DARRIN T. MISH: Good morning and welcome to the IRS Solution Attorney show I’m your host, THE IRS Solution Attorney, Darrin Mish.
KATRINA MADEWELL: And I’m your co-host, Katrina Madewell. Welcome to the show today.
DARRIN T. MISH: How are you doing Katrina?
KATRINA MADEWELL: I’m doing great. How are you Darrin?
DARRIN T. MISH: Very good. We were chatting like right up to the last second where I came on here so I think that means that I’m starting to become kind of an old hand at radio.
KATRINA MADEWELL: That’s always the case for me and then Pat George will try to pop the mic on and catch me in the middle of the conversation mid stream.
DARRIN T. MISH: You kind of look at your peripheral vision and watch for the red light. If you see the red light you are live.
PAT GEORGE: Keep an eye on her.
DARRIN T. MISH: No hot mics, no Donald Trump moments.
KATRINA MADEWELL: See I think you were talking a little more than me so he didn’t want to catch you. He’s only after me. I got it.
DARRIN T. MISH: Yeah, it’s because the guys got to stick together here.
PAT GEORGE: I’m going to be a good guy to her today cause she fed me this morning I am sooo, I am just going to go to sleep now I have a nice full tummy.
KATRINA MADEWELL: So you are trying to say that if I didn’t bring you food you would gang up on me and take Darrin’s side is that what you are saying?
PAT GEORGE: To the tenth power.
KATRINA MADEWELL: Oh my gosh.
DARRIN T. MISH: So, what is it about radio guys and you know you are always talking about food in the studio. I mean that is pervasive across different types of formats.
PAT GEORGE: You ever seen our paystubs?
KATRINA MADEWELL: Plus they are on lock down in these air tight rooms you know.
DARRIN T. MISH: That could be.
KATRINA MADEWELL: Because you don’t have a window cause you would be like, oh I don’t know, no light and no sound.
PAT GEORGE: We like the food.
DARRIN T. MISH: That’s one of the things that is kind of unique to this studio, to this building is that there is at least windows on one side of the hallway here…
KATRINA MADEWELL: Yes.
DARRIN T. MISH: Which is kind of nice cause I’ve been in other radio stations and you know they are not always like that, it’s usually like a claustrophobic sort of cave…
KATRINA MADEWELL: Yes. Think closet, big dark closet.
DARRIN T. MISH: Unless you are at the other station that we were at were, it was like dogs running around barking and stuff.
KATRINA MADEWELL: Oh, the station in between yes.
PAT GEORGE: I worked at a radio station once that there was a nice big window on an open field and I worked at night.
KATRINA MADEWELL: That’s like creepy.
PAT GEORGE: You cannot see out at night but they sure can see in so the first thing I would do is I would tack up with thumbtacks a sheet over that window because I just know now a days it would have been that clown…
KATRINA MADEWELL: This is about scary clowns.
PAT GEORGE: Scary clowns.
KATRINA MADEWELL: Oh my gosh.
DARRIN T. MISH: Where did the clowns come from anyway?
KATRINA MADEWELL: I don’t know.
PAT GEORGE: Who sent in the clowns.
KATRINA MADEWELL: I had a client in my car yesterday and we were talking about this with another agent that was shadowing me and I said you know, they were talking about somebody driving along the road and they stopped and this clown was in front of them and I’m like I wouldn’t stop I would just keep driving, the clown would be run over.
DARRIN T. MISH: Dead clown.
KATRINA MADEWELL: I mean if you are dumb enough to come out with a costume and a mask in the middle of the night by the woods and go in front of my car you are going to get run over.
PAT GEORGE: I don’t know how many are going to be coming to the door to try to get candy because I don’t think they are going to get anything.
KATRINA MADEWELL: Don’t go to Darrin’s house.
PAT GEORGE: Go to his house and they are going to get chicken eggs.
KATRINA MADEWELL: Trick or treat my chicken just laid this. Oh, my gosh.
PAT GEORGE: By the way, if you cut lawns out there and you would like to cut the lawn of Darrin’s home and you can beat “x” amount of dollars. He’s looking for a great lawn care person.
KATRINA MADEWELL: He’s going to buy a goat.
DARRIN T. MISH: I think we’ve solved that problem. But…
KATRINA MADEWELL: You…buying a goat.
DARRIN T. MISH: No I think a goat comes with different challenges.
KATRINA MADEWELL: They eat everything,
DARRIN T. MISH: Like they eat the fence. At least that is what I understand.
KATRINA MADEWELL: You put up an electric fence. It might not eat that.
DARRIN T. MISH: You would have pre-cooked goat.
KATRINA MADEWELL: Oh my gosh yes.
DARRIN T. MISH: Anyway this is the IRS Solution Attorney show and today we are going to be talking about Federal Tax Liens and how to get Federal Tax Liens released. It’s kind of a challenging situation and it’s not always easy.
KATRINA MADEWELL: No. Well we were talking about his so Federal tax liens is there different variations of Federal Tax liens or are they just different reasons why they are liened?
DARRIN T. MISH: Well, let’s talk about what a Federal Tax Lien is, a Federal Tax Lien is when the IRS files a document typically in Florida in your county clerk’s office in the official records section and what it is is notice to the world that that tax payer owes the money. Now a common misconception is that the tax lien attaches to the property that’s listed on the address of the tax lien and that’s not the case. It can be the case, but it’s not necessarily the case. For example, if you live at 123 Main street and you are a tenant and you are renting, it doesn’t attach to 123 Main street because you don’t have an interest in the property in that apartment that you are living in. But if you had a mortgage on 123 Main street and you were buying that from the bank or, god forbid, it was free and clear, then of course it would attach because the lien attaches to all of your property, real and personal wherever it may be. Now what does that mean?
KATRINA MADEWELL: Even your underwear.
DARRIN T. MISH: Yeah exactly.
KATRINA MADEWELL: We’ve talked about that.
DARRIN T. MISH: Yeah, it attaches to your real estate and that is what the real property is and it attaches to your personal property which is everything but real estate so literally attaches to everything. The very second that it gets filed and clocked into the clerk’s office, it magically attaches to everything you own so that your socks in your underwear drawer are actually liened at the moment that the lien is filed with the county clerk.
KATRINA MADEWELL: So how, what about late fees and interest and all that jazz is it just continue to accrue no matter what and does it matter what type of lien it is?
DARRIN T. MISH: Yeah, typically, well there is only one kind of Federal tax lien, I think you are, there’s state tax liens to and so that’s a different, it’s similar but it’s a different issue. Federal tax liens there is only one kind and typically on the face of the lien there will be a balance for each tax year, you know where there is a balance due and there will be penalties and interest included on that lien and penalties and interest will continue to accrue. Now what happens if you, let’s say you owe, there’s $50,000 on the Lien and you’ve been in an installment agreement for years and now you only owe $10,000 and now you want to sell your house and you want to get that lien payed off at the closing is it $50,000 or is it $10,000 well the answer is it’s $10,000 because you have been paying on it. Now it could also be that you have a lien that says $50,000 on it and you are trying to get it taken care of at the closing of the house and you haven’t been paying on it and it’s not $50,000 it’s kind of a rude awakening for some people it’s you know $67,000 now because penalties and interest have been continuing to accrue.
KATRINA MADEWELL: So, when you are in the middle of an installment plan doesn’t that stop those penalties and interest or they keep on going?
DARRIN T. MISH: Well interest really never stops. so that’s one thing and the penalties are slow during the time that you are in an installment agreement.
KATRINA MADEWELL: Which they should be if you are repaying. That would make sense.
DARRIN T. MISH: Yeah, yeah and right now the, the interest rate is 3% that the IRS charges on unpaid balances which sounds kind of reasonable. I mean 3% pretty low except for the fact that it’s compounded daily which makes it effectively much higher than 3%.
KATRINA MADEWELL: Yeah, you actually have to look at the math on that to totally get it.
DARRIN T. MISH: Yeah. you need computer software in order to figure that out but it’s, it’s higher than 3% that’s you know fair to say.
KATRINA MADEWELL: So, Federal tax liens are those always just unpaid tax return balances or no?
DARRIN T. MISH: I’m trying to think of an instance where it wasn’t an unpaid balance and I really can’t think of a situation where…
KATRINA MADEWELL: So like other types of things like payroll taxes for example those are State taxes not Federal?
DARRIN T. MISH: Well. no it could be an unpaid, you are right it’s not unpaid income tax exclusively it could be unpaid corporate tax, income tax or it could be unpaid payroll tax or it could be a trust fund recovery penalty which we don’t talk much about on the show…
KATRINA MADEWELL: No.
DARRIN T. MISH: A trust fund recovery penalty is basically unpaid payroll tax that has flown through a process back down to the individual who is in control of the company at the time and didn’t pay the payroll taxes so it’s essentially unpaid tax of some sort or penalties to the IRS and the it eventually gets liens, there’s a variety of other penalties like prepare penalties and tax protester penalties and frivolous you know frivolous filing penalties and things like that that ultimately can be liened but basically a Federal Tax lien is unpaid debt.
KATRINA MADEWELL: So, they are usually hard to get released like they don’t want to let go even after they are paid?
DARRIN T. MISH: Well you know if you…
KATRINA MADEWELL: Or you see if it’s one of those things that lingers like yeah I paid the balance but I actually owe more so.
DARRIN T. MISH: If you think about what a lien is, it’s doing a job, I’m not on their side I’m just trying to explain what the concept is. A lien’s job is to is…
KATRINA MADEWELL: A place holder.
DARRIN T. MISH: Yeah, it’s to be noticed to the world that you owe this debt so nobody jumps in line ahead of them and gets paid off earlier. That doesn’t always work, but it works pretty well and it’s, it’s filed to be sort of a thorn in the side of the tax payer to get the tax payer to deal with the situation somehow. I can tell you having met you know literally thousands of people who have tax debt, if there wasn’t a tax lien, there wouldn’t be near the motivation to take care of it. The tax lien hurts people’s credit, it keeps them from buying and selling houses in a sense in most cases. So that lien is there doing its job. So the IRS is naturally pretty reluctant to release that lien because there is another issue too is that we don’t talk about this all that much on the show, but taxes can, in certain circumstances, be discharged on bankruptcy and if there’s a lien there then the lien can attach to their real property for example and things like that, but if there’s no lien there and you go through a bankruptcy you might be off scott free so….
KATRINA MADEWELL: It’s just craziness like is that an oversight on the IRS part?
DARRIN T. MISH: Sometimes, sometimes they just didn’t follow the standard operating procedure sometimes they agree to release the lien for whatever, or withdrawal the lien for whatever reason and there’s a distinction between those 2 words. But you know there is a lot of tax payers in the United States and there’s a lot of tax payers in the United States that don’t file and pay their taxes. Just the sheer numbers that they are dealing with there’s going to be some people that fall through the cracks from time to time.
KATRINA MADEWELL: And I think when we come back we should talk about the difference between cause you slipped that in there really quick released to withdrawal so we should look at the differences between the release of the lien compared to withdrawing the lien and the satisfaction of one of those things or is that a 3rd category?
DARRIN T. MISH: Well, satisfaction is going to be yeah, it’s kind of a third issue so let’s talk about that as well.
KATRINA MADEWELL: Talk about release, withdrawal and satisfactions of Federal Tax lien’s when we come back in just a minute. You are listening to the IRS Solution Attorney show thanks for joining us today we are really glad that you are here if you have a question we are on air and you can get us at 888-404-1010, 888-404-1010 Pat George back there will grab your call and Darrin and I will jump in. We will be back in a minute.
PAT GEORGE: And we got to talk when you come back about our trip to Key West.
KATRINA MADEWELL: Welcome back, you are listening to the IRS Solution Attorney show thank you so much for sticking around with us through the break we appreciate you chiming in we try to have a little bit of fun here and talk about some other stuff besides just IRS Solutions because we know it’s morning radio and not everybody has a tax problem but when and if you do or if someone you know does I would highly suggest you run it past Mr. Darrin Mish and you can get him at 888-get-mish.
DARRIN T. MISH: That’s 888-438-6474. You know just last night I had a Facebook friend who, who listened to one of our train wreck segments, that’s at the end of our show where we talk about success stories essentially and his comment on Facebook was Darrin you make me wish I had a tax problem so that I could come and hire you so that you could fix it. So, if we are doing that then I think we are doing a pretty good job.
KATRINA MADEWELL: Yeah at least they are engaged.
DARRIN T. MISH: Cause it is not like real fun stuff you know a lot of this is kind of esoteric kind of…
PAT GEORGE: I was watching a talk show on television and the question came up and I said I have got to ask Darrin this and they said, and I said to myself it’s self-explanatory what it is but maybe you can elaborate a little bit but they said what’s the difference between personal tax and corporate tax?
DARRIN T. MISH: Oh well it’s pretty self-explanatory..
PAT GEORGE: That’s what I thought.
KATRINA MADEWELL: Tax ID.
PAT GEORGE: It was pretty elaborate.
DARRIN T. MISH: So I would say that, I’m kind of a simplistic guy I try to boil things down to easy terms because you know I think it’s easier to understand things that way…
KATRINA MADEWELL: Yes.
DARRIN T. MISH: You know.
KATRINA MADEWELL: Yes keep it super simple.
DARRIN T. MISH: Yeah because I mean this is radio and it’s going to be kind of hard if I make it to boring right so personal income tax…
KATRINA MADEWELL: Plus no one is going to want to listen.
DARRIN T. MISH: It’s what individuals owe it’s what human beings owe, it’s like what John and Mary Smith owe and if John and Mary Smith have a like for example a C Corporation and that C Corporation has its own tax liability that’s going to be you know a tax liability attributable to that corporation and what’s really important is if that corporation, if that C corporation doesn’t pay it’s taxes then there’s no recourse against John and Mary Smith, you know they could be the only share holders.
KATRINA MADEWELL: But there going to have an EIN not just a social so it wouldn’t apply to a sole proprietor that’s filing everything under the social.
DARRIN T. MISH: Yeah for sure, oh for sure. Absolutely does not apply to sole proprietor and probably doesn’t apply to a LLC that’s being taxed as a sole proprietor. In Florida, it does not apply to a single member LLC ever so…
KATRINA MADEWELL: Why is that?
DARRIN T. MISH: That’s a different show but there’s been some really bad Florida Supreme Court cases that have decided that there is no actual personal liability protection for a single member LLC in Florida so I do not put clients into single member LLC’s because it’s just, it’s just not a great idea. There’s just so much more case law for corporations you know specifically S Corporations as opposed to LLC’s that, that’s the route we are taking.
KATRINA MADEWELL: Yeah, so, we are going to have to talk about that.
DARRIN T. MISH: Yeah, so in some point in the future.
KATRINA MADEWELL: For another show yes because for example somebody like me they like, and they keep changing this right the state of Florida keeps changing it but if you want to work under another big corporate umbrella and they pay you corporation to corporation you cannot be anything other then like my name LLC or PA that’s it.
DARRIN T. MISH: Well I think that’s one of those restriction’s that your falling under for real estate brokers right?
KATRINA MADEWELL: Right, right but I’m saying you just used that example of single member LLC and not having that same protection even though you are taxed as a corporation that’s interesting.
DARRIN T. MISH: Yeah for so for lawyers it’s the same, it’s kind of the same principle as for realtors is we don’t have any liability protection anyway no matter how we’re organized we are on the hook.
KATRINA MADEWELL: I’m going to let you take the bar you are exempt.
DARRIN T. MISH: Which is why we have to have lots of liability, liability insurance although lots of lawyers maybe even most lawyers don’t have any liability insurance it’s kind of scary…
KATRINA MADEWELL: Is it expensive for attorney’s?
DARRIN T. MISH: It can be depends on you know…
KATRINA MADEWELL: Your practice?
DARRIN T. MISH: Your practice area and how, how bad your track record is with complaints and things like that. After…
KATRINA MADEWELL: Imagine criminal defense attorneys don’t have very cheap liability insurance.
DARRIN T. MISH: Actually it’s pretty low because the bar to sue you know to be able to prove malpractice is that you would have prevailed but for the malpractice so you have to basically prove, so you are the criminal defense client right and there’s been malpractice, what you have to prove is what, I would have been found not guilty except for this mistake you made, well that’s a pretty high bar.
KATRINA MADEWELL: Yeah.
DARRIN T. MISH: So yeah, I don’t think criminal defense attorney’s malpractice insurance is all that high. After the stock, the real estate market crashed in 2008 and actually after 9-11 when money markets got tight the cost of insurance went up because it has something to do with how much money is available and things like that so even though…
KATRINA MADEWELL: Makes sense.
DARRIN T. MISH: We are in a non-related field had nothing to do with 9-11 for example the premiums spiked I think it was because they were trying to, the big money companies in the country were trying to recoup some of their losses…
KATRINA MADEWELL: Isn’t that insurance in general though like a whole I don’t even want to get on this train wreck but the whole Obama care stuff like going up next year. Anyway so we left off at tax release vs withdrawing a tax lien vs a sanctification of a tax lien. Well what’s the difference in all of those because they sound one in the same. Don’t be….
DARRIN T. MISH: Ok so let’s talk about a satisfaction first a satisfaction is where you’ve paid off the debt so the lien has technically been satisfied but that doesn’t necessarily mean that it’s reflected as satisfied in the court records, I’ve never seen a satisfaction file in an IRS tax lien in a clerks office but I can certainly think of situations where the lien has been satisfied. There’s a couple of different ways right I mean there could be, you could pay it off that would be a satisfaction, you could outlast the statute of limitations which is actually going to be the topics of the train wreck of the week this week. Where there’s a 10 year statute of limitations for the collection of IRS tax and after that 10 years expires then the, the debt is no longer legal and enforceable and the lien has to be, it’s satisfied at that point and then we will talk about the difference between release and withdrawal here in a second and then the third way could be maybe you filed an amended return and the amended return took care of the balance of the lien, does that make sense so…
KATRINA MADEWELL: Yeah.
DARRIN T. MISH: You know let’s say you filed a tax return..
KATRINA MADEWELL: Forgot your deductions and they covered them.
DARRIN T. MISH: Yeah, yeah and then you went back and you fixed the return and it wiped out the liability that would also technically satisfy the lien. So…
KATRINA MADEWELL: You ever see or file it as a straight up error like just not accurate? Like this tax lien was not mine, should not have had it filed don’t even know why it’s here.
DARRIN T. MISH: I’ve have seen a couple instances where JR and SR have gotten mixed up so you got John Smith Sr. and John Smith Jr. and I’m not even going to pick on which one is worse but in this case you know like one…
KATRINA MADEWELL: It happens though.
DARRIN T. MISH: Yeah one’s law abiding or pays his taxes and doesn’t have a tax debt and the other one doesn’t and somehow the socials get screwed up and it makes it even harder if they live at the same address because that has happened more and more now so you might have you know a 30 year old son that is living at your house and he has the same name and different social security numbers obviously but I’ve seen that.
KATRINA MADEWELL: We used to see mix credit a lot with same names a lot, not as much anymore but we used to see mix credit a lot.
DARRIN T. MISH: Yeah, I think as computer technology has improved that are fewer and fewer of those things. That’s one of the defenses that you can fight you know the IRS if they file a tax lien against you it’s one of the defenses is hey it’s not me or I don’t owe this money and I will tell you that’s pretty rare because I don’t see it very much at all and it might be that I don’t just get those cases but I don’t think it happens that often so.
KATRINA MADEWELL: That’s what I was thinking. It was more of a curious question but.
DARRIN T. MISH: And then let’s talk about what a release is, a release is a where it’s kind of a, it’s not quite as good as a withdrawal, a release just means simply the lien has been satisfied or…
KATRINA MADEWELL: Like it’s payed off?
DARRIN T. MISH: Or released in some way…
KATRINA MADEWELL: Well I guess they could still release it if you still owe the money, that’s happened.
DARRIN T. MISH: Yeah, we are going to talk about some specific examples in the next segment probably about how you can get a lien released under some special new programs that the IRS has or actually you can get them withdrawn come to think of it. But you can request a release and a release on your credit report is supposed to be almost as good as if it was never there because it’s an indication that there’s you know no longer that debt.
KATRINA MADEWELL: It’s still going to show up on there.
DARRIN T. MISH: It is it’s going to show a lien, it’s going to show a release and then the third sort of area is a withdrawal and a withdrawal is akin to, it’s almost like a pardon, it’s akin to well we want this to be treated like it was never there. And so a withdrawal is slightly better. Do I think there’s much difference between a withdrawal and a release on a credit report I don’t think so I haven’t studied the issue.
KATRINA MADEWELL: Well if you withdrew it I would think that they might have to take that off your credit file.
DARRIN T. MISH: Like the lien was never filed perhaps.
KATRINA MADEWELL: Like they, cause if they withdrew, if they withdrew it like technically that’s saying this is reporting that it should not have been and I would say, I mean I would fight that as a removal.
DARRIN T. MISH: But I’ve, I’ve talked to lots and lots of people after they have had liens released and what the effect was to their credit and for the most part I don’t think there is really that much detrimental effect after there has been a lien released.
KATRINA MADEWELL: Right. Because they don’t, the credit card companies don’t want to take anything off like if you ever talk to anybody that’s had to have anything repaired on credit or removed that was an error it is not any easy process and we fight them like in the middle of a mortgage process and pay, I mean it’s like 30 something bucks a pop per bureau to rescore something and then you get one of the idiot bureau’s that doesn’t even like you are sending them a letter from the organization saying oh this is not late or this is not owed or oh it’s paid off or oh it was a mistake and they still don’t want to remove it.
DARRIN T. MISH: Yeah, I’ve dealt with some of the credit bureau’s you know professionally and it’s worse with the IRS quite honestly, they’re all about keeping the negative information and all about letting the good information go if they decide if they want to. So it’s interesting I think it’s almost like a closet governmental agency nowadays right so because there is so much that the government and banking and regulations all relies upon the credit bureaus, I think they are essentially monopolies and they are essentially the same…
KATRINA MADEWELL: Right.
DARRIN T. MISH: They’re a little bit different.
KATRINA MADEWELL: Well they share info I mean their algorithms and how they calculate the score is different but they all share information.
DARRIN T. MISH: Clearly, I am not a big fan of experiment but that is just me.
KATRINA MADEWELL: We could tell you some stories that are not very fun it happens. But anyway, you are listening to the IRS Solution Attorney show. Today our topic is all about how to get that Federal Tax released, Tax Lien released, yeah let’s start that one again we will come back in a minute we will also talk about the Fresh Start Initiative because we haven’t chatted on that yet. You are listening to the IRS Solution Attorney show I am your co-host Katrina Madewell. Mr. Darrin Mish is the host sharing the expert advice from the attorney seat in the room and if you want to get him you can catch up with him at 888-get-mish.
DARRIN T. MISH: 888-438-6474 don’t forget to follow us on Facebook at The IRS Solution Attorney show, you can also download the app on the iPhone and Android store it’s called the IRS Problem solution, IRS Problem Solution Attorney.
KATRINA MADEWELL: Don’t worry they will find it. @darrin_mish on Twitter.
DARRIN T. MISH: Welcome back to the IRS Solution Attorney show I am the IRS Solution Attorney Darrin Mish.
KATRINA MADEWELL: Are you sure about that you looked like you had to think about that for a second.
DARRIN T. MISH: I did there just for just a second.
KATRINA MADEWELL: I am your co-host Katrina Madewell and Pat George is back there doing a great job on the show producing it.
DARRIN T. MISH: You ever have those moments where someone asks how old you are and you are like hold on a second let me do the math it’s getting a little high.
KATRINA MADEWELL: Yes somebody asked me that yesterday cause my birthday is right around the corner and they said oh you are going to be this age and I said yeah, my husband said yeah again and I was off by a year.
DARRIN T. MISH: That’s dangerous territory there.
KATRINA MADEWELL: But he always says that kind of stuff to me so I don’t pay much attention to it cause that is just how he, he just says that like that it’s like hmm you are 39 again?
PAT GEORGE: I got another question what about a new president that we are going to have in less than 2 weeks, do you think anything in the tax law’s going to change with the new president?
KATRINA MADEWELL: That is a vast possibility.
DARRIN T. MISH: Big sweeping generalization but I’ve seen this happen over the last 20 years or so. Generally speaking what happens is Democrats raise taxes and do less to collect them, Republicans have a tendency to reduce taxes and do more to collect them so bizarrely in my mind at least, it’s better, probably significantly better for Hillary Clinton to be elected for me in my business then in my family that it is for Donald Trump to be elected because it’s quite likely she is going to raise taxes, I mean I don’t think she’s even really disputing that fact, although not on people who earn more than $250,000 a year allegedly but that number has a tendency to slip you know and then Donald Trump probably would reduce taxes but I can see the Trumpster really coming after people who owe taxes can’t you I mean..
PAT GEORGE: Wouldn’t that help you if he is going to reduce taxes, more people start paying their tax or start filing and they have problems that will still come back to you.
DARRIN T. MISH: Well one of the reasons why I am in this niche of helping people who have tax problems despite the fact that I do like to help people and that’s the truth, is that my business is good no matter what, my business is good if the economy’s good or if it’s bad because…
KATRINA MADEWELL: People are always going to have a tax problem.
DARRIN T. MISH: If they economy is good, then there’s people who are actively deciding I’m going to postpone paying my taxes because the economy is good and I will just make the money back and then unexpected things happen and then if the economy is bad, well I mean there’s probably even more people who are making the excuse or the decision not to pay their taxes and so then I get that business as well so I’ve been in this you know for a couple of decades now most and I’ve seen the downturns and the upturns and you know when 2008 hit and everybody was going crazy and the world was falling apart I was doing ok.
KATRINA MADEWELL: Same old thing. Same old thing.
DARRIN T. MISH: Yeah there was probably more business.
KATRINA MADEWELL: It’s the same thing in real estate there is always going to be people that need to sell and want to buy, somebody is getting divorced, somebody is getting married, somebody’s got a blended family, somebodies house is to small and a lot of those same things would create a tax liability.
DARRIN T. MISH: Somebody’s tired of all the snow.
PAT GEORGE: Speaking of divorce don’t you have a good story of a divorce IRS problem where they were both at the table maybe with you?
DARRIN T. MISH: I have no idea what he is talking about.
KATRINA MADEWELL: Like a, you have to elaborate.
PAT GEORGE: Husband and wife, tax problem…
DARRIN T. MISH: Sure.
PAT GEORGE: Going through a divorce and you are involved as far as trying to solve that…
DARRIN T. MISH: It happens all the time, it happens all the time.
KATRINA MADEWELL: That’s probably the reason why they are getting the divorce Pat it’s because they owe the IRS so much money.
DARRIN T. MISH: It’s kind of a challenging situation to because if you think about it there could be a conflict there right because almost my definition somebody is going to get, somebody is kind of at fault right I mean it’s very rare that only one spouse is, or only, you know both spouses are equally at fault, it can happen like if they decide to make an early withdrawal from an IRA or something, that’s kind of both there faults but if one of the people is you know a wage earner and has taxes taken out of there check and one of the people is a sole proprietor and doesn’t pay estimated tax payments then it’s kind of one person’s fault. And almost by definition one of those spouses is going to get stuck with it if they are divorced or divorcing or living separately. If they are living together then they are both going to get the benefit but if, if they split that is when there is a conflict potentially.
KATRINA MADEWELL: Have you seen anybody like get divorced just because they are like oh I am not getting stuck with that $100,000 tax bill?
DARRIN T. MISH: I don’t do family law on purpose because I don’t want to be injected into that acrimonious situation, my life is stressful enough I don’t need that extra stress and God Bless the people who handle divorces, I don’t know how they do it. But, yeah, I have been in that situation, I’ve been in the middle, I try not to take those cases because, you know quite frankly it’s hard enough to represent the perfect client let alone the you know the situation where you’ve got the couple that is splitting so they have that stress, they don’t communicate well, it’s really more like having 2 clients.
KATRINA MADEWELL: We see some crazy stuff like literally I just had a client buy a property and she’s like oh we are technically divorced but we both want to be on the deed but they are so, you know you wouldn’t even know they were divorced but legally they are cause they had a child with special needs and then you got the process and the letters like no she’s not being on the loan we don’t want her on the deed you’ve got to take her off so they made us at the table take her off the contract cause they don’t want her on the deed.
DARRIN T. MISH: Oh yeah. There’s more and more sort of non-traditional situations going on, there’s a lot of people come in and say that they are married you know during their initial consultation and when I’m discussing it with them, sometimes I get the feeling like maybe that’s not totally accurate and I will say are you guys actually married like do you have a marriage license and they say oh no we’ve just been together for 20 years isn’t that common law marriage answer no not in Florida.
KATRINA MADEWELL: No…
DARRIN T. MISH: Might be in Texas, I think in Texas it’s like 3 days…
KATRINA MADEWELL: Oh it doesn’t take long in Texas.
DARRIN T. MISH: But anyway I think we better get back to the topic of tax liens…
KATRINA MADEWELL: Yeah… We were going to talk about the fresh start initiative, don’t forget about that.
DARRIN T. MISH: Ok so the Fresh Start Initiative is actually pretty cool, when it comes to, what comes into play with regard to Federal Tax Liens is if the tax payer owes $25,000 or less and enters into an installment agreement and enters into a direct debit installment agreement, that’s where they are automatically debiting your bank account for those payments after you have made 3 payments then you can request that the IRS withdrawal the lien and it’s not discretionary they don’t really have any choice…
KATRINA MADEWELL: They have to?
DARRIN T. MISH: They have to withdrawal the lien at that point in time and that is done…
KATRINA MADEWELL: So that is pretty cool so if you’ve got this tax lien thing following you and hovering over your head and you need to get rid of it so you can sell, buy, refinance whatever, it’s pretty easy to do that once you get installment agreement in place.
DARRIN T. MISH: Right that’s on a form 12277, that’s a form 12277 application for withdrawal, it’s not discretionary if you owe under $25,000 and you’ve made 3 direct debit installment payments so.. That came out a couple of years ago and I was kind of skeptical when I first heard about it but it sure is a life save for a lot of people, let’s think about a context where, it might not exactly fit but you could make it work, let’s say you are trying to buy a house and you got this lien on your credit and it’s kind of the only thing holding you up..
KATRINA MADEWELL: Holding you back.
DARRIN T. MISH: And you owe $32,000, well might make sense to pay that thing down to to around 25 grand, get on that installment agreement, make the 3 direct debit payments and apply for a withdrawal.
KATRINA MADEWELL: Is that the cap like why would you have to pay it down to 25? What’s the deal with that?
DARRIN T. MISH: That’s the limit the IRS doesn’t want to be left holding the bag potentially for people who owe more than 25,000..
KATRINA MADEWELL: So they will only give you a payment plan if it’s less than 25,000?
DARRIN T. MISH: No, no, no they will only automatically withdraw the lien if you owe less than 25,000.
KATRINA MADEWELL: Somehow I misheard that.
DARRIN T. MISH: Yeah, if you owe less than 25,000, you made the 3 payments direct debit they will automatically, well after you ask them, they will not deny you an application for withdrawal of the tax lien and that’s pretty good you know…
KATRINA MADEWELL: They don’t do it automatically though you have to ask I’m sure?
DARRIN T. MISH: They absolutely do not do it automatically that’s why you need to use that form 12277 so that you can get that thing withdrawn.
KATRINA MADEWELL: Gotcha, gotcha, gotcha.
DARRIN T. MISH: So let’s talk about a couple other ways that you can get liens released, you can do what I call a traditional request, you have to look up the address for the lien unit it’s in Cincinnati Ohio and if you’ve satisfied the lien, so we talked about that in the last segment, what different ways to satisfy it, you know you’ve paid it off or it’s no longer enforceable because the statute of limitations is expired…
KATRINA MADEWELL: Which is…
DARRIN T. MISH: 10 years from the date of the assessment of the tax, you can go ahead and ask the IRS to release that lien and you send a written request to the lien unit in Cincinnati and 9 times out of 10 will go ahead and release it.
KATRINA MADEWELL: How long does that take? What’s the timeline on that?
DARRIN T. MISH: 30 days or so.
KATRINA MADEWELL: Ok.
DARRIN T. MISH: I’ve been having some trouble lately getting you know righteously you know releasable liens released, the IRS is becoming more and more of a stickler. Here’s kind of a funny situation…
KATRINA MADEWELL: No it’s my lien, it’s my lien…
DARRIN T. MISH: I had a guy who actually works over at the Florida Aquarium had a tax lien and it’s a really old problem that the statute of limitations had expired, I went ahead a released a, I requested a release. Well the IRS sends us the release form ok, the certificate of release but that form has to be recorded at the Clerks office for it to be of any legal effect right I mean cause the lien is the notice to the world that you owe the money and the release is the notice to the world that you no longer owe the money right…
KATRINA MADEWELL: Can you record it they gave it to you?
DARRIN T. MISH: Well this is the part of the story, so we get the release and the IRS doesn’t record it so I tell, you know the client’s kind of complaining about it I said go down to the county and record that thing, he goes down to the county, calls me from there he is like the clerk will not let me pay the fee and record this. So, we are stuck, right? I basically had to do another…
KATRINA MADEWELL: They think it’s like a made up letter or something?
DARRIN T. MISH: That’s what the clerk’s opinion was well it’s not officially coming from the IRS so I can’t be, we are not going to let you file it. So, I had to go through back channels and complain and basically force the IRS to you know record the stinking release because what good is a release that is not recorded…
KATRINA MADEWELL: It’s not recorded.
DARRIN T. MISH: I mean that is just absolutely ridiculous.
KATRINA MADEWELL: It’s like getting a deed to a property that is not recorded doesn’t mean that it’s not valid but you know you want to send a notice to the world that it’s there and you are the owner.
DARRIN T. MISH: Exactly. Yeah, this particular client one of his problems was that it’s just wrecking his credit because it was some big number, I don’t remember how much but it was some big number and it was wrecking his credit and he was trying to get his life rebuilt and you know well I paid you to get this thing released and I’m like well it got released…
KATRINA MADEWELL: Yeah but…
DARRIN T. MISH: I didn’t give him a hard time at all I was like you are absolutely. I’m like you are absolutely right I mean that is not a release it was not recorded it was not a release in my book.
KATRINA MADEWELL: So how long and drilling of a process was that? So, you had to go through those back channels to get them to record it?
DARRIN T. MISH: I think it’s taken us between 60-90 days, I have another case much more complicated fact pattern, too much to go into here but it’s been over a year where it was an accepted and paid and settled offer in compromise…
KATRINA MADEWELL: And they are supposed to be releasing?
DARRIN T. MISH: They are supposed to release the lien within 90 days after the payment of the you know the satisfied offer in compromise, we had 2 spouses you know you had spouses, and one spouse they released and one spouse they wouldn’t release and I had to go, I’ve been going round and round for a year saying now look I’ve diagrammed this out, you’ve released it on him, you haven’t released it on her you need to take care of her and the last word I heard yesterday was they are like ok they agree with you they are going to issue the release it’s like ok when I see it I will believe it.
KATRINA MADEWELL: So finally they after, after they finally say yes that’s still what another 30-60-90 day process?
DARRIN T. MISH: After an offer in compromise it’s about 90 days.
KATRINA MADEWELL: Yes that’s still not very fast. You know.
DARRIN T. MISH: Well it depends on what world you are living in, if you are living in the real estate world where you want to close next week you are right, that is not very fast.
KATRINA MADEWELL: Yeah, I love the people that want to fix credit while they are under contract that’s always so much fun.
DARRIN T. MISH: If you are living in my world where your average case takes a year or two then you know 90 days is not slow right…
KATRINA MADEWELL: Yeah, exactly right on time.
DARRIN T. MISH: So let’s talk about a couple of other ways that, so we talked about the fresh start, we talked about the traditional request, we talked about the offer in compromise OIC that is going to get the lien released. You can also get a lien released in the context of an appeal. So, if the IRS files a Federal Tax lien they issue you something called a final notice or basically a final notice of, it’s not a final notice of intent to levy basically they issue a notice that they filed the lien ok?
KATRINA MADEWELL: Ok.
DARRIN T. MISH: And you have, you essentially have up to a year to appeal that thing and if you appeal it and you can argue that it’s not in the best interest of the government and technically you can also argue not in the best interest of the taxpayer then there’s a chance that they will release the lien.
KATRINA MADEWELL: It’s never in the best interest of the tax payer is it ever?
DARRIN T. MISH: That’s why I said no technically you can argue that it’s not in the best interest of the tax payer. I have argued that, I have never argued that successfully because obviously it’s not in the best interest of the tax payer to have a Federal tax lien there stopping them from living there life.
KATRINA MADEWELL: Well I mean if it could affect their livelihood or whatever their environment is they might cause if they think there’s a chance they are not going to get paid that could be…
DARRIN T. MISH: Yeah maybe a security clearance or maybe things like that it could be. Just haven’t had the right case come along but if you could argue that it’s not in the best interest of the government then sometimes you get them to release that lien.
KATRINA MADEWELL: So when we come back we are going to answer some questions that we got on Twitter which you can get Darrin @darrin_mish and we have some questions what are the chances of being audited by the IRS and a few more that we will answer when we get back after the break.
PAT GEORGE: And when we come back we got to find out about the crazy thing that happened to you in the checkout line of the grocery store Katrina, you’ve got to tell that story again.
KATRINA MADEWELL: Welcome back you are listening to the IRS Solution Attorney show thanks for sticking with us through the break we are glad that you are here. Today’s show we talked all about how to get that Federal Tax Lien released, we talked about the difference between a release, a withdrawal, satisfaction.
DARRIN T. MISH: Satisfaction. So, let me add one last way to get a lien released, it’s kind of a lien released. There’s a process called a Certificate of Release or Lien Subordination, I’m going to lump those in together. That’s the situation where you are trying to buy a house for example or you are trying to sell the house is a better example, trying to sell the house there’s a lien that’s attached to the house, it’s not in your best interest to keep the house and the IRS is going to want to get paid something to let you get out of that particular lien situation so that’s a long complicated process to go ahead and apply for that but it does exist.
KATRINA MADEWELL: So to give you an example what the heck you just said, there’s a lien line and so if you can imagine this horizontal line, these little monopoly pieces on the line there is a pecking order on who has priority and as you can imagine the IRS or any type of tax lien is high on that priority order.
DARRIN T. MISH: Yeah usually number 2.
KATRINA MADEWELL: Yes…
DARRIN T. MISH: Sometimes number one.
KATRINA MADEWELL: So the house thing what you are talking about is allowing that to proceed or go past or move around in line, is that pretty simple?
DARRIN T. MISH: Yeah for example if you want to refi you know lets say you have a 7% interest rate and you are trying to refi your house and you are trying to get 3.5%….
KATRINA MADEWELL: You are trying to get some money so you can make that tax payment.
DARRIN T. MISH: The IRS will usually let you do that but they have to get involved in the closing, they have to get involved in the deal, they have to make sure they are getting there money and so on and so forth.
KATRINA MADEWELL: Yeah that makes sense. Alright so lets answer the questions we’ve got from some of our Tweeter followers, Tweeter, Tweeter, Tweeter we should record your chickens. Stacy wants to know what are the chances of being audited by the IRS that’s kind of a broad range question.
DARRIN T. MISH: You know your chances of being audited by the IRS are absolutely very low at this point in time. I have a, right now if you are between 100-200,000 your audit rate is .65% it’s less, the less than 1%. If you owe between, if you earn between 200-500 it’s about 1.75% and it goes up from there if you earn over a million dollars, from 1 million to 5 million dollars it goes up to 6.21% and if you think about that it makes sense that the IRS is focusing it’s resources on the higher income earners because even the smallest error will result in more money for the IRS. Now…
KATRINA MADEWELL: Plus the tax is higher.
DARRIN T. MISH: Now my understanding has always been if you are self-employed filing what’s called a Schedule C you know sole proprietor and you file a schedule c with your 1040 your audit rate is quite a bit higher your audit rate is going to go up to about 5% and if you are self-prepared and filing a schedule c I don’t know what the number is…
KATRINA MADEWELL: Way high.
DARRIN T. MISH: It’s higher than 5% because there is just so many more opportunities to make mistakes.
KATRINA MADEWELL: That is exactly what I was thinking, Stacy, was that it depends on, there is probably different schedules or things that you can file that would significantly increase that chance.
DARRIN T. MISH: If you are a wage earner and you are just having taxes withheld from your paycheck and that’s about it your odds of being audited are about close to zero because there is nothing to audit, they already know everything about you.
KATRINA MADEWELL: That makes sense. Alright and so Joe wants to know if I’m called in for an IRS audit should I take my attorney? Or should I take my accountant with me which that is a very good question Joe.
DARRIN T. MISH: Neither Joe because you shouldn’t be going, that’s the answer.
KATRINA MADEWELL: Ahh, listen to that.
DARRIN T. MISH: See how I did that. What I think you should do is, you should hire a tax attorney and you should send him in there and when they ask all the questions the tax attorney…me…will say I don’t know, I don’t know the answer to that, I don’t know the answer to that and what I do is I just literally I write down a list of questions and then I go back to my client and I say ok so what are the answers to all of these questions and then we have time to go ahead and answer them. If I brought Joe with the audit to me here’s what Joe is going to do, Joe is going to be singing like a bird because he is going to be under stress and freaked out and he is going to say things that are not accurate, I’m not saying that we are going to lie we are absolutely never going to lie but Joe is going to say things in the heat of that stress of that moment that he doesn’t that aren’t accurate because he is just scared which is totally normal.
KATRINA MADEWELL: What about the accountant to answer the second part of Joe’s question like how often should they or could they or would they be involved?
DARRIN T. MISH: There are some audits where I would hire an accountant to help me figure out you know the actual math and things like that, typically speaking and I’m not saying anything bad about accountants, we are trained differently. So, lawyers are trained to be advocates for clients, to represent a side. Accountants are trained in math…
KATRINA MADEWELL: The numbers.
DARRIN T. MISH: But there’s a black and white answer. I’m a lawyer I don’t think there is anything that is black and white.
KATRINA MADEWELL: Of course.
DARRIN T. MISH: Everything is gray. Everything is negotiable.
KATRINA MADEWELL: So Joe’s question was should I take my attorney or my accountant so I think…
DARRIN T. MISH: Neither.
KATRINA MADEWELL: And I agree with you but what about his accountant would that ever like if you were representing him.
DARRIN T. MISH: There are accountants who are good at audit representation, there are. If you think that your positions are absolutely correct and there’s nothing debatable in there it might make sense to bring a really good, very aggressive, very experienced accountant with you it might…
PAT GEORGE: I had a tax problem so bad once they advised me to take my bail bondsman.
KATRINA MADEWELL: Oh stop. So, tweet Darrin your questions @darrin_mish you can also Facebook him or call him with them at 888-get-mish we will answer them on the air anonymously, or with just your first name.
DARRIN T. MISH: It’s about that time it’s the time for the IRS train wreck of the week. This is the segment of the show were we talk about somebody who came into my office and they are essentially a hot mess I mean they were in just a whole bunch of trouble and they didn’t know exactly what to do and by the end they came out smelling like a rose, or singing or not singing like a bird, smelling like a rose for sure. So, anyway, in this case this particular gentleman….
KATRINA MADEWELL: They came out better then they started…
DARRIN T. MISH: Absolutely. So, this particular gentleman came into the office and he had some really old tax debt. He owed about a $154,000 spanning back to 1999 into 2000 and so if you have been listening to the show one of the things you might be thinking is, well, wait a minute Darrin, I thought there was a 10-year statute of limitations. How in the world did he still owe taxes for 1999 and 2000. And if you thought that to yourself, you are right cause that is the first thing that went through my mind when I found out that they were from 1999 and 2000 as oh boy I am rubbing my hands together I’m like oh boy….
KATRINA MADEWELL: It’s going to be more than 20 years.
DARRIN T. MISH: These things got to be getting close, and so there are a variety of things that can toll the statute of limitations. That means that there are things that you can do that can stop the statute of limitations from running and even add more time on. But, in this case, I think what happened is this particular tax payer never got around to filing tax returns and so the IRS eventually filed what are called substitute for returns for him. That was several years later after they were due and that’s when the statute of limitations started running so in this particular case…
KATRINA MADEWELL: Wait, was when he filed them or when the IRS filed them?
DARRIN T. MISH: When the IRS filed them. So, he owed for 1999 and 2000, they get around to filing them in 2006 ok and so then when I get the case and I am able to identify hey wait a minute these things are going to expire later in 2016, it was early in 2016 when he hired us to look into it. He owed $154,000 and he had a revenue officer on his back and so my best advice to him was let the revenue officer levy, just let him. You know they were getting, the IRS was getting I forget it was a really small amount of money couple hundred dollars a month or something and my advice was well if this doesn’t get any worse let’s just wait them out and that is what we did, we waited them out, he owed $154,000 we are going to get that tax lien released because it is satisfied because it is legally unenforceable and this particular gentleman, that part of his life is over he doesn’t owe the money anymore.
KATRINA MADEWELL: Talk about a weight off of your back. So Darrin answers a lot of these questions every day and some of the simpler ones too if you have a question for Darrin or you got any type of IRS, anything breathing down your back I would highly suggest that you dial 888-get-mish.
DARRIN T. MISH: 888-438-6474 don’t forget the podcast. And it’s on iTunes as well as our app so it’s the IRS Problem Solver or the IRS Solution Attorney not sure which it’s called at this very moment in time but certainly if you search either one of those platforms under Darrin Mish it will come up and we have listeners all over the nation and all over the globe.
KATRINA MADEWELL: We are going to have to get both of those meta tagged in there. Thanks for listening this week. will be back same time same place next week.
DARRIN T. MISH: We’re out.