in the sands like an ostrich?
Katrina Madewell: Yeah for sure, and remember that the decision not to make a decision is in fact a decision. It’s just the worst decision you can make.
Darrin Mish: Right, it’s just that’s the worst decision you can make in these kinds of circumstances.
Katrina Madewell: Some of these people the amounts are so big that I hear you talk about that I’m sure people are thinking, wow I don’t know if I can ever pay this off, like ever.
Darrin Mish: Yeah a lot of people think that the– Owing the IRS a lot of money is a life sentence and it’s not, it’s absolutely not. There’s is a ten year statutory limitation for the collection of a tax which in simple terms means that the IRS only has 10 years to get their money. Often times, probably most times yeah there’s going to be some change of lifestyle involved in making sure that you pay your taxes from now on, so that you don’t continue to exhibit the same pattern that got you in trouble in the first place.
Most people are really relived when they come in, like let’s say they owe $300,000 and we figure out a plan where they can settle that thing and move on with their life. You know of course they’re going to have to pay their taxes going forward, but we all kind of know that we’ve got to pay taxes, right?
Katrina Madewell: Yeah, I mean that’s the way our country works.
Darrin Mish: I kind of wish it worked a different way honestly, but I’d be out of business, but you know paying taxes is a necessary evil, it’s how we pay for you know all the things that we take for granted that the government does.
Katrina Madewell: I know like some people are afraid that they’re just going to be embarrassed that everybody is going to know, but really I mean no one will really even know unless they told them, right? It’s not like they publish in the paper, do they?
Darrin Mish: Well there is one way that people could potentially find out, and that is if the IRS files a notice in Federal tax lean, they file that in the clerk’s office usually in the county you reside in. In some stated it’s called something different, it might be called the recorder’s office or the comptroller or something like that. They record this public record, and then theoretically if somebody was to run your name through that computer system if there is one in you county or in your area, then they might find out. It might, it’s going to show up on your credit report, and it might stop you from buying a house.
Katrina Madewell: It will stop you from buying as house until you get it fixed.
Darrin Mish: You know it might stop you from buying a car, that kind of thing. You know fear of embarrassment, it’s actually– I want to reframe the way that people think, I think it’s more embarrassing to that you haven’t done anything to take care of it, and that’s going to require a mind shift, or a mindset shift to just think about it. Like okay it was maybe a little foolish to end up in this problem, but it’s more foolish not to try to solve the problem
Katrina Madewell: Yeah it’s just carving out the time, knocking it out, getting together whatever you have to get together to prepare those returns so you can knock it out. Oops it’s about that time.
Darrin Mish: It’s about that time so when we come back, we’re going to share some questions that we got from twitter.
Katrina Madewell: Again studio calling line 727-441-3000. If you have those IRS text questions 727-441-3000, save it on your phone, we’ll be back in a minute.
Katrina Madewell: Welcome back, you’re listening to the IRS attorney solution show, I’m your co-host Katrina Madewell.
Darrin Mish: I’m the IRS solution attorney Darrin T. Mish, not to be confused with all those other Darren Mish’s out there in the world.
Katrina Madewell: We have some questions that came in on Twitter. If you would like to ask questions on Twitter you can do that at…
Darrin Mish: The Twitter handle is Darrin D-A-R-R-I-N underscore Mish, M-I-S-H. I get a fair a number of questions there.
Katrina Madewell: Out of luck with the IRS guy or something, but you know I guess you can hash tag that.
Darrin Mish: Yeah you could do hush tag IRS solution attorney and I’ll make sure to pick those up, or you can follow us on Facebook, we have a couple of pages on Facebook, get IRS help now, or law offices of Darrin T. Mish, or you can even follow me personally, I think I’m the only Darrin Mish on Facebook.
Katrina Madewell: It’s Darrin with an I.
Darrin Mish: It is, in fact Darrin with and I and two Rs kind of a unique spelling. My mom– to hear tell my mother used to watch that old show some, bewitched.
Katrina Madewell: I love that show.
Darrin Mish: Remember and that’s how you spelled the husband’s name was…
Katrina Madewell: He did spell it like that?
Darrin Mish: Darren D-A-R-R-I-N, so…
Katrina Madewell: I love that show, I was like I dream of…
Speaker 3: The first or the second Darrin?
Darrin Mish: Well I was going to say interesting trivia a little point is there was actually two different actors that played Darrin. There was one that was like I can’t even describe how they looked, but they definitely looked different. The second Darrin actually looked significantly older, and I think he was taller too so…
Katrina Madewell: Well I only remember one, so I think that dates you guys, I’m just saying.
Speaker 3: Second guy had really had big ears.
Darrin Mish: Yeah sort of like Barak Obama. Hey if that’s the worst thing I’ve said…
Speaker 3: Sure, they could have been twins.
Darrin Mish: Well there’s some other physical differences, but they both have big ears, so that’s for sure.
Katrina Madewell: All right so first Twitter question is, is there a certain amount of money the IRS keeps me– keeps a month if they garnish my pay checks. I think we answered that already, but that’s recap?
Darrin Mish: That was from Daryl, and I wish Daryl had been listening in the last segment I wouldn’t have to repeat this, but yeah the IRS can keep a certain amount out of your pay cheque if you wait until they levy your pay check. If you want to find out for sure how much you get to keep, not how much you’re going to take, but how much you get to keep you can always look up publication 1494. In his scenario if he was getting paid– if he was single and getting paid once a month, had no dependents, well good old Daryl you get to keep $858.33. Now I do not know anywhere in this country where you can live on 858 bucks, so don’t…
Katrina Madewell: Live with mom, or if you live somewhere else and you’re in the basement that might work maybe, any difference here?
Darrin Mish: I guess maybe if you were like 16 or 17 you know and you already racked up your first IRS problem– incidentally I forgot about this. I actually had my first IRS problem when I was at 18 or 19, come to think of it.
Katrina Madewell: What?
Darrin Mish: Yeah I use to be– I got a little side job as an independent contractor. You know those real estate signs, you would know this for like the models homes and stuff?
Katrina Madewell: Yes.
Darrin Mish: In our area code enforcement would come in and yank them out of the ground if you left them there full time, but they were kind of cool with it if they went up on Friday afternoon and came down on Sunday evening. That’s what I did, I used to drive around in my area there was lot of development going on and stuff. I used to drive around, I put up those real estate signs, and the guy was paying me you know as a 1099 subcontractor. I think he even warned me, you know hey you’re going to have to pay us some major tax payments and stuff. I was like yeah whatever.
Katrina Madewell: You don’t think about that?
Darrin Mish: Yeah so…
Katrina Madewell: Not when you’re 19.
Darrin Mish: Then I think my parents actually even helped me file the return you know because I don’t—this is complicated return now, right? It’s got a schedule C, it’s got a schedule SE, and I forget. Not much because I didn’t make that much, but probably 1000 bucks or something, but when you’re a kid and this is in the 80s…
Darrin Mish: 1000 bucks is a lot of money.
Katrina Madewell: Yes.
Darrin Mish: I can remember to this day, my step father actually, I don’t know how he did it but he called the IRS on my behalf, and he got me my very first installment agreement. Yeah, wee, I have an installment agreement…
Katrina Madewell: You’ve learned.
Darrin Mish: He’s 19, so and bizarrely enough I think during that timeframe I was even working for a printing company as customer service rep where that sold tax forms. I mean this is like this recurring theme throughout my life…
Katrina Madewell: All the– how this whole tax thing everywhere?
Darrin Mish: It wasn’t planned, but yeah. What I was doing as my real job back then is I was helping people buy W-2s at 1099 and stuff like that, because I’m not sure if they, if you still have to do that. You must, but…
Katrina Madewell: Not so much anymore. I think most of the time, either print it online or you can get it online, the IRS website yeah.
Darrin Mish: Yeah this is pre-internet I mean this is long ago…
Katrina Madewell: Yeah definitely.
Darrin Mish: Yeah we…
Katrina Madewell: You used to have to go buy those thing.
Darrin Mish: Yeah you’d say– but at least they were– you can buy a carbonless paper which is kind of a big deal back then. They would run through these gigantic dot matrix printers.
Katrina Madewell: Yes, that’s it, or we tear out the sides.
Darrin Mish: Exactly, but then they’re also at self mailer, self mailer is really like a big deal, because then the dot matrix printer would print everything all encapsulated. One thing that you just had to tear off and drop in the mail, so it was kind of a big deal.
Katrina Madewell: Well Dave asked this question, I know we got it, I think a couple weeks back we talked about this, but he said I owe a bit of taxes and he really thinks that his business is about to take off. Should I hurry up and call you before the money starts coming in again? Good question.
Darrin Mish: Oh there’s a bunch of variables…
Katrina Madewell: That’s a good one Dave.
Darrin Mish: Yeah, there’s a bunch of variables there, I kind of wish Dave was on the phone. He can call himself Sam if he wanted to.
Katrina Madewell: He might be Sam and calling himself Dave, we don’t know.
Darrin Mish: It might be, he should call us at 727-441-3000, but here’s the variables. I don’t know what a bit of taxes; you know I don’t know how much that is. If we’re talking 300 grand and maybe business might be getting better in a year and a half, yeah well you might want to deal with it right now. We can maybe potentially do an offer and compromise or something like that. If we’re talking, you owe seven grand and business is going to take, pick up next week, well…
Katrina Madewell: It’s kind of vague you don’t know like how much is owed, or how much he’s going to get.
Darrin Mish: Kind of the same answer actually, if you owe seven grand and the business is going to catch up next week, yeah we probably ought to do something about that so that you don’t wait until you get a wage levy or bank levy, or one of these bad things, but…
Katrina Madewell: This is a good one and a lot of people might not know this about you, but someone else said I heard you speak at Florida CPA association meeting a while ago, are you available for speaking engagements?
Darrin Mish: Sure, I absolutely I’m.
Katrina Madewell: You talk about your background, because you have spoken in plenty of other CPA associations and different associations that we talk tax stuff.
Darrin Mish: Right you know I actually got into this business in 1999 and within about two to three years I was already speaking and teaching how to draw the professional’s tax attorneys or attorneys and old agents and CPAs. I was teaching those guys how to do this practice, because there’s a need for more practitioners in this area for sure despite the fact that you can’t seem to listen to the radio without hearing a commercial in every, you know commercial break.
There is really a big name for people on this area, and I have a unique way that I can explain this stuff to help people really get started and get going on it. I don’t talk about this very often but I’m a bestselling author. I’ve written a number of books, you know done a lot of video and things like that. In fact if you have questions and you’re too shy to call into the show you might want to check out the YouTube channel, Google YouTube and Darrin Mish definitely bring up the YouTube channel.
There’s over 200 videos there where I explain virtually every question I could even think up, and I get comments pretty frequently about how people have watched those videos and solved their own problems, and I feel pretty good about that.
Katrina Madewell: At twitter or Facebook, so @Darrin_mish on Twitter…
Darrin Mish: Even LinkedIn you know LinkedIn is a good place, it’s kind of a safe place to friend me, because I don’t decline on LinkedIn, and we can ask questions privately and we’ll chat privately and that kind of thing. Yeah I do a lot of speaking, I enjoy it, I like breaking down what’s seemingly complex and into something that’s simple and easy to understand.
Katrina Madewell: One of the questions, one of the stories that we have lined up for today was a new survey revealing five countries are leading the fight against tax evasion, how the heck are they doing that?
Darrin Mish: Well, you know with this global…
Katrina Madewell: What countries is this, that’s what I want to know.
Darrin Mish: You know with this almost this decade long global economic slowdown I mean countries especially the bigger sort of social you know safety net kind of countries really need the revenue that come from taxes. One of the interesting countries, there’s is a couple in Europe. I mean these two don’t really surprise me, Spain and Germany. You know Spain’s economy has always been kind of on the lower end of the income level for Europe for the EU for sure, and then Germany has kind of an interesting problem going on right now.
I mean they’ve got hundreds of thousands of refugees pouring in from the Middle East from Syria and those areas. Germany has really quite generous social welfare programs, and so they’re both Spain and Germany are cracking down and trying to collect more of the money that’s, that their tax payers in those respective countries should be paying.
Katrina Madewell: We may be doing that too in another year roughly. I definitely see that whole thing changing.
Darrin Mish: You mean refugees or…
Katrina Madewell: No, I mean like when our political…
Darrin Mish: Yeah you know…
Katrina Madewell: Leader changes place in a year from now regardless of what your position is. I think that there’s definitely going to be some changes to the healthcare system, and to the tax pay system, because there has to be.
Darrin Mish: Well there is certainly has to be some changes to the healthcare system because what we have right now is not working. Either the purely private or the purely public I mean it’s just not working out for most people I don’t think. Can I have a…
Katrina Madewell: I think the problem is a lot of people like even if you were for Obama and they voted for this think everybody is entitled to. Like I remember something my cousin said, he’s like everybody should be able to have health insurance, but I don’t think he realize that you’re just going to shoot yourself in the foot, because if your employer doesn’t provide it, then you have to get it or you’re going to be fined.
Darrin Mish: Yeah we’re starting to see the very first Obama care penalties rolling in our office, so they call them a shoot…
Katrina Madewell: What do those look like, how much roughly?
Darrin Mish: Well they call them a shared responsibility payment, and when I first saw the first you know the first statement with the bill…
Katrina Madewell: Because this is new.
Darrin Mish: Yeah when I saw the first one I can remember saying it out loud what in the heck is a shared responsibility payment? They are running the gamut Katrina. I mean everywhere from 40 bucks to you know 1000.
Katrina Madewell: That so crazy.
Darrin Mish: It just depends roughly on I think size of the, your income. Like how much you overstated your income, because in the real estate business when somebody is self employed and they’re trying to get a loan, what do they always do? Well quite often they overstate their income right, I mean that’s…
Katrina Madewell: Wow.
Darrin Mish: Part of…
Katrina Madewell: I mean they might not be, but here’s the thing is you’re going to write off every single little thing they could find where they might not have needed to write that off, or they could have kept the money if they wanted to right? Or they might not have spent money on certain things.
Darrin Mish: Right, I just meant that when you try to buy something, you have a tendency to overstate your income, and when you’re trying to get Obama care I think people will try– or basically understating their income, so they qualify for a bigger subsidy. When their income comes in higher than they estimated it would be, then they’re going to have a shared responsibility payment. They are going to have an Obama care penalty.
Katrina Madewell: For self employed people that could be virtually impossible, because I mean you can set out your goals for whatever you want, but you could be high you could be low, you don’t know where you’re going to land on that.
Darrin Mish: Yeah that’s an interesting point right and in…
Katrina Madewell: I mean seriously anybody self employed knows exactly what we’re talking about.
Darrin Mish: Yeah, it’s a– I’ve been going through a lot of stuff lately where they’re asking me to estimate my income, and I’m like well I can get you then 50 to 100,000, but I’m not going to be able to know until the end of the year exactly what that came out to be, and there’s no guarantee that next year is going to be the same as last year or better or worse. You just don’t really know. I agree you have to have a target like a goal, but how realistic is the goal too?
Katrina Madewell: I mean it could be realistic, but you never know what’s going to happen. I mean we all– this year for example we had a lot of setbacks. We lost some of the key players on our team. You know one of my buyers agents lost her daughter, that put a whole lot of responsibility on myself and the other team members that were left. You know that you can definitely take a step back when stuff like that happens, and it’s not even anything that happened directly to me, but you know it’s my problem.
Darrin Mish: It seems like there’s almost a bias in the government against you know self employed small business owners, and I’m not trying to be over like political…
Katrina Madewell: We get taxed more I know that.
Darrin Mish: It’s just, it’s really I mean the stats are that small businesses employ the vast majority of Americans, and it seems like Congress looks at small business owners as the super deep pocket they can just absorb more taxes and fees and what not. Again without trying to be super political if you think about it, I mean if the government waxed me my business with a big new fee or something or requires me to buy health insurance for all my employees which I really can’t afford…
Katrina Madewell: Like it could bankrupt some people…
Darrin Mish: It’s not really coming out of my pockets, ultimately what’s going to happen is I’m going to higher fewer employ…
Katrina Madewell: You cut people.
Darrin Mish: Yeah I’m going to have to let people go, because when it comes down to I’m I going to pay you know some new government fee, or am I going to buy my kid new tennis shoes? I mean it’s not I’m not buying a second vacation home or even a first vacation home for that matter.
Katrina Madewell: Right.
Darrin Mish: You know you’ve got to remember small business people…
Katrina Madewell: But it’s not there, they’re going to end up outsourcing more stuff overseas. They’re going to do things that aren’t subject to the same rules for people that live here.
Darrin Mish: Right, exactly, you are going to think ways around it. You got to just remember that small businesses create the vast majority of jobs in America. I don’t even know anybody. I don’t know if I know a single person that works for like a Fortune 500 company, not the Tampa Bay area. I mean, we don’t have that kind of job base here.
Katrina Madewell: Yeah, and it’s not how it used to be. I think more and more people are self employed than ever, and while it is a gateway to wealth, in a lot of instances it’s– you can crush the small business owner by forcing their hand to do some of these things.
Darrin Mish: Yeah, so let me round up the other three countries that are cracking down on tax evasion. Argentina, it’s kind of interesting. Argentina has been going through a fiscal monetary crisis for like twenty years. A lot of Americans go down to Argentina because our currency is worth so much more than theirs, that it even the cost of living is super low. I actually priced it one time, and you can live in a luxury apartment in Buenos Aires for like $300 a month.
So everything is a lot cheaper in Argentina, but obviously they are trying to fix their problems and they are cracking down on tax evaders. The next one is actually their neighbor, Brazil. I would guess that Brazil is probably cracking down. They got to pay for Olympics that are coming up, which I predict they are going to be quite interesting. The Olympics in Rio are going to be a colossal failure. I don’t see how it can do anything, but they are going to be a train wreck. They just don’t have the infrastructure down there to deal with what’s coming their way. It will be fun though. It will be fun to watch.
Katrina Madewell: Of course it’s a football story, who’d know, like football, soccer.
Darrin Mish: Yeah.
Katrina Madewell: Accused of evading $16 million worth of taxes.
Darrin Mish: Yeah, apparently there’s a footballer, soccer player named Neymar down in Brazil. He’s accused of evading $16 million worth of taxes. There’s a lot of people criticizing Brazil for saying that their punishments for tax evasion are too weak.
Katrina Madewell: I guess that’s where the chances are.
Darrin Mish: And the last one is actually in Russia. It doesn’t ever surprise me when I hear of Russia cracking down on people for anything, quite honestly. But actually it’s interesting that almost all of these; we can tie to a current news story. Russia, got some expenses that probably weren’t contemplated with this whole Syria thing, so it’s kind of interesting how that goes.
There’s another news story I wanted to bring up and talk about, and that is that the story out of a daily signal that says– there was actually an audit of the IRS by TIGTA which is the Treasury Inspector General for Tax Administration. Basically TIGTA has two interesting roles. TIGTA is a secret service for IRS employees, but their other role that we sometimes forget about is they’re actually like the inspector general for the IRS. So they are actually are charged, it’s like internal affairs for the IRS.
So it’s kind of an interesting role. They are like– when the word TIGTA comes up, IRS employees kind of shudder, because even though they understand the protection role, there’s also this internal affairs role. So if you actually have an IRS employee who’s actually violating the law, you can report that to TIGTA, and they are supposed to go and investigate it and take care of it, and recommend punishment if that’s warranted.
But TIGTA when they had an audit at the IRS on how often they actually comply with FOIA request, FOIA request is a freedom of information act request. We do this sometimes in our practice where we do a FOIA request requesting the entire collection file, or like the entire entire audit file, or the entire appeals file for a given tax payer. And we do that because we get additional information that you wouldn’t get from just the normal like electronic transcript.
So when we do these FOIAs and we are doing them more rarely, we used to do them in every case, but you actually get like the entire print out, like all the notes the employee made on a particular tax payer’s file. Sometimes even in my cases, that stuff will be redacted. So the word “redacted” is sort of interesting, it’s a fancy word. This means they black it out or white it out. They just erase it so you can’t see it.
Katrina Madewell: They do that?
Darrin Mish: They’re only supposed to do in given slender exceptions and what not. But when TIGTA did this audit, they found out that quite a huge number of them were actually inappropriately redacted. And I think this might unfortunately be a trend that IRS is going through, because a lot of these organizations that were involved in the Lois Learner scandal were trying to do FOIAs and that’s actually how that Lois Learner scandal is being prosecuted in a sense, because the government is not prosecuting that.
These are private lawsuits over FOIA requests and refusals to answer FOIA requests appropriately that landed them in federal court. But they found that– the TIGTA report found that over 11.3% of these FOIA requests in their samples were inappropriately redacted. I’m pretty sure…
Katrina Madewell: That’s a pretty big number.
Darrin Mish: Yeah, and that was just a random sampling. They said that ultimately they thought that over 346 of these requests were inappropriately handled during this one calendar year that they looked at. You know, I know that at least one of ours was in there, because I’ve done a FOIA request recently where they just erased a bunch of stuff that there’s no way it could have been legal to erase that. They just felt like they did want to deal with it.
Katrina Madewell: And any other business that would be like not okay, they would be like, oh no. like– you are just not allowed to do that kind of stuff.
Darrin Mish: That’s one of the problems.
Katrina Madewell: It just needs to be more transparent than that.
Darrin Mish: Yeah, I think all of us Americans are a little bit more comfortable when our government is actually transparent as opposed to non-transparent like they’ve been.
Katrina Madewell: Oh it’s time for a break.
Darrin Mish: One more break. When we come back, we’ll have the IRS train wreck of the week.
Katrina Madewell: Got you, back in a minute.
Commercial
This is the Tam Talk Radio Network.
Darrin Mish: Welcome back to the IRS solution attorney show. I’m your host the IRS solution attorney Darrin T. Mish.
Katrina Madewell: And I’m your co-host Katrina Madewell. Welcome back to the show.
Darrin Mish: Thanks Katrina. So there’s one more new story I want to share here with the audience because it’s really is spooky. What that is that computer scientists are actually developing artificial intelligence to help the IRS battle tax evasion. I mean, wow, are we getting closer and closer to 1984 or what?
Katrina Madewell: I’m just wondering where this story is going, and what they’re planning to do.
Darrin Mish: Well for now, they are partnering up with the MIT and that’s scary in itself, because there is some smart people at MIT. And they are developing computer algorithms to check partnerships in big corporation returns to find tax shelters that aren’t appropriate. So they are actually– the computer program, the algorithm, is attempting to basically delve into the intent of what the tax return, you know the tax shelter, to try to root out these inappropriate tax shelters.
I actually don’t have a problem philosophically with rooting out inappropriate tax shelters. But the scary thing about this story is that we are going to use artificial intelligence now to decide who to audit. And actually it’s going to be incredibly hard to combat I would guess because now it’s almost like when you are suspected of DUI and you blow into that machine and the machine says you are over blood alcohol content limit, and you got to rebut that machine’s finding.
It’s a little bit frightening to me that we are going to have an artificial intelligence algorithm deciding the stuff for the IRS. I think we are little bit away, probably several years away from them trying to use this on 1040 returns. I mean the writing is on the wall, I can see it all day long coming.
Katrina Madewell: I mean, artificial intelligence, when you think about that it in itself, it just sounds bad. But so give somebody an example like you mentioned that they are looking for different tax shelters and things that are not appropriate. What would an example be, what kind of stuff do you think they are looking for?
Darrin Mish: Well some of the famous ones were people used to invest in oil wells in the 70s, 80s, and 90s. They would invest in these oil wells, and they would basically get double or triple their investments as a deduction, as a write off. That’s the best example I can come up kind of on the fly. And that’s what the IRS is trying to do. They are trying to root out these inappropriate tax shelters that basically go against the intent of the law. But again I mean, intent is one of those subjective things that has to be interpreted up until now by human beings, by a judge or a court or jury or something.
Katrina Madewell: Right.
Darrin Mish: So it’s a little bit frightening to me that we are going to use a computer, we are going to rely upon a computer to make these decisions. I don’t think we are that close.
Katrina Madewell: Even attorneys have different interpretations, right?
Darrin Mish: That’s actually what helps keep attorneys employed is that they all have a different interpretation about what the law means, and what the facts in the case actually mean. I mean how often do you get a defense attorney and a prosecutor to ever agree. I mean, they never are going to agree by definition.
Katrina Madewell: Just come to some of kind of compromise. It’s about that time.
Darrin Mish: I think she means it’s time for the IRS train wreck of the week. So this was actually a case that I came up with that goes way back into the annals of my practice. I think this happened in about 19…
Katrina Madewell: These are the good ones though. The ones you forget about.
Darrin Mish: Yeah, this is was my very first really big win. I had a guy; actually he was out of Houston, Texas. And that was kind of cool, because my practices is based in Tampa, but I can represent clients in all 30 states and I do. And he owed $99,000. He was one of these guys that was really afraid that he was going to get in big trouble. They were going to take all their stuff.
And ultimately what happened is we filed and offer and compromise and we offered a very low amount of money. I think we offered like a $1,000. I wasn’t as brave or as aggressive then as I am now, but we offered a $1,000. And what happened is, remember there’s a statute to limitations for the collection of tax? Well, this guy only had one month left on the statute to limitations. So he had gone nine years eleven months. Had one month left on the statute to limitations? He wanted me to file the offering comprise even though he knew it would stop that statute to limitations from running, he was really scared. Ultimately what happened is the IRS employee called up. She said, I’ll settle this thing right now for a thousand bucks.
Katrina Madewell: Take it.
Darrin Mish: We are kind of like done.
Katrina Madewell: Boom. There’s our IRS train wrecker of the week. That’s a pretty good one from 99 grand to a thousand.
Darrin Mish: Yup. That was my first big win. It’s fun to talk about it to this day.
Katrina Madewell: Thanks for listening. This week we’ll be back, same time, same place next week, 1:00 pm eastern, Tam Talk 1340, 1354, 1400 for this week. We are out.