What to do With the CP2000 Letter the IRS Sent You

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DARRIN T. MISH:  Welcome to the IRS Solution Attorney show, I’m your host THE IRS Solution Attorney Darrin T. Mish.

KATRINA MADEWELL:  And I am your co-host Katrina Madewell.

DARRIN T. MISH:  How are you doing today Katrina?

KATRINA MADEWELL:  Better than you.

DARRIN T. MISH:  No hurricanes or anything like that.

KATRINA MADEWELL:  No hurricanes yes and the traffic oh my gosh it’s a breeze this morning.

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DARRIN T. MISH:  Yeah usually we complain and we complain, complain and moan and groan…

KATRINA MADEWELL:  It’s really good.

DARRIN T. MISH:  Today was not too bad I agree.

KATRINA MADEWELL:  What’s going on today Pat that the traffic was so light any idea?

PAT GEORGE:  Ah no it’s just we are lucky today.

KATRINA MADEWELL:  Maybe people weren’t texting, they were paying attention while they are driving that’s good.

DARRIN T. MISH:  Yeah cause people we’re not getting into accidents is what usually happens out there.

KATRINA MADEWELL:  Or they drive like idiots and we’ve been in no traffic mood, we are really glad that you are not doing that today.  So thank you but you are listening to the IRS Solution Attorney show and we got a great outline planned for you guys today and unless you’ve heard of an IRS CP2000 you probably have no idea what it is so Darrin is going to explain.

DARRIN T. MISH:  Yeah so the title of the show is What is an IRS letter CP2000 and what do I do when I get one?  So an IRS letter CP2000 is a notice from the IRS that alerts the tax payer that their tax, that their filed return has inconsistency from the information returns filed with the IRS.  Now that sounds really lawyerly so here’s the bottom, bottom line…

KATRINA MADEWELL:  Very lawyerly yes break down.

DARRIN T. MISH:  Here’s the bottom, bottom line, the IRS is sending you a letter that says hey we are going to do what’s called a correspondence audit, we are going to do an audit by the mail, through the mail because you forgot to put some income on your tax return.

KATRINA MADEWELL:  So it’s almost like a light audit because they got a 1099 or something?

DARRIN T. MISH:  Yeah it’s definitely a light audit from the standpoint of it’s all done by mail so it’s not one of these love letters that says, hey, congratulations you’re under audit and bring all of your stuff down to the auditor’s office on such date and reserve 4 hours.  Now that is not what this is about, what this is about is like hey you forgot to put some income that we know about on your tax return…

KATRINA MADEWELL:  We are going to see if we can find it kind of thing.

DARRIN T. MISH:  And what we’ve done is very helpfully decided to, asses tax and recalculate everything and if you agree, sign here and if you disagree here’s what you do.

KATRINA MADEWELL:  So is there an amount on that letter like this is how we reassessed it, this is what we think you owe if you agree, sign it and send a check?

DARRIN T. MISH:  Absolutely there’s an amount and usually…

KATRINA MADEWELL:  And you can do that and that’s the end of it?

DARRIN T. MISH:  Well, theoretically and we will get into that in some detail…

KATRINA MADEWELL:  Ok.

DARRIN T. MISH:  But yeah there’s an amount on there and the amount can be low, you know it could be a few hundred bucks or it could be eye-popping, I’ve seen both, I’ve seen…

KATRINA MADEWELL:  What’s eye-popping on one of those?

DARRIN T. MISH:  Umm well to me, if it were me, if it was my money anything eye-popping is over 10 grand. Now in my world as an attorney that handles and helps people with tax problems I would say eye-popping is like a hundred grand?

KATRINA MADEWELL:  Ridiculous tax problems.

DARRIN T. MISH:  Yeah that’s like hundred grand?

KATRINA MADEWELL:  So let me ask you a real estate question. So with one of these notices the IRS CP2000 let’s say someone did a short sale or a foreclosure or whatever and then they got the 1099 for the difference that the bank resold the house for, would they send you a notice for something like that? Let’s say you didn’t file the 1099 because they are taxing you as income because it was their loss, have you seen that?

DARRIN T. MISH:  Yeah we actually need to do a whole show on IRS you know cancellation of debt issues but yeah absolutely if that 1099’s C for that cancellation of debt was not included on the tax return well yeah for sure you are going to get a CP2000 and they are going to very helpfully recalculate the the tax for you and the penalties and interest and what not.

KATRINA MADEWELL:  So let’s say it’s a $100,000 difference just raw, even numbers, roughly what might that look like?

DARRIN T. MISH:  Well you are going to have depending on the tax bracket you are probably going to owe $25-30,000 in tax plus, plus, plus.  Interestingly enough the penalty is not going to just be late payment. You are going to have an accuracy penalty because…

KATRINA MADEWELL:  What?

DARRIN T. MISH:  By definition you were inaccurate.

KATRINA MADEWELL:  Inaccuracy penalty?

DARRIN T. MISH:  Inaccuracy penalty is 25% of the tax. So accuracy penalties like they hurt.

KATRINA MADEWELL:  Well $100,000 is 25 grand plus whatever your tax is right?

DARRIN T. MISH:  Well no it’s 25% of the tax not 25% of the income.

KATRINA MADEWELL:  But it’s still 25% of that amount?

DARRIN T. MISH:  Absolutely so it can be a really big deal. We’re seeing a lot of CP2000 and you always see them sort of around this time of year because people filed their tax returns early because you know they were expecting refunds and what not and then it takes 6 or 8 months for the IRS to kind of like match up the return to the information returns. I think that this process is largely automated, you know the payor of the money, so the payor of the 1099 for example, is going to send in those 1099’s, I think 1099’s are due at the end of February and so then they computer eventually matches all of the information returns all of the W-2’s, 1099’s and 1098’s matches those in an automated fashion to the 1040 that was filed by the tax payer. If there’s a discrepancy for example a 1099 doesn’t end up on a tax return, then you are going to get a CP2000 guaranteed.

KATRINA MADEWELL:  So in that scenario that we used like let’s say it’s $100,000, it’s a mortgage tax or you know where they sold the house and that’s the loss they took. In that particular instance let’s say if, cause you now people move obviously afterward in that scenario and the banks going to send it to whatever the property address was. Would they still hold that against the taxpayer or do you have loopholes around that? Right cause that’s a good question, don’t you think?

DARRIN T. MISH:  Well…

KATRINA MADEWELL:  Because they are saying oh you didn’t file this or what did you just call it a minute ago what kind of penalty?

DARRIN T. MISH:  Accuracy penalty.

KATRINA MADEWELL: Accuracy penalty.  But the homeowner, let’s say they just didn’t know or they didn’t mean to be inaccurate but they never got it, never got the 1099?

DARRIN T. MISH:  Well that’s going to be perhaps an argument against you know having the accuracy penalty filed against them and I can see that scenario exactly what you are saying you have the 1099C for cancellation of debt and they send it to the home that was actually short sold you know…

KATRINA MADEWELL:  Right.

DARRIN T. MISH:  Sometimes it’s years…

KATRINA MADEWELL:  Oh yeah.

DARRIN T. MISH:  Sometimes that 1099 gets issued years after…

KATRINA MADEWELL:  Can they do that, though?

DARRIN T. MISH:  Well…

KATRINA MADEWELL:  I guess if that’s the year that they took the loss because they sat on the property and they finally foreclosed on it right?

DARRIN T. MISH:  As a practical matter that is what they do but there’s remember there’s 3 exceptions to the cancellation of debt incomes sort of situation so let’s recap what we are talking about here. When a taxpayer has debt that’s cancelled by the IRS, Congress has decided that it’s the same as if you have gotten the money and then the debt was forgiven so, it doesn’t make a lot of sense to me let’s say you owe, your $100,000 in your case so the way that the tax code looks at it is that if it’s a hundred grand then, if it’s a hundred grand…

KATRINA MADEWELL:  You can’t (inaudible) but I will just, ok it sounds like Darrin’s distracted because he is so I will just tell you, you might have heard this before we have this little monitor literally sitting next to Darrin and Pat loves to, he does it to me all the time when I’m in the studio on Friday’s to but he loves to flash these funny images just to see if he can mess us up so we are both sitting here trying not to crack up laughing and Darrin, anyway…

DARRIN T. MISH:  Well here’s the actual deal I’m not even looking at the monitor, I’m not looking at Pat I’m actually looking at Katrina and Katrina’s so distracted laughing at the pictures of farmers in overalls because that’s poking fun at me that I can’t, I can’t concentrate because she is asking me these questions about those complex stuff and laughing at the same time.

KATRINA MADEWELL:  I’m sorry ok.

DARRIN T. MISH:  So let’s go back…

KATRINA MADEWELL:  Let’s recap please yes.

DARRIN T. MISH:  So let’s go back to the cancellation of debt you have a homeowner that owes 100 grand on the property and it short sold and so, therefore they didn’t have to pay that hundred grand.

KATRINA MADEWELL:  Forestalled or Foreclosed or whatever happened.

DARRIN T. MISH:  Foreclosed or whatever.

KATRINA MADEWELL:  Yeah.

DARRIN T. MISH:  So then the, it, because that hundred grand was forgiven then they are supposed to pay tax on that $100,000 because the theory is if they had gotten the hundred thousand dollars and then they would have been able to pay that debt off and you know and so on.

KATRINA MADEWELL:  But they lost money in the sale so now they want to tax.

DARRIN T. MISH:  Yeah really kind of a stupid.

KATRINA MADEWELL:  Well it’s kind of like the bank is writing it off right as a lost so now…

DARRIN T. MISH:  Yeah.  I hate the law I think it’s stupid, it’s just a money grab but that’s just my opinion honestly.  So, there’s 3 exceptions to that situation ok so there’s, if it’s right now this is the law right now and it’s been extended year by year for a while now but if it was acquisition, if it was due to acquisition debt for a primary residence then it’s not, it’s not taxable, you have to fill out a form called 982 and then you can deal with it but that’s a great example in this situation so let’s say there’s a 1099C that was issued, taxpayer didn’t know about it so it’s not on their 1040 and you know what do you do?  Because let’s say it was acquisition debt for the primary residence, well what you do is you fill out that form 982 and you do an amended return and you, that’s your response to the CP2000 letter if that makes sense.

KATRINA MADEWELL:  And your 982 is for insolvency right?

DARRIN T. MISH:  Well it’s also for the primary acquisition debt so the second exception would be insolvency. Insolvency is exactly what?  Well, insolvency means that you have more debt than you have assets.

KATRINA MADEWELL:  Which is usually the case for a foreseller foreclosure.

DARRIN T. MISH:  Typically when somebody is losing their primary residence is not because they have the money it’s because they don’t have the money so it’s only, the debt is only, only nontaxable to the extent they are insolvent.  So let me give you, hypothetical there. If they are insolvent by $70,000 and they owed a hundred thousand dollars or they had a hundred thousand dollars cancelled then they still have to pay tax on that last $30,000 also not fair but that’s what the law is.  The third exception is if the debt itself was discharged in a title 11 case, fancy way of saying bankruptcy, if the debt itself was discharged in a bankruptcy then there is no cancellation of debt penalty.

KATRINA MADEWELL:  Of course, right, because they can’t collect on bankruptcy stuff.

DARRIN T. MISH:  Otherwise every person who ever went through a bankruptcy would get a 1099C at the end, owe a bunch of tax money and it would do away with the whole purpose of filing bankruptcy…

KATRINA MADEWELL:  Kind of defeat the whole purpose yeah, bankruptcy exactly.  So our topic for today’s show is the IRS letter CP2000 and what to do if you actually get one.  So I asked Darrin a question that kind of took us off topic real estate as always, but we are going to answer those questions for real when we come back and if you received an IRS notice CP2000 and you want to call in and chat about it and ask Darrin a question you can do so at 888-404-1010. Again we are live today in the studio 888-404-1010 and we will answer your IRS CP2000 questions we will be back in a minute.

(commercial break)

KATRINA MADEWELL:  I forget what this is to?  What did this, what was this music, Pat?  Where did it come from?

KATRINA MADEWELL:  Ok there we go.

DARRIN T. MISH:  I don’t think you are quite old enough.

KATRINA MADEWELL:  I’ve heard it before but I didn’t know what it was.

PAT GEORGE:  Oh, to be this young.

KATRINA MADEWELL:  I didn’t recognize it; how old do you think I am?

PAT GEORGE:  47.

KATRINA MADEWELL:  What you are crazy.

DARRIN T. MISH:  I’m going with 28.

KATRINA MADEWELL:  Whatever you are both liars that’s good that’s fine.

DARRIN T. MISH:  One was at least a nice liar.

KATRINA MADEWELL:  Yes.

PAT GEORGE:  Is this your wife? Is she Ava Gabor?

DARRIN T. MISH:  My wife is absolutely gorgeous but she is not afraid to get dirty.

PAT GEORGE:  Ok, that’s good.

KATRINA MADEWELL:  Yes I could see that about Heather.

DARRIN T. MISH:  But Ava Gabor was definitely you know absolutely gorgeous but definitely afraid of getting dirty.

PAT GEORGE:  You know it’s just such a contrast of you. You know you come in so educated about the IRS and all of the rules and you are always dressed so nice, and you own a farm.

KATRINA MADEWELL:  I know. With quail.

DARRIN T. MISH:  Alright, so today’s farm story if anybody is following the saga, so I just bought a small farm out in Pasco county and we’re living on an and it’s my first sort of foray into farming and my wife grew up on a farm in Colorado and she knows lots of things and she is really awesome.  So I decided to get some quail to raise for fun over the last weekend and I got, you know I had a quail coop and the whole nine yards and I spent a lot of time securing this thing and you know building a new stand for it and stuff.

PAT GEORGE:  Would it have been tax deductible?

DARRIN T. MISH:  No, well maybe theoretically on a schedule F I think that’s a little bit…

KATRINA MADEWELL:  What does it, what does a quail look like, they have a long black tail?  I’ve never seen a quail?

PAT GEORGE:  It’s very small they look like a gray sparrow but kind of fat.

DARRIN T. MISH:  Yeah they are like 8 inches tall they walk around on 2 legs like a chicken.

KATRINA MADEWELL:  Ok.

DARRIN T. MISH:  You know they are not real big.

PAT GEORGE:  People like to shoot those and eat them but you get a tiny piece of meat for a lot of bones.  They are very bony.

DARRIN T. MISH:  Yeah.  But they lay eggs, the eggs are really small, and the eggs are like you know…

KATRINA MADEWELL:  But do you eat the quail eggs?

DARRIN T. MISH:  Yeah, you can they are just like a chicken egg but the ratio is 5 to 1 so they are pretty small.

KATRINA MADEWELL:  Ok.

DARRIN T. MISH:  But so a devastatingly sad thing happened yesterday morning, I woke up and I went out to go feed my quail and a racoon had apparently gotten into the cage and massacred almost all of them.

KATRINA MADEWELL:  I’m surprised they got them all at once?  Usually don’t they take a little longer?  Might have been a team of racoons.

DARRIN T. MISH:  Yeah might have been a whole family.  What do you call a group of racoons, probably a Congress, a covey I don’t know?

PAT GEORGE:  You know it’s funny you pulled up what you would call that I was just looking at the word of the day and the word of the day today is Bevy.

DARRIN T. MISH:  Oh was it a bevy of racoons?

PAT GEORGE:  So it’s a bevy of racoons maybe I will find out.  But what do you think you call a bunch of crows?  I was shocked by this a bunch of crows.

KATRINA MADEWELL:  I don’t know.

PAT GEORGE:  A murder.

KATRINA MADEWELL:  What?

DARRIN T. MISH:  Oh, ok, that’s interesting.

PAT GEORGE:  And a group of swine because you might raise pigs it’s a sounder.

DARRIN T. MISH:  A sounder of swine.

PAT GEORGE:  Yeah.

DARRIN T. MISH:  Well they do squeal a lot.  They make a lot of sound that’s for sure.

KATRINA MADEWELL:  Never heard of that.  I’m definitely not a farm chick.

PAT GEORGE:  I guess that’s where they got you know what is it a murder on crows or something, murders row and there’s always a black crow.

KATRINA MADEWELL:  See I would live in the city if it were up to me but my husband would never go for it so.

PAT GEORGE:  You would live where?

KATRINA MADEWELL:  I’d live in the city.

PAT GEORGE:  You don’t live in the city now?

KATRINA MADEWELL:  No I live like in downtown.

PAT GEORGE:  That’s pretty much the city where you live now.

KATRINA MADEWELL:  Oh you know.

DARRIN T. MISH:  No she lives, yeah she lives…

KATRINA MADEWELL:  I live like in a high rise condo or something.

DARRIN T. MISH:  She is saying she would, she lives in like a subdivision that’s semi-rural right now.

KATRINA MADEWELL:  Well, it used to be it’s not so rural anymore.

DARRIN T. MISH:  Yeah right.

PAT GEORGE:  That’s why I say it’s a city now, it’s all city…

DARRIN T. MISH:  If you got gutters and drains and stuff it’s a city.

PAT GEORGE:  Right.

KATRINA MADEWELL:  Yeah exactly.  So anyway.  The Facebook following is the racoon got your quail did you see my comment about the masks, the bandits?

DARRIN T. MISH:  Yes, they definitely are bad news.

KATRINA MADEWELL:  I think God made them that way for a reason.

DARRIN T. MISH:  I will have to eliminate the racoons either humanely or inhumanely because I will recover, we will rebuild.   So back to the show topic.

KATRINA MADEWELL:  Alright, so back to our CP2000 so what happens if you get this letter and what the heck should somebody do about it?

DARRIN T. MISH:  Well let me give you a couple of examples some stories of people that I have handled recently who’ve gotten CP2000’s.  One was actually a recent IRS train wreck of the week where the gentleman actually was a…if you recall he was a combat veteran and there was something to do where he’d gotten some, I don’t know exactly, I can’t remember but he had…

KATRINA MADEWELL:  I remember he was our hero of the week.

DARRIN T. MISH:  Yeah he is definitely our hero but he, he had some money that he owed and he very helpfully pointed out this particular Federal Statute that said that if in his situation in the military and combat and whatnot that that was not taxable and so we basically wrote back a letter, we sighted the statute and we you know complied with the time requirements and all that, we got back a letter that said you know basically you don’t owe us any money so that’s one example.  The next example would be I represented a gentleman who sells auto parts on Ebay, so what he does as I recall is he, he will go to a junk yard and he knows what kind of parts are worth good money and they are easily shippable so like he’s not buying bumpers because that’s not going to work really all that well but he might buy like, you know the springs that hold up the hatch back he might buy those, those are kind of expensive and he might get those at a pull apart place for you know 10 bucks and he might be able to sell them online for 75 bucks…

KATRINA MADEWELL:  Gotcha.

DARRIN T. MISH:  So he forgot to, to include that Ebay income on his tax return and so he had a really high cost of goods sold in shipping and really high expenses, so that CP2000’s was one of those eye poppers. It was like wow you know the IRS wants me to pay more in tax penalties and interest that I even made, you know that I actually earned and so what we had to do was go back and calculate what his sales were, what his expenses where so the expenses where (inaudible) get sold, some driving to go to the junkyards and stuff and shipping. So then we were able to recalculate that basically file an amended return and send it into the IRS, the IRS wrote back and he did owe some money because he did in fact have some Ebay income but it wasn’t nearly as bad, for example the letter might have said he owed $30,000 and it ended up being knocked down to like $3000.

KATRINA MADEWELL:  So what happens when you do the amended return because we were using like the $100,000 example and I don’t know what all penalties go in it but theoretically a 25% tax will be 25 grand plus the penalty of 25% of that tax is a pretty hefty amount.

DARRIN T. MISH:  Oh well if you file, if you respond to the CP, so you have to disagree and we will go through this step by step in a minute, probably in the next segment but if you disagree you are going to send in that amended tax return and then they are going to recalculate it and by the way there will be no accuracy penalty at that point in time because basically you just beat it you know because you filed an inaccurate…

KATRINA MADEWELL:  You filed it before, like when you got the initial letter you filed it before they actually…

DARRIN T. MISH:  Assessed it.

KATRINA MADEWELL:  Ok.

DARRIN T. MISH:  Right otherwise you are going to fight an uphill battle.

KATRINA MADEWELL:  Gotcha, yep.

DARRIN T. MISH:  You can still fight it even if you get a CP2000 and you blow the deadlines and they assess the tax you can still fight it, it’s still something that can be done it’s just better to do it before…

KATRINA MADEWELL:  It gets harder the longer you wait I guess.

DARRIN T. MISH:  It’s going to be a lot harder for a late person and a non-lawyer to deal with it after it’s already happened.

KATRINA MADEWELL:  Yeah that makes sense.

DARRIN T. MISH:  So what we are trying to do today is talk about just the perspective of if you get the letter and you don’t want to hire a lawyer and, let’s say the total purposed adjustment is just 3 grand, that probably doesn’t make sense to hire a lawyer so you are going to have to do this yourself.

KATRINA MADEWELL:  Right.

PAT GEORGE:  We just had a caller that wanted to tell us that a group of raccoons is called a gaze.

KATRINA MADEWELL:  Oh we are yet being corrected.  Listen just for the record I am not the farmer, don’t expect me to know that stuff but….

PAT GEORGE:  So you must have some farmers listening or something out there.  A gaze.

DARRIN T. MISH:  There will be no longer a gaze of raccoons at my place in about a week.

KATRINA MADEWELL:  Well thank you for listening to the show and thank you for correcting us.

DARRIN T. MISH:  Absolutely, that’s awesome.

KATRINA MADEWELL:  Appreciate that.

DARRIN T. MISH:  Alright I think we should probably get back to what we are talking about.

KATRINA MADEWELL:  So step by step what to do in that suggestion, in that scenario if it’s $3000 I mean the purpose of the show is also to help people just like that so if someone is listening in that scenario as opposed to hiring an attorney they could follow the show and get some good advice on how to fix that.

DARRIN T. MISH:  Yeah, let me give you one more example of somebody, a theoretical situation where you can get a CP2000 so let’s say you have a regular job, you have a wage earner type job and you get a W-2 but then you do some freelance work on the side and you get a 1099, a lot of people sort of forget about that freelance work, especially if they were under the impression, let’s say it’s the first year that they’ve ever done it and they were under the impression they were working for cash and you know…

KATRINA MADEWELL:  There is a lot of those freelance sites too.

DARRIN T. MISH:   Yeah I mean it goes on and on but I’m just saying like let’s say, well my example was when I was a kid I used to go put those real estate signs out for new housing developments on Friday nights and I would pick them up on Sunday and I got paid with a 1099, that created my very first tax problem at 18 years of age that I needed help to get solved because I couldn’t solve it and the guy even told me he’s like I’m going to give you a 1099 at the end of the year this is, this is what that’s going to mean and this is what it is…

KATRINA MADEWELL:  And when you are 18 your eyes are glazing; you have no idea what he just said to you.

DARRIN T. MISH:  I’m like you are going to pay me 50 bucks a week to do that…

KATRINA MADEWELL:  That’s all you heard.

DARRIN T. MISH:  Right on I’m going to do it.  That also shows you how old I was or I am because I could make money doing that…

KATRINA MADEWELL:  But to most kids like high school age 50 bucks a weekend is still good money.

DARRIN T. MISH:  Yeah not bad, you know gas was like a dollar a gallon to so it wasn’t that big a deal. So you have a W-2 job and you get a 1099, you kind of forget to put you know the 1099 on the tax return you are guaranteed to get a CP2000 but let’s think about this if you are in a scenario like my Ebay auto parts seller where you have high expenses it’s probably not that big a deal right mean cause you are going to, you are going to calculate all the expenses and sort of off set it when filing an amended return but what if you are a freelancer that provides some personal service so you don’t really have expenses?

KATRINA MADEWELL:  There’s no expenses yes.  Software maybe?

DARRIN T. MISH:  Yeah or you know we have guys that, that compile data for us online, right, there expenses are…

KATRINA MADEWELL:  Excel.

DARRIN T. MISH:  Yeah their internet connection maybe.

KATRINA MADEWELL:  Yeah it’s excel.

DARRIN T. MISH:  Probably not.  So it’s a bigger deal if you have a low expense sort of you know business where you get a 1099 then if you have a high expense business where you get a 1099.

KATRINA MADEWELL:  Yeah that makes sense.  Ok so coming up after the break what’s our, what are we going to go into next?  Talking about…

DARRIN T. MISH:  We are going to do step by step what to do if you get the letter and we will just knock it out in the next segment.

KATRINA MADEWELL:  We will talk about some more stories and don’t miss our train wreck of the week which we will talk about in the last segment you are listening to the IRS Solution Attorney show, I’m your co-host Katrina Madewell with Mr. Darrin Mish if you’ve got a question on the IRS CP2000 888-404-1010 thanks for listening 888-404-1010 we will be back in just a minute, stick around.

(commercial break)

KATRINA MADEWELL:  Welcome back. You are listening to the IRS Solution Attorney show where we occasionally talk about raccoons and more.

DARRIN T. MISH:  And I am the IRS Solution Attorney Darrin Mish.

KATRINA MADEWELL:  I’m your co-host, Katrina Madewell trying to keep that conversation alive.

PAT GEORGE:  You know after you take care of this gaze of raccoons…

DARRIN T. MISH:  Right.

PAT GEORGE:  Will you make me a Davey Crockett hat?

KATRINA MADEWELL:  See I don’t bring up the farm conversations it’s all Pat.

DARRIN T. MISH:  Well this is going to be really politically incorrect and perhaps a little bit unpopular but I’ve been wanting to tan some raccoon hides for a while so yeah if I get enough of them to make it…

PAT GEORGE:  Don’t spank them you got to get rid of them.

DARRIN T. MISH:  Well you have to cure them basically, if you don’t do it right then the fur will all pull out and it won’t be permanent, but it either, it’s a process that you have to go through where you tan the hide and that’s basically the curing process and then I’ll give you the hide and you can make the hat.

PAT GEORGE:  The only tanning of hides that I know about involve a leather strap.

DARRIN T. MISH:  Oh, now you’ve really dated yourself because people don’t do that anymore but yeah I went through my fair share of those things as well.

PAT GEORGE:  So I am going to get a Davey Crockett hat.

KATRINA MADEWELL:  Listen I was the one asking my in-laws when chicken lay eggs how do you know if a chicken is going to come out or if it’s an egg you eat ok like that’s me so you can laugh now it’s all good cause I Iaugh about it too.

DARRIN T. MISH:  Nice.

KATRINA MADEWELL:  But that is a legitimate question if you’ve never grown up around farm animals.

DARRIN T. MISH:  So you are like is that an eating egg or is that a hatching egg?

KATRINA MADEWELL:  Like is it how do I know if I crack it that a chicken is not going to pop out.

PAT GEORGE:  You know we planted corn on the side of my house and I live right in the middle of Carroway and we planted like 12 ears of corn with seed and they all came up and we had little tiny corn and then something ate it, I don’t know what it was it was a bug that ate all the corn and then we had all that rain and it killed all the corn, I didn’t know that you could over water corn and it would just die.

DARRIN T. MISH:  Oh for sure.  I’ve been battling raccoons for like 20 years.  I had a big garden when I lived in Port Tampa in South Tampa and I can remember planting squash and you wait and you got zucchini out there and you are like oh no that one’s going to get a little bigger I’m going to wait until tomorrow to get that one and you go out in the morning and you kind of get a little pep in your step….

KATRINA MADEWELL:  And something got it.

DARRIN T. MISH:   You are like yeah I’m going to get my zucchini and it’s gone because a darn raccoon ate it.  They will eat anything that you like to eat.

PAT GEORGE:  Wow.

KATRINA MADEWELL:  We have a lot of deer at our house like they run around like wild dogs.

DARRIN T. MISH:  Yeah that’s, at my new place we don’t have any deer, at the old place the last place in Wesley Chapel we had deer where you couldn’t grow, you couldn’t even have certain landscaping plants even in the front yard because they would just come and eat them.

KATRINA MADEWELL:  They like hibiscuses and stuff like that.

DARRIN T. MISH:  One morning I was on my way to the airport about 4 in the morning and I opened the front door and there was a pretty good size buck standing on my front porch, I slammed the door he ran off I don’t know who was more scared me or him but I can tell you it was a little disconcerting. You are not expecting there to be a large body you know of anything standing….

PAT GEORGE:  Every morning because I come to work so early I leave the house at 5 am and it’s still, you know it’s really dark and I walk out there and I think every morning snakes like the warmth of the sidewalk and one morning it’s either going to happen it’s going to be by the car, he’s going to be on the sidewalk or something there’s going to be a snake one morning. So we live in the jungle, we live in Florida.

DARRIN T. MISH:  Do you remember a few years back there was a rash of rattlesnakes in mail boxes?

KATRINA MADEWELL:  Yes, vaguely I do.

DARRIN T. MISH:  There were like 2 or 3 occasions where like people reach in their mailbox and got bit by rattlesnakes and I don’t think if they ever figured out if people putting the snakes in the mailboxes or not so that…

KATRINA MADEWELL:  I wouldn’t stick my hands in anywhere without looking in there first.

PAT GEORGE:  I don’t look in my mailbox because it’s always just bills so.  I never open my mailbox.

KATRINA MADEWELL:  Bill pay, Pat, bill pay.

DARRIN T. MISH:  As fun as this is talking about other things let’s talk about what you do step-by-step if you get a CP2000 ok?

KATRINA MADEWELL:  Yes.

DARRIN T. MISH:  So the first thing to do now most people would think that I wouldn’t need to put this on the list but open the envelope.

KATRINA MADEWELL:  Yeah don’t leave your head in the sand like an ostrich and not open it.

DARRIN T. MISH:  I would say probably most of my IRS problem clients come in and they have a stack of unopened envelopes.  We’ve got to open the envelope to find out what the deal is.

KATRINA MADEWELL:  Roughly what percentage?

DARRIN T. MISH:  60 or 70%.

KATRINA MADEWELL:  Wow.

DARRIN T. MISH:  You know come in with unopened mail from the IRS.  Now you know they’ve had a problem for a long time…

KATRINA MADEWELL:  What do they say to that?  Like do you ever ask them hey why didn’t you at least open this to see what is was?

DARRIN T. MISH:  Well, they know it’s bad news and they just don’t want to deal with it.

KATRINA MADEWELL:  They don’t care they are like….

DARRIN T. MISH:  Yeah it’s like more of the same.

KATRINA MADEWELL:  Ok.

DARRIN T. MISH:  And you know in their defense the IRS sends out a lot of duplicate notices they send one to the husband, one to the wife you know that kind of thing.  But open the letter. Step 2 read it and don’t hyperventilate while you are reading it ok this is a proposed assessment there may still be hope, ok, so don’t freak out.

KATRINA MADEWELL:  So that’s what would be in there is the assessment that would freak somebody out?

DARRIN T. MISH:  Yeah well if you see $100,000 on the thing in big bold letters that’s going to be a little bit scary don’t hyperventilate there’s probably a pretty good explanation probably a better thing to do then ignore the letter so that would be step number 2.  Step number 3 right on the letter there is going to be a deadline there’s going to be a date, write the date down, put it on your calendar if you use a calendar, if you are one of these kind of people that don’t use a calendar and you know miss a lot of dates then what I want you to do is write the date on sticky notes and put them all over the place….

KATRINA MADEWELL:  Put sticky notes everywhere.

DARRIN T. MISH:  Put them in the car, put them on the mirror in the bathroom.

KATRINA MADEWELL:  People say is that your birthday or your anniversary?

DARRIN T. MISH:  Put them on the toilet, put them in places where you are going to see it.  Better yet what my advice is why don’t you deal with it like today or tomorrow or this week.

KATRINA MADEWELL:  Alright so what should somebody, how do they deal with it.  That probably don’t know what to do.

DARRIN T. MISH:  Well, first before I can tell you how to deal with it we have to identify what’s the issue ok so what got left off of the return?

KATRINA MADEWELL:  What if they are like I have no clue what this is or why I got it.

DARRIN T. MISH:  Well, the letter itself in less than super clear terms is going to tell you what the problem is, it’s going to say you left off this 1099 that you got from Acme company.

KATRINA MADEWELL:  Oh it does tell you who it’s from?

DARRIN T. MISH:  Yeah it will tell you who the issuer is, what their address is, what the exact amount of money is and so it’s not going to be that hard to identify.  Now there are sometimes people get 1099’s that I don’t know how it’s wrong or sometimes I’ve had a lot of cases where they were duplicated so you get like one, I remember one case where I had a 1099 or the client had a 1099 for $100,000 and one for $100,500.00.

KATRINA MADEWELL:  So they were trying to get him twice but it was really only one.

DARRIN T. MISH:  Yeah what had happened in that case was the higher one was the correct one and it was issued after the first one, and what the issuer was trying to do was issue one for just $500 more but the way the IRS looked at it that was 2 separate 1099’s and so that’s what happened and so actually in that case the client did not respond to the CP2000 letter appropriately and then the IRS basically what they did is they issued what’s called a notice of deficiency and we had to file a tax corp petition and it was one of my easiest tax corp cases ever, counsel called me, IRS counsel called me and said I agree with your position I’ll send over the stipulation documents and we are done.  So I love cases like that.

KATRINA MADEWELL:  And that scenario that would have been really simple right just to file that amended return and pay the tax on the 500 bucks?

DARRIN T. MISH:  It may not have been that simple in that particular case because there was two outstanding 1099’s and there have been made efforts to get one of those rescinded and the issuer would not rescind them and so it probably would not have ever gotten worked out in the CP2000 process just because it’s like above those decision makers pay grade if that makes sense.

KATRINA MADEWELL:  So what recourse does somebody like that have?

DARRIN T. MISH:  Well, we will talk about that in a minute ok?

KATRINA MADEWELL:  Ok.

DARRIN T. MISH:  So you have to understand what is the issue if you agree with the issue, like if you just agree with there figures you can sign the letter and send it back or if you want more time before it’s assessed so you have more time to pay for example then just don’t send it back.  You know….

KATRINA MADEWELL:  So just ignore it in a sense?  At least temporarily?

DARRIN T. MISH:  Yeah in my little note here is, don’t worry they will still assess the tax you know they eventually will still assess the tax it’s not like you are going to ignore it and it’s going to disappear it’s just going to take months longer for it to actually be formally assessed against you.

KATRINA MADEWELL:  Uncle Sam is that uncle that never goes away.

DARRIN T. MISH:  Yeah so what the IRS will do is quite often they will issue what’s called a notice of deficiency then you have 90 days to petition the tax court and so it could take several months before the tax is actually assessed against you.  If you disagree what I want, you to do is I want you to send in your response via certified mail.  Now there is going to be a fax number on the CP2000, I’m not a very big proponent of faxing the response back.

KATRINA MADEWELL:  Now why would you say that because I would think if you sent a fax and it’s got a confirmation right there that it went to the IRS and its time stamped that would be even better.

DARRIN T. MISH: You said that to me at the break and I said good luck trying to prove that that confirmation of the fax went through.  I don’t know, the IRS is still really old school in their technology and I feel a lot more comfortable if I sent it back by certified mail that I could prove that it was sent then if I faxed it that’s for sure.

KATRINA MADEWELL:  But the fax transmission does say if it went through or it did not and like some…

PAT GEORGE:  Faxes are almost gone now.

KATRINA MADEWELL:  I know it is and like we rarely fax to and there was a whole running joke on this real estate happy hour that said about faxing but anyway when you send a fax it says in the transmission report and it actually copies, like my fax machine copies the first part of the first page of whatever you sent.

DARRIN T. MISH:  Well I can tell you that…

KATRINA MADEWELL:  Would that have any leverage or still no.

DARRIN T. MISH:  I could probably win it I just think it would be harder then trying then winning the proof of the certified mail because the certified mail is just like the gold standard of proof that you mailed something…

KATRINA MADEWELL:  I know but literally you could how do I want to say you could wrap up a turd and send it.  You know what I mean?

DARRIN T. MISH:  Yeah, In the statutes there’s actually something called the mailbox rule so it’s if you can prove that it was mailed it’s presumed to have been received and I’m unaware of a fax rule so where you can prove that it was faxed then it’s presumed to have been received.

KATRINA MADEWELL:  Probably cause it’s so antiquated that they never updated it.

DARRIN T. MISH:  Well I know the IRS has varying treatments how they actually receive fax documents, let me give you an example, here in the local offices we are about I don’t know 500 years from one of the local offices here in the studio, there’s a common fax machine that just like in my imagination at least just spits out paper all day long so what happens they probably fall on the floor and they get separated and they get confused…

KATRINA MADEWELL:  Nobody’s watching that thing?

DARRIN T. MISH:  Nobody’s watching it because nobody wants it because you know everything that is on that fax machine just equals more work for them.

KATRINA MADEWELL:  I was going to say that’s more work exactly.

DARRIN T. MISH:  And then in over the last few years the IRS has assigned many employees their own unique E-fax phone numbers and so I think those are handled a little bit better because those go into there secure IRS email…

KATRINA MADEWELL:  Yeah.

DARRIN T. MISH:  The security of Federal government emails remains up in question but, anyway, so those go into that guy’s email box and then he can handle it right?

KATRINA MADEWELL:  Yeah.

DARRIN T. MISH:  I have no idea if you faxed you know your response to a CP2000 if that’s an E-fax number, a real fax number I have no idea how they handle that but since mail….

KATRINA MADEWELL:  I would imagine at this point it’s probably E-fax just because it’s so much cheaper for companies to do that then in that scenario with the paper flying everywhere and the toner and the paper and the maintenance on the machine right it would just be easier just to have an E-fax number and have someone to organize it from there.

DARRIN T. MISH:  That is how a person who has experience in private industry would think.

KATRINA MADEWELL:  Oh ok it’s the government I got it.

DARRIN T. MISH:  So I don’t know, I don’t know I can just tell you I don’t trust it, you know mail has been around forever, the IRS has been handling mail forever and they are not that bad at handling mail assuming that you can prove that you sent it by certified mail.  That’s a good point too, by the way, never mail anything to the IRS with a deadline by putting a first class stamp on it ever because they are going to say that they didn’t get it.  Now interestingly enough and I’ve said this many times I have sent them you know 6 figure checks with a first class stamp on it…

KATRINA MADEWELL:  Oh they get those.

DARRIN T. MISH:  Never gets lost never any dispute or debate about when they got there that works every time but if you send them a letter that says I disagree with your, I disagree with your position and you know we are beating the deadline it’s going to get lost a hundred percent of the time.

KATRINA MADEWELL:  So with that letter you either have to A sign it saying you agree and send it back, is there a box to mark that says you disagree or do you have to send a letter saying that you disagree?

DARRIN T. MISH:  Yeah, there’s a box to mark I believe that says you disagree and then you should put in some supporting documentation or something like that as well, you can’t just check the box I disagree cause what’s going to happen is you are definitely going to get a notice of deficiency at that point in time at some point later.

KATRINA MADEWELL:  What did you mean by don’t complicate it, is that in complexity is an enemy?

DARRIN T. MISH:  When we come back I’ll talk about what I’m talking about when I say don’t complicate matters ok?

KATRINA MADEWELL:  Ok sounds good I figured that was going to be a long answer to a short question but I thought I would try.  So you are listening to the IRS Solution Attorney show we will be back in just a moment stick around we are going to get into the fun part next then we will have our IRS train wreck of the week back in a minute.

(commercial break)

DARRIN T. MISH:  Welcome back to the IRS Solution Attorney show I am THE IRS Solution Attorney Darrin Mish.

KATRINA MADEWELL:  And I am your co-host Katrina Madewell thanks for sticking around during the break I’ve had some fun with you guys today hopefully you have enjoyed the show?

DARRIN T. MISH:  Yeah, we have we definitely talked about the gaze of raccoons…

PAT GEORGE:  Yes we have…

DARRIN T. MISH:  And right now we are eating banana cream ice cream I think?

PAT GEORGE:  Banana pudding from Blue Bell.

KATRINA MADEWELL:  Not Katrina just for the record.

DARRIN T. MISH:  It’s very good.

PAT GEORGE:  Oh it is so good.

KATRINA MADEWELL:  You are not tempting me I have my coffee.

DARRIN T. MISH:  I wish I didn’t have to talk so much in this last segment but anyway we have to get through what you do step by step if you get one of these CP2000 letters from the IRS.

KATRINA MADEWELL:  So yeah just to recap really quick open the letter, read it, don’t freak out, pay attention to the deadline, figure out what the issue is, if you disagree send your response via certified mail, don’t fax it. And the last little point is, don’t complicate matters.  So what do you mean by complexity is the enemy?

DARRIN T. MISH:  Ok so late people when they try to answer legal documents they try to write like they think a lawyer writes right so we all think as late people we think that lawyers write in a very complex fashion. Well, complexity is your enemy here, ok? We have to write this…

KATRINA MADEWELL:  Less is more?

DARRIN T. MISH:  We have to write this response so clearly that an 8-year-old child could understand and agree with your position if you can do that and it is hard but if you can do that you are going to win.  If you can’t do that, if you are going to tell a 3-page story about how your grandma died it’s not, you are not going to win. It has to be very clear, concise simple to understand.  That’s my opinion and that’s what works for me.

KATRINA MADEWELL:  Well even the Wall Street Journal is written in I think 7th grade grammar.  It’s not complex at all.

DARRIN T. MISH:  Right well there some articles in the Wall Street Journal….

KATRINA MADEWELL:  Well there are some complex topics but for the most part its written in 7th grade, like a 7th grader could read it and understand it.

DARRIN T. MISH:  Yeah especially in the news stories you know the typical straight news.

KATRINA MADEWELL:  But that is why they have the readership that they do.

DARRIN T. MISH:  If you have to file, if you need to file an amended return like some of the examples that we talked about earlier what you need to do and this is in the letter, you need to mark at the, along the top of the amended return CP2000 in big bold black letters, I usually use a sharpie to do that and that’s, then you send it to the address on the letter and it helps them understand that this is your response to the CP2000 letter.  I’ve done this many, many times it works great, you just don’t want to file the amended return in the normal channels because then you are going to gum up the works and you are going to screw it up.

KATRINA MADEWELL:  Have you had anything yet where you’ve like literally fought some time lines or something where somebody put something on Facebook and time stamped it or anything like that and they I don’t know say, oh I mailed the letter to the IRS today or anything like that?

DARRIN T. MISH:  No.

KATRINA MADEWELL:  Have you seen, have you ran across anything like that?

DARRIN T. MISH:  I don’t have that many time you know disputes, timing disputes because we don’t usually…

KATRINA MADEWELL:  Everything’s already late.

DARRIN T. MISH:  Yeah, it’s either the client has already blown all the deadlines or when we get deadlines we try to do things well in advance, occasionally I’ll file something on the last day you know and some IRS employee will fight me and say well we had to get it before that date and I say no the mailbox rules says that they just have to be postmarked by that date so I usually win those arguments.

KATRINA MADEWELL:  So someone sends it off they totally disagree how long before they actually will hear something back from the IRS?

DARRIN T. MISH:  About 30-45 days typically you are going to hear back, in my you know if you win that’s great that’s fantastic, if you lose you have to figure out where to go from there so you are going to have your typical options open to you, you are going to have an installment agreement Offer in Compromise, a hardship determination, you know something like that it’s going to have to be you know you are just going to have to figure out what the deal is, what you are going to do.

KATRINA MADEWELL:  And so depending obviously the amount of that you may want to consider hiring an attorney to do that you can reach Darrin at 888-get-mish.

DARRIN T. MISH:  Or you can visit the website at getirshelp.com, our phone number is 888-438-6474.

KATRINA MADEWELL:  Again 888-get-mish and then you were talking a little bit about the IRS pages you set up one for the IRS Solution Attorney right where you are putting information over there.

DARRIN T. MISH:  Yeah we have the IRS Solution Attorney page on Facebook now or you can also friend me at Darrin Mish on Facebook as well or Twitter @darrin_mish.

KATRINA MADEWELL:  And we do answer questions usually from the show we are not going to do that this week because you know Pat George isn’t ready.

DARRIN T. MISH:  So it’s about that time….

KATRINA MADEWELL:  He’s a little slow today, the ice cream has got him sluggish.

DARRIN T. MISH:  It’s time for my favorite segment of the show, the IRS train wreck of the week.  This is a story of typically where somebody came in and they were just a hot mess and we worked together to resolve the problem and I think….

KATRINA MADEWELL:  I think I wear off on you, you didn’t used to say hot mess, I think I pushed that on you. I love it.

DARRIN T. MISH:  So in this particular story this goes back a long way, this is a story from probably about 15 years or more ago.   There was a gentleman he, he lived in Houston Texas and he was one of my first cases that I got from out of state and he came to me and he owed $99,000.  And it was from an earlier tax year, I mean it was really an old case and as you recall there is a statute of limitations for the collection attacks that’s 10 years typically ok.  There’s exceptions and what not but this tax debt was pretty close to 10 years and in my mind so the first thing I was thinking is well maybe we can just like wait it out and the whole thing will expire.  The client was under some pressure I can’t remember exactly why but he was under some pressure and so we decided to file an Offer in Compromise…

KATRINA MADEWELL:  He was probably getting a mortgage.

DARRIN T. MISH:  I think he had a revenue officer breathing down his neck because it was 99 grand you know it was a pretty concise case. We filed an Offer in Compromise and after we had filed, probably right before we determined there was only a month left on the statute of limitations ok so the IRS didn’t have a lot of time regardless if they got, if you….

KATRINA MADEWELL:  You think that is why they were there?

DARRIN T. MISH:  Yeah that is probably why they were putting the pressure on him as they knew the time was running short and so we filed the Offer in Compromise and the Offer in Compromise tolls the statute of limitations, what that means is that it stops it from running while the offer is pending and so the statute was really, really very short and I think….

KATRINA MADEWELL:  Why would you want to do that if it was so close to expiring?

DARRIN T. MISH:  Well, if the revenue officer was breathing down his neck and was going to levy his bank account, hit him with a wage garnishment and you know go seize stuff

KATRINA MADEWELL:  You think it would all happen that fast though?

DARRIN T. MISH:  It could, it could it depends on, and I don’t recall exactly but it could definitely happen that fast if the revenue officer had already been working the case for some time and had it all mapped out and knew what he had and stuff.  So we filed the Offer in Compromise and I, remember I filed it for $500, you know thinking that is pretty low but it’s doable.

KATRINA MADEWELL:  What did you put for why your time is almost up?

DARRIN T. MISH:  No we filed it based on doubt to his collectability because he didn’t have a lot of money or assets or anything like that and I will never forget this call, the lady called and she says what do you think about a thousand dollars?  And I was like oh gee…

KATRINA MADEWELL:  The revenue officer?

DARRIN T. MISH:  No the lady that was working the offer…

KATRINA MADEWELL:  Oh.

DARRIN T. MISH:  And then she says what do you think about a thousand dollars and I’m doing the math I’m thinking a thousand bucks on 99 grand is a pretty good deal so I called the client and I said well…

KATRINA MADEWELL:  I would say how fast can I write a check that is what I think…

DARRIN T. MISH:  We offered 500 bucks he’s willing to take a thousand what do you think and he was over the moon, he was thrilled…

KATRINA MADEWELL:  You say $750…

DARRIN T. MISH:  Sometimes clients do stuff like that but….

KATRINA MADEWELL:  I’ve got one right now that loves to negotiate he would do that in a minute.

DARRIN T. MISH:  So he was really happy with the thousand dollars and so we got it worked out for so 99 grand for a thousand bucks.

KATRINA MADEWELL:  Pretty good even trade there one percent on the dollar.

DARRIN T. MISH:  That kind of thing does happen.

PAT GEORGE:  That’s why Darrin is the only person I would ever call.  Mr. Mish.

DARRIN T. MISH:  The IRS Solution Attorney.

KATRINA MADEWELL:  He’s at 888-get-mish in case you have some off air questions that you don’t want to chat about on air 888-get-mish you can Tweet him @darrin_mish or Facebook him, and send the questions to the IRS Solution Attorney page on Facebook.  We had fun hanging out with you today and talking about farm animals.

DARRIN T. MISH:  We had a great time.

PAT GEORGE:  You’ve got to get out of here the cows need some milking.

KATRINA MADEWELL:  Thanks for joining us we will be back same time same place next week for this week.

DARRIN T. MISH:  We’re out.

 

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