Find the Solution to Your IRS Problems Instead of Focusing on the Negative

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DARRIN T. MISH: It’s a great day to be the IRS Solution Attorney. I’m your host, Darrin T. Mish. I’m here today again with my beautiful co-host, Katrina Madewell.

KATRINA MADEWELL: Oh, once he gets the mic going…This is Katrina Madewell, welcome to the show.

DARRIN T. MISH: It is a beautiful day. It’s a beautiful day to discuss IRS solutions instead of focusing on the problems and the negativity. We don’t do negativity here, folks, we talk about how every problem has a solution and that’s what we’re going to talk about today and figure out how to stop my music in the background.

KATRINA MADEWELL: He’s doing the intro a little late, it’s ok. He’s tired. We haven’t been here in a while, we took a little break.

Jeff:   That’s the way the professionals do it, it keeps things moving.

DARRIN T. MISH: Gotcha, alright. The great thing about me is I’m not a radio professional, I guess.

KATRINA MADEWELL: Well, your real job is an IRS attorney, that’s the good news.

DARRIN T. MISH: This is true. I’m lurking in the trenches every day. Fighting the IRS on behalf of taxpayers like you and I. Or sometimes non-tax payers.

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Jeff:   Trenches?

DARRIN T. MISH: Hey, you try fighting the IRS every day, it’s trench warfare. It’s like World War I, we’re down in the mud.

KATRINA MADEWELL: That’s right, head to head with those big dogs that most people are scared of talk to.

DARRIN T. MISH: I had one laughing yesterday.

KATRINA MADEWELL: The IRS guy? That’s good.

Jeff:   Say it isn’t so.

DARRIN T. MISH: Yeah, I had one laughing and it was an appeals call and the call ended with her saying, well, you know Mr. Mish it’s been a pleasure. I look forward to our next hearing together. And I said, you’re right, I agree. My pleasure.

KATRINA MADEWELL: Oh, yeah, me too.

Jeff:   Did you win?

DARRIN T. MISH: It was very amicable. I didn’t win because we weren’t…we had some challenges with our client providing documentation in a timely manner. That type of thing never happens. (sarcasm) The great thing is I try to always have fallback position number one, fallback position number two, so I shared with the appeals officer what my fallback position was and she says, oh that’s great, that’s a great idea. What I’ll do is I’ll go ahead and write this up and that will give you another two to three months of a collection hold and that will give you the time to do what you’re trying to do. Which is to file an Offer in Compromise, which is how we make deals with the IRS to settle for less. Sometimes as much as 90% off. It gives us the time to get that done so the client doesn’t have to worry about a levy.

KATRINA MADEWELL: Here’s the thing, though, Darrin. I can say this because I’m not an attorney, you are. A lot of attorneys are just not likeable, they’re not liked by most people. So if you can get some of the folks at the IRS to like you and you’re likeable that’s going to be half the battle because then they’ll want to work with you which ultimately it ends up in the consumers best interest when you’re trying to settle it.

DARRIN T. MISH: Sometimes clients want you to be the guy that figuratively goes down and burns down the houses and kills the women and children. And I’m not really that guy.

KATRINA MADEWELL: Hence the non-taxpayers.

DARRIN T. MISH: I’m not really that guy. I learned this a long time ago about myself. I’ve been practicing law for going on 23 years now. I would much rather take the Forest Gump style of negotiation and just be likeable. I’m ok, I can feign ignorance now and again if it’s going to be strategically intelligent. I do try to be amicable and friendly and nice. Especially, if you think about with the local IRS people I’ve dealt with for 15 or 16 years and I have to deal with them again at some point in the future. I try to be professional and amicable. What happens often is…

KATRINA MADEWELL: Can I ask you a question real quick while you hold that thought? Why would you deal with somebody local versus call the 800 number? That doesn’t make sense to me, I don’t know the answer to that question. We’ve never talked about it.

DARRIN T. MISH: There’s lots of reasons. If you’re a taxpayer who owes a significant amount of money, say typically in our area, in the Tampa Bay area, a significant amount of money would be around 100 grand. In parts of Texas, a significant amount of money is half a million to a million because there just haven’t been any local people. There’s just more money there. Your case can be assigned to somebody called a revenue officer. A revenue officer is a local person that typically works in a local office. Their job is to get the money.

KATRINA MADEWELL: Come visit you.

DARRIN T. MISH: They are federal debt collectors. That’s their deal. Now, there is a difference between a revenue officer and a revenue agent. Then there’s something also called an IRS special agent. A revenue officer is a debt collector. A revenue agent is an auditor, then the special agent would be like a criminal investigative division type person.

KATRINA MADEWELL: like you lied, falsified stuff.

DARRIN T. MISH: Yeah, like you’re getting ready to get prosecuted. They show up at your door with a gold badge and they wear firearms. Revenue officers are not allowed to carry firearms probably for a good reason, based on temperament. They have a badge, it has their photo on it, and it’s some kind of credential. I haven’t seen one in a long time. That’s why you would be dealing with a local person. But also, think about this, we appeal probably about 50% of all of our cases involve some sort of appeal because we’re trying to move it up the food chain, so to speak. We’re trying to get it to somebody with more experience, a little bit better training a little more authority and a little bit better discretion. So we appeal a lot of things. It used to be that most of my appeals were handled locally in the Tampa appeals office. There’s some really great guys there. I hope they’re listening. There’s some really great guys that work in that office. We’ve known each other for years. Typically when we work cases together we talk about the weather and our families and sports for a good 15 minutes before the case then we get the case settled in five minutes and everybody’s happy. A lot of appeals lately have been shipped off to other places. It’s interesting that you brought that up because I’ve identified different temperaments based upon the appeals office they’re located in. For example, Memphis, not real nice.

KATRINA MADEWELL: A good old boy IRS club?

DARRIN T. MISH: Well, it’s not the good old boys that work there. Memphis just has not been a great place for us to have appeals heard. Yesterday, for example, I handled a case with a lady that the lady was in Fresno, California. It’s no secret I was born and raised in California. I think I get people from California, and it was the most amicable hearing I’ve done in months because I guess she just…maybe it’s the holidays, I don’t know. She was really nice and we were able to work really well together. As opposed to some officers are cut and dried, no personality, there’s nothing you can do as far as that goes with them. I pride myself in trying to develop a rapport with a person that works at the IRS that I’ve never worked with before. And you have about five seconds. You have about five to fifteen seconds.

KATRINA MADEWELL: Oh, you’re in California! Me too!

DARRIN T. MISH: You have five to fifteen seconds to try and lighten this thing up a little bit.

Jeff:   Does it go south if you do thirty seconds? Is there a time?

DARRIN T. MISH: Well, it’s really hard for me to talk about the weather for thirty seconds. Despite the fact that…

KATRINA MADEWELL: Well, that’s with anything like when you meet somebody you have, on average, fifteen seconds tops to build some rapport.

DARRIN T. MISH: I’ve read some books on how to get people to like you in 90 seconds. Typically, one of the keys is to talk about them as much as you can.

KATRINA MADEWELL: Or common denominators, what you have in common.

DARRIN T. MISH: So there are a lot of people at the IRS that are nice and that you can work with.

Jeff:   But how do you regroup if you find this person is just not going to…he doesn’t want to talk about the weather, or she doesn’t want to talk about the weather. How do you make it easier so it goes into your favor?

DARRIN T. MISH: Well, that’s a good question. I don’t give up for one.

Jeff:   Well, you shouldn’t. Tenacity is the key ingredient.

DARRIN T. MISH: If things are really not going my way, like if the facts are bad. I’m going to circle back, I’m going to hit the weather, then I’m going to hit where they live in the country, then I’m going to hit an upcoming holiday, I might hit football. Although, I’ll tell you, remember when the buccaneers and the Philadelphia Eagles had a really strong rivalry? When we call ACS, which is the automated collection system of the IRS. It’s the 800 number most people’s cases are assigned with once it goes into collections. We would have to call Philadelphia, they would see Florida and they were just mad.

KATRINA MADEWELL: By the way, you’re the only stadium in the whole United States that has a (inaudible).

DARRIN T. MISH: Well, you know, people in Philly aren’t very happy just stereotypically any way. NO offense to any Philly fans out there.

KATRINA MADEWELL: Look at that weather, I mean, how can you be happy there?

DARRIN T. MISH: I did notice that in the depths of winter, calling Philadelphia from Tampa, bringing up the weather is not a great strategy. I think the answer, Jeff, is you circle back to human things. Things that you talk to your friends about, or a new friend about, and you just hammer away at them. And I’ll tell you what, it works. Even the grumpiest person, once they’re talking to somebody that’s happy and upbeat, they’re going to come around.

Jeff:  It’s hard to frown when somebody’s smiling, it just…it works. If the attitude over the phone especially is good and up, how can they be mean to you? It’s very difficult. Yet there are people, I’ve run across them, it doesn’t matter…jokes..it doesn’t matter. They are just are A-holes. And you have to give up or walk away and come back another day. Another question, do you find that cases go smoother during the holiday seasons? Or do they get worst at other times?

DARRIN T. MISH: You know, they can during the holiday seasons, can be a little bit easier. I tell this story quite a bit. I used to be a public defender years and years ago. The hardest job I think there is as a lawyer. The judges hate you, the state hates you, clients hate you, everybody hates you, it’s a really rough job. I used to be in front of this older, southern, white judge and I was assigned to his courtroom and we handled serious felonies in there. It didn’t take me long to realize that this guy was going to hammer everybody that came up, if he had the opportunity. If there wasn’t a plea negotiation, the judge was going to hammer the guy. There are times when you just couldn’t work out a good deal with the state so you had to do what’s called plead people open. You had to go up there and say, judge, the client pleads guilty or no contest, here’s the mitigating factors, what can you do? Some judges would give advisory opinions so you can kind of approach the bend, it’s one of the things we do as lawyers, is we approach the bench and lay people don’t know what we’re talking about. Sometimes we’re talking about, does anybody have hockey tickets and things like that.

KATRINA MADEWELL: You never would have guessed!

Jeff:  It’s nice to know when your life is on the line…do you have good seats?

DARRIN T. MISH: Well, it goes back to the likeable thing, honestly. I got word during the time that I worked in this courtroom, that…this was like in the fall…that this particular judge just turned into a sweetheart right before Christmas. I can remember, I continued a bunch of cases from September, October, November, to December, and I just lined them up, man, And I plead them. I plead them all and got smoking deals on everybody because it was the holiday season, it was the end of the year, kind of thing like that. I think there’s a little bit of that same attitude as the IRS, you know, where if somebody has a wage garnishment right before Christmas, right before Christmas is a good time to call and sort of play that card. If that’s what you got.

KATRINA MADEWELL: It’s the only card you got. It’s the only Face card you have in your hand.

DARRIN T. MISH: I’m not shy about saying this, I’m not a huge fan of wage levies, like trying to get wage levies released because it’s hard. You don’t really have any leverage. It’s not like if you guys don’t do this, then I have this card that I can play that’s going to trump that card. There is nothing like that, you’re just sort of at their mercy. It can be really challenging where you have to come up with more unique and valuable…

KATRINA MADEWELL: The highest card in the deck and you’re just like “please can you help me and stick me in there? I want to stay in the game!”

JEFF:   When you find yourself in a difficult situation, what’s the time frame that you have to regroup and still have some effectiveness in the courtroom?

DARRIN T. MISH: Oh, in the courtroom? It’s measured in seconds. One of the great things about being a public defender and if there are any people that are aspiring lawyers that are listening, I would suggest becoming a public defender because it’s going to be the best OJT that you’re going to have. The best on the job training ever. Things happen in the courtroom in particular, all the time. Multiple times a day that you were not expecting, shots from left field that you were like, wow, didn’t see that one coming. The really effective lawyers, that stuff comes in, they process it in a matter of fractions of a second and then they react in such a way that it appears that they knew about it all along. So if you can act with that degree of precision and if you can respond that rapidly…

KATRINA MADEWELL: Think fast on your feet.

DARRIN T. MISH: Yeah, if you can think that fast then you’re you’re really going to do well. The other thing that’s really great about being either a state attorney or a public defender is that typically you’re going to spend hours a day in a courtroom and you’re going to see all the private lawyers, all the old hands come in, and you can learn good lessons and bad lessons. I once saw a lawyer that I really respect and one of the rules that we always hear is that you never ask a question in court that you don’t know the answer to.

Jeff:  Pretty much in life that’s a good philosophy.

DARRIN T. MISH: Sometimes you just have a gut feeling and you go for it. But this lawyer made an absolute bonehead mistake this time. After the state put on their case, they had not proven their case. Actually, that’s not what happened. They put on a witness, they asked the questions and they did not hurt him at all on their questions and he goes blundering in there on cross examination and he was the one that elicited all the bad testimony and sunk his case and sunk his client. As just a baby lawyer, I was probably a lawyer for less than a year I saw that happen and I was like, mental note, do not do that.

KATRINA MADEWELL: Baby lawyer.

DARRIN T. MISH: There’s lots of things that are applicable from the courtroom in to the IRS practice, it’s just that in my practice now, most of this stuff happens on the phone. That can be really good. There’s a lot of nonverbal communication that can’t happen on the phone. One of the things that I think is important for me, is I wear a headset when I speak on the phone 100% of the time and I try to smile like I am right now, and do you see the difference in the tonality of my voice when I smiled? I actually sound nicer when I’m smiling than I am when I’m not smiling like right now.

KATRINA MADEWELL: You sound like an IRS agent when you’re not smiling.

Jeff:  Doesn’t he? I got scared.

DARRIN T. MISH: So I think that’s really important. It’s about personality and it’s about drive and it’s about wanting to win and it’s about wanting the absolute best for your clients every day all the time, no matter what, even when they’re irritating.

JEFF:   And winning doesn’t always mean you have to be nasty and mean, it’s negotiated.

DARRIN T. MISH: Rarely is it intelligent to be nasty or mean.

JEFF:   No, you’ll go nowhere.

DARRIN T. MISH: I can remember some of the very hardest fought jury trials that had become somewhat personal. Getting acquittals and walking over to the prosecutor, who I did not like, and slapping him on the back shaking his hand, big old smile and say hey, you did a really good job. Until next time. And I did that when I lost too, so it wasn’t like I was just rubbing it in. It’s about relationships and you don’t want to burn bridges with the relationships if you can help it.

KATRINA MADEWELL: It’s no different on my side. You never know, you may be working with the listing agent and the buyer’s agent the next time. You just never know. So what you do now may hurt your client tomorrow.

JEFF:   It’s become a very small world. It comes back on you.

KATRINA MADEWELL: Well, you’re listening to the IRS Solution Attorney Show. It’s about that time, we should take a quick…

 

Commercial break

 

KATRINA MADEWELL: Welcome back, you’re listening to the IRS Attorney…IRS Solution Attorney show. I’ll get that right one of these days. It might take me a year or so. Going in to this segment we’re going to talk about are you guilty of tax evasion?

DARRIN T. MISH: During the break, Jeff asked some really good questions, so Jeff, go ahead and repeat those.

JEFF:   First question is, do good people fall on hard times and do silly things with the IRS?

DARRIN T. MISH: When I was doing a lot of criminal defense work years and years ago, there was even good people who just made bad decisions. They wrote a bad check and then they couldn’t take care of before it went to prosecution. Or they got in an argument with their wife when they drank too much and pushed her or whatever. Or they got a dui because they had one or ten too many drinks.

KATRINA MADEWELL: Got caught up in the moment.

DARRIN T. MISH: Those are really good people too. But in the IRS problem space, I think it’s even more common for just really good people to just kind of get behind. Most of the people that I speak to, honestly, they didn’t set out to end up owing a hundred thousand or two hundred thousand or three hundred thousand.

JEFF:   So what causes that?

KATRINA MADEWELL: They’re working people.

DARRIN T. MISH: Yeah, they’re working people typically. I would say a majority of my clients are self-employed people just trying to make ends meet and they just don’t fudge it for the taxes because they don’t understand how they’re supposed to be remitting those taxes, paying those taxes with the government. And they don’t…they’re good candlestick maker, they’re not a good business man. They’re a good plumber, they’re not a good administrator. They’re not an accountant, they’re whatever it is they’re doing. Their realtors. Realtors are just like notoriously bad.

KATRINA MADEWELL: You love to throw me under the bus. I love it, I don’t mind. You know what, I don’t handle my stuff, I have bookkeepers that tell me what to do and I’m all straight. I’ve been there.

DARRIN T. MISH: Yeah, you’re really sophisticated at this point in your career so you don’t have these problems. But it’s good people…and sometimes it’s a lifestyle thing. When our personal economy started to head downhill, we don’t…most people immediately cut their personal expenses. Sometimes they can’t. Maybe they have a house payment that’s through the roof, or you see a lot of people with kids in private schools and I look at the tuition bill and I’m like, wow, that’s high. It’s just good people who just don’t really know the way out. They think that professional help is really expensive or unobtainable. Sometimes they just don’t know who to call to get help.

JEFF:   With that attitude, you mitigate or litigate. Because if you know the trouble is there, you know that it’s only going to get worse. Smart people just don’t make smart decisions. You’re going to be called one way or the other. Sooner or later.

DARRIN T. MISH: A lot of them are very entrepreneurial. I have those characteristics as well. And when you’re an entrepreneur and you have boundless optimism, you think you can out earn your way out of just about any problem that you have. A lot of times it happens, but it doesn’t always happen. That’s one of the problems that I see with folks too. I’m just going to out earn this.

KATRINA MADEWELL: You can’t out earn your stupidity.

DARRIN T. MISH: Hope without a plan is not really gonna work out.

JEFF:   Fool’s errand.

KATRINA MADEWELL: It’s wishful thinking.

DARRIN T. MISH: Every time I’ve actually planned out something, chunk down that goal into a plan and then chunk the plan into little action steps. A lot of times, I don’t even know how to do the stuff. Every time I’ve ever done that, that goal has come true. A lot of times people that come to me don’t really have a tax problem so much is they have a business problem. The business is not generating the revenue that it’s supposed to. When I can, when it’s appropriate, I try to help try to fix the business as much as I can. But people don’t come to me for business advice, they come to me for legal advice, so sometimes it’s not really…

KATRINA MADEWELL: Fitting.

DARRIN T. MISH: Yeah and sometimes it’s not well-received.

KATRINA MADEWELL: Going back to the question of, are you guilty of tax evasion? I know I’ve heard you say this a number of times on the show, Darrin. A lot of people that come for tax evasion, they think they’re going to prison. I would too. In that space, I wouldn’t know.

DARRIN T. MISH: There’s a really high percentage of people that come and think they’re…

JEFF:   They’ll come with their toothbrush and everything?

DARRIN T. MISH: No, I don’t think they’ve ever come with their toothbrush, although you never know what’s in a woman’s purse. Sometimes they are really really nervous and they think that they’re guilty of tax evasion.

JEFF:   What’s the percentage of people that actually do go to jail? Is debtor’s prison still…? Do we have debtor’s prison?

DARRIN T. MISH: Well, let me give you some perspective. I’ve been representing taxpayers with tax problems for over sixteen years and I would comfortably say the number of clients is in the thousands and…knock on wood…not one…

KATRINA MADEWELL: This is wood, that’s Formica.

DARRIN T. MISH: Not one person has even been credibly threatened with prosecution, let alone prosecuted.

KATRINA MADEWELL: Even the guy that whited out his checks, huh? Remember that?

DARRIN T. MISH: Even that guy.

JEFF:   Really?

KATRINA MADEWELL: I don’t know any of your clients, but I know all their stories.

DARRIN T. MISH: What Katrina is talking about, I was representing a guy years ago in an audit. I hope he’s listening too because he’ll get a kick out of this. During the audit, we show the auditor…he’s not there…but we’re showing the auditor the proof of the cancelled checks. I didn’t know this until this happened. On the bottom of the cancelled checks, there’s a series of numbers and the series of numbers is like the account number, the routing number, and the amount of the check. So what he did, was he went in and he artificially, he whited out and then wrote in like a higher amount and then he photocopied them so he basically forged all these photocopies. The auditor looks at me, big smiles and says did you know that the amount of the checks is right here coded on the bottom and your client forgot to change that?

KATRINA MADEWELL: The check numbers the last digit too.

DARRIN T. MISH: Yeah, so that was a lesson learned.

JEFF:   Now you just shared that with everybody.

DARRIN T. MISH: And he didn’t go to jail, he wasn’t even referred. He committed…

KATRINA MADEWELL: Was he even scared?

DARRIN T. MISH: No, I don’t think he was. I can count like three different felonies that he committed that day. No, I don’t think he was real scared. He should have been because I think that was criminal activity.

JEFF:   So it could happen. They could go to jail.

DARRIN T. MISH: Oh, yeah, there’s lots of things. I heard some stats recently. There’s thousands of federal statutes that criminalize behavior that none of us even know. Especially in the last six or seven years even before regulations and laws that have been passed that we don’t even know criminal behavior. So there’s a lot of stuff.

JEFF:   Garage sales for one. It’s a fifteen million dollar federal fine if you have a garage sale.

KATRINA MADEWELL: What?

JEFF:   Hello…I didn’t vote for him, did you?

KATRINA MADEWELL: What are you talking about?

JEFF:   Check out garage sales. Yeah, absolutely.

KATRINA MADEWELL: Look up the statute, will you, Darrin?

JEFF:   Look it up.

DARRIN T. MISH: During our next break we’ll look it up.

KATRINA MADEWELL: Another day.

DARRIN T. MISH: Actually I want to do it during the break. It’s going to be a good thing to talk about.

JEFF:   And Christmas if you’re getting somebody a drone that’s not registered with the FAA, prison time and a fine.

DARRIN T. MISH: It goes without saying you should not be pointing lasers in the sky.

KATRINA MADEWELL: Oh my gosh, I had this conversation with my son.

DARRIN T. MISH: To people that are trying to blind pilots and bring down planes. Let’s talk about people, the people who are worried about tax evasion. There are some different categories that come in with tax problems. The first would be non-filer. A non-filer is somebody who has one or many tax returns that they haven’t filed. Jeff, there’s a lot of reasons why that happens too. The biggest reason why someone turns in to a non-filer and then it stretches in to a decade is they’re self-employed, they know they’ve made no estimated tax payments, they know they’re going to have a hefty tax bill, and maybe they get an extension up to October. So October comes. And in April when they do that extension to October they mean to do it. They mean, they fully intend with all their hearts to have the money by October to pay the tax bill. And lots and lots of self-employed people do that. Actually file in October and pay their tax bill.

KATRINA MADEWELL: The other thing too is expenses. Someone like me… I don’t exactly fit the category, but if I didn’t have a bookkeeper keeping up with all that stuff, you have to itemize those expenses, getting them all ready so when you take them to their tax preparer, they don’t send you a bill bigger than you’d get from the IRS for going through a shoebox full of stuff. I think that’s the biggest thing.

DARRIN T. MISH: Disorganization is a really big thing. The October date comes and goes, they don’t file, they still intend to file, they mean to do it. Then it’s like in to the next April. That’s six months away. But the IRS dose nothing. They send no letter. Nobody showed up.

KATRINA MADEWELL: They’re busy,

DARRIN T. MISH: They’re busy, life gets ahead.

JEFF:   But they still know it.

DARRIN T. MISH: So then two years comes. Same thing happens, nobody calls, no letters and then the next thing happens. Before long, it’s 2, 3, 4 years and now they’re really scared because they know. The law says we have to file a tax return, right? So they know they’re in trouble but they don’t know how to extricate themselves from the trouble. And now…the word overwhelming is used in my office a lot.

JEFF:   Burying your head in the sand.

DARRIN T. MISH: People say it’s so overwhelming, I have no idea how to approach with this problem. And I love these problems because they’re such a burden on people and I have the answers to resolve these problems for so many people. I actually love…well I don’t love that they come in stressed…but I love the fact that I try to leave them less stressed. It’s really fulfilling. Everybody likes to make people happy. At least sane people do. It’s nice to be able to turn people…

KATRINA MADEWELL: Even if you’re an IRS attorney.

DARRIN T. MISH: Yeah. It’s nice to send people on their way happy or less stressed than when they showed up. Smart aleck. So that’s the first category.

KATRINA MADEWELL: I have to make this show fun, otherwise it would be way too serious with an attorney hosting it.

DARRIN T. MISH: I’m plenty funny. So there’s non-filers. The second category would be people who came in to a lot of money and then they spend it all before they pay their taxes.

KATRINA MADEWELL: What do you mean by that specifically? What’s an example?

DARRIN T. MISH: An inheritance but that would be very rare because most inheritances are not taxable. Could be a lotto winning. Unless it’s some predetermined number that changes every single year that I have to look at every time. Congress, that’s congress. I’ve had some lotto winners come in and they say…this one gal came in and she said she won, let’s say it was six million which is kind of a small lotto winning and she owed a bunch of taxes because she didn’t pay the taxes.

DARRIN T. MISH: And you’re thinking…

KATRINA MADEWELL: How did they not take it?

D:…you just had six million.

JEFF:   Exactly, why don’t they take it right when you cash out?

DARRIN T. MISH: In this particular case, they didn’t take it and she went and she bought a very modest house. Like $175,000 house or something, which she paid for in full, which is great. And then she like loses it.

KATRINA MADEWELL: And then she couldn’t find six million dollars? Like it was just gone?

DARRIN T. MISH: Like literally…blew it.

JEFF:   Just gave it away and just partied with it.

KATRINA MADEWELL: People do, it’s crazy.

DARRIN T. MISH: Party. She gave some of it away to close family, but when I asked her, what did you do with it? I wasn’t getting a real clear answer.

KATRINA MADEWELL: Because they don’t know. People like that that have no plan, again. And they’re not good at saving and they just have this windfall of money…

DARRIN T. MISH: So my best advice to someone who comes in to a windfall, especially a lottery winning, is to go and see a lawyer and financial advisor immediately. Look, you weren’t rich the second before you won the lottery. So…

KATRINA MADEWELL: Well, statistics show those people are broke within five years.

DARRIN T. MISH: I’ve represented athletes from every major league except for the NHL, By the way, if there are that want to come on by to help even that up, that’d be great.

JEFF:   And your number is?

DARRIN T. MISH: My number is 888-438-6474, that’s 888-GET-MISH

KATRINA MADEWELL: 888-GET-MISH

DARRIN T. MISH: I’ve represented a bunch of, a football player, a baseball player, an NBA player, and yeah, they’re broke. Because they didn’t have a plan. It’s because they were good technicians, they were good at what they do for a living. The guy that I represent at the NBA, was in the NBA and 7 feet tall. You can’t teach that.

KATRINA MADEWELL: Don’t make him mad.

DARRIN T. MISH: You can’t teach that, though. But he didn’t have a real good financial plan. The third kind of person that comes in with a problem is the kind of person who has an incomplete or an incorrect tax return.

KATRINA MADEWELL: What does that look like?

DARRIN T. MISH: So they file a tax return and sometimes they forget to put the Income…”they forget”…to put the income from a 1099 because they didn’t get it or they don’t want to acknowledge that it exists and maybe the IRS won’t. Maybe they got it late. What happens is when you file a tax return, what happens is the IRS computer, no person does this, the IRS computer goes and checks your social security numbers for a married couple and then it looks for information returns to match to your tax return to make sure that all those information return showed up on the return. So what’s an information return? It’s a W-2, a 1099, a 1096, you know. A 1098. All that stuff, those are all information returns and congress keeps passing laws.

KATRINA MADEWELL: It means someone gave you some money or something you should report.

DARRIN T. MISH: Yeah, there’s some financial transaction you must account for. Sometimes it’s not even an income thing, you just have to account for it.

KATRINA MADEWELL: People that have a short sale, they might get a 1098.

DARRIN T. MISH: Or 1099-c, cancellation of debt. That’s the one that was right at the top of my mind is if you deal with that and you have one of the exceptions, you don’t have to pay tax on that cancellation of debt. But if you don’t deal with that cancellation of debt 1099, then you’re going to have to pay tax on debt that was cancelled.

JEFF:   I didn’t know that.

KATRINA MADEWELL: They wrote it off.

DARRIN T. MISH: So the bank writes off a hundred grand second mortgage and if you don’t deal with that on your tax return appropriately with someone that knows what they’re doing, then you’re going to have to pay tax on that hundred grand. Unless it’s some predetermined number that changes every single year, that I have to look at every time. Congress, that’s congress. I’ve had some lotto winners come in and they say…this one gal came in and she said she won, let’s say it was six million which is kind of a small lotto winning and she owed a bunch of taxes because she didn’t pay the taxes.

DARRIN T. MISH: And you’re thinking…

KATRINA MADEWELL: How did they not take it?

D:…you just had six million.

JEFF:   Exactly, why don’t they take it right when you cash out?

DARRIN T. MISH: In this particular case, they didn’t take it and she went and she bought a very modest house. Like $175,000 house or something, which she paid for in full, which is great. And then she like loses it.

KATRINA MADEWELL: And then she couldn’t find six million dollars? Like it was just gone?

DARRIN T. MISH: Like literally…blew it.

JEFF:   Just gave it away and just partied with it.

KATRINA MADEWELL: People do, it’s crazy.

DARRIN T. MISH: Party. She gave some of it away to close family, but when I asked her, what did you do with it? I wasn’t getting a real clear answer.

KATRINA MADEWELL: Because they don’t know. People like that that have no plan, again. And they’re not good at saving and they just have this windfall of money…

DARRIN T. MISH: So my best advice to someone who comes in to a windfall, especially a lottery winning, is to go and see a lawyer and financial advisor immediately. Look, you weren’t rich the second before you won the lottery. So…

KATRINA MADEWELL: Well, statistics show those people are broke within five years.

DARRIN T. MISH: I’ve represented athletes from every major league except for the NHL, By the way, if there are that want to come on by to help even that up, that’d be great.

JEFF:   And your number is?

DARRIN T. MISH: My number is 888-438-6474, that’s 888-GET-MISH

KATRINA MADEWELL: 888-GET-MISH

DARRIN T. MISH: I’ve represented a bunch of, a football player, a baseball player, an NBA player, and yeah, they’re broke. Because they didn’t have a plan. It’s because they were good technicians, they were good at what they do for a living. The guy that I represent at the NBA, was in the NBA and 7 foot tall. You can’t teach that.

KATRINA MADEWELL: Don’t make him mad.

DARRIN T. MISH: You can’t teach that, though. But he didn’t have a real good financial plan. The third kind of person that comes in with a problem is the kind of person who has an incomplete or an incorrect tax return.

KATRINA MADEWELL: What does that look like?

DARRIN T. MISH: So they file a tax return and sometimes they forget to put the Income…”they forget”…to put the income from a 1099 because they didn’t get it or they don’t want to acknowledge that it exists and maybe the IRS won’t. Maybe they got it late. What happens is when you file a tax return, what happens is the IRS computer, no person does this, the IRS computer goes and checks your social security numbers for a married couple and then it looks for information returns to match to your tax return to make sure that all those information return showed up on the return. So what’s an information return? It’s a W-2, a 1099, a 1096, you know. A 1098. All that stuff, those are all information returns and congress keeps passing laws.

KATRINA MADEWELL: It means someone gave you some money or something you should report.

DARRIN T. MISH: Yeah, there’s some financial transaction you must account for. Sometimes it’s not even an income thing, you just have to account for it.

KATRINA MADEWELL: People that have a short sale, they might get a 1098.

DARRIN T. MISH: Or 1099-c, cancellation of debt. That’s the one that was right at the top of my mind is if you deal with that and you have one of the exceptions, you don’t have to pay tax on that cancellation of debt. But if you don’t deal with that cancellation of debt 1099, then you’re going to have to pay tax on debt that was cancelled.

JEFF:   I didn’t know that.

KATRINA MADEWELL: They wrote it off.

DARRIN T. MISH: So the bank writes off a hundred grand second mortgage and if you don’t deal with that on your tax return appropriately with someone that knows what they’re doing, then you’re going to have to pay tax on that hundred grand.

JEFF:   After you’ve been cancelled.

DARRIN T. MISH: Yeah

KATRINA MADEWELL: What about if you don’t get it? Is that a gray area or are you always supposed to do it?

DARRIN T. MISH: No, not getting it, not an excuse.

JEFF:   So what do you have to fill out?

KATRINA MADEWELL: Well, there’s a couple of different forms, there’s another one too, if they’re insolvent what is it 9802c? I’m not a tax person.

DARRIN T. MISH: There’s a form 982 that deals with a cancellation of debt and there’s a couple exceptions that are pretty good. There’s one for primary homeownership and there’s one for insolvency.

KATRINA MADEWELL: Insolvency’s been around for a while but the other one is new.

DARRIN T. MISH: If the taxpayer was insolvent at the time of the cancellation, meaning that you have…Insolvent in this way means that your debts exceed your assets. You don’t have to be broke.

JEFF:   That’s pretty much 90% of the population.

KATRINA MADEWELL: Upside down. They have no worth.

DARRIN T. MISH: How many people have a mortgage written off that weren’t insolvent? Now there are some. Investors have that.

KATRINA MADEWELL: Strategic default.

DARRIN T. MISH: Right, but not the people with one home who have been having trouble making their mortgage payments. Those are the people that are going to fall under insolvency.

KATRINA MADEWELL: We’ve seen a lot of those people. The primary wage earner, they lost their job and maybe had some time in between when they didn’t have another job and then when they got another job it was making half or a fraction of what they were making before.

DARRIN T. MISH: That’s a pretty good exception. The fourth kind of person that comes in is they have the money to pay their taxes and they just don’t want to part with it. Those folks are actually kind of rare and those folks might be entering in to the tax evasion sort of realm of things. We’re going to be talking about an example later of someone who certainly fell into that realm. That’s pretty uncommon. Most of those people aren’t coming to me for help, right? Because they kind of know that they’re doing something that’s…

JEFF:   Where would they go instead of you?

DARRIN T. MISH: Good question. I don’t know. I certainly can help them, but we have to have a heart to heart and decide. Ok, you have the money now how are we going to deal with the fact that you have the money? And a lot of times what that looks like is we’re going to work out an installment agreement. So you owe $50,000, you have $50,000, you don’t want to give them all $50,000, so let’s do an installment agreement of $700 or $800 a month.

KATRINA MADEWELL: It’s easier to make payments than stroke a check for 50 grand.

DARRIN T. MISH: I would also say that using the IRS as your bank and financing company is a really bad idea because the interest and penalties are really high.

KATRINA MADEWELL: Plus they’re not very good with money. Anybody with the government.

DARRIN T. MISH: Sometimes that’s what you have to do.

JEFF:   They confuse IRS with IRA I think.

DARRIN T. MISH: The last kind of people who come in, and this is super super rare. Are people who lied on their tax returns and they’re actively doing their best to hide the money from the IRS.

KATRINA MADEWELL: Like what?

DARRIN T. MISH: It would be somebody who…I’ll give you an example. A contractor, let’s say it’s a tree contractor just so it gives us a little bit better of a mental picture.

KATRINA MADEWELL: So somebody cuts down trees or trims them or whatever?

DARRIN T. MISH: Yeah, so he’s going to homeowners and he’s getting paid ultimately by the homeowner and so he doesn’t have one big identifiable source of money that’s going to issue a 1099. If you have a tree guy come to your house, you’re not going to issue him a 1099. That’s just not the way the world works.

KATRINA MADEWELL: Any contractor really.

DARRIN T. MISH: So some of his clients are going to pay him with checks and some of them are going to swipe a credit card on his little mobile device or whatever and some of them are going to pay him cash. It’s just the way it’s going to be. And he’s even probably going to give the ones that pay cash, a discount, he’s probably even going to tell them, hey if you pay my cash…

JEFF:   10% or whatever

DARRIN T. MISH: Yeah, I’ll cut you some slack and then that guy in our hypothetical situation is not going to report the cash on the tax return.

KATRINA MADEWELL: Hopefully you’re not cutting trees for an IRS person.

JEFF:   That would be sad, wouldn’t it?

KATRINA MADEWELL: I’ll give you a discount if you pay cash.

JEFF:   Funny you should say that. GET-MISH

KATRINA MADEWELL: 888-GET-MISH

DARRIN T. MISH: I would say in the blue collar trades where they’re dealing with the public or even small business…

JEFF:   That happens all the time.

DARRIN T. MISH: It’s going to happen a lot. There’s a huge underground economy that’s not currently being taxed and the IRS would love nothing more, they would love nothing more than to know about every transaction that occurs. Let me tell you a little story about something that happened in the past five years and it was a dismal failure. Congress passed a law that said, now all payments over $600, even the corporations which currently aren’t subject to the 1099 rules, but all payments, even between corporations were going to have to be subject to a 1099. And here’s what happened and it’s hilarious.

KATRINA MADEWELL: That is passed or it’s not passed?

DARRIN T. MISH: That did get passed. What happened was once. Now and when it passed I just scoffed, I’m like look, they can’t even handle the data they have now. That’s billions perhaps trillions of transactions every year. They’re going to swamp themselves with data. And that’s exactly what happened. They did like a trial on it and they made it like voluntary for a little while.

KATRINA MADEWELL: Then they said oh, no thanks.

DARRIN T. MISH: Yeah. They just couldn’t handle it. Until we go to an entirely electronic based currency.

JEFF:   Cashless society.

DARRIN T. MISH: Which I hope we don’t go to.

KATRINA MADEWELL: That’s scary.

DARRIN T. MISH: Because the prospects for ultimate government control…

JEFF:   Is very high at that point.

DARRIN T. MISH: Yeah. Completely electronic paperless currency system. The opportunity for a dictator to seize control and just really…

JEFF:   Is very plausible and very possible.

DARRIN T. MISH: I’m not being a weirdo when I say that.

JEFF:   No, not at all. People cannot dispute that we’re heading in that direction. People that say oh, you’re a conspiracy theorist, no. Just read. Just see what’s going on. They really want us to be cashless. Maybe sooner than you think, eventually when cash is not around, don’t start thinking about dealing in gold because gold is not a currency. You can’t go to 7-11 and buy a Slurpee and give them a bitcoin or something, it doesn’t work. So what are you going to do? Are you going to hand them a chain of gold? Here, a loaf of bread for a chain of gold. No. You got to use the card.

DARRIN T. MISH: Up in Alaska and Yukon and stuff where they do a lot of gold mining and they have a lot of really fine gold, they actually do use gold as a currency up in there because they’re out in the middle of nowhere. I often wonder who those gold miners are even taxed because…

JEFF:   How do you know?

DARRIN T. MISH: How much gold?

KATRINA MADEWELL: How many grams?

DARRIN T. MISH: How much gold just doesn’t end up on the books. We’re kind of at a big segway here.

KATRINA MADEWELL: Two for me, one for you.

DARRIN T. MISH: It already is a law that if you withdraw money, more than $10,000 from a bank account, which by the way is probably more cash than most banks keep on hand. I don’t know, that’s speculation.

KATRINA MADEWELL: That’s just irritates me by the way.

JEFF:   I have to wait five days.

KATRINA MADEWELL: That really irritates me.

DARRIN T. MISH: If you withdraw more than $10,000 then the bank’s going to report it. Also, this has been in the news lately and that is the banks are under pressure from the federal regulators to report more and more large cash withdraws as potentially suspicious. Even under 10 grand. A lot of my clients will come and pay in cash. And yes, all that money ends up in the bank, it does. And reported.

KATRINA MADEWELL: Gosh, I don’t even do anything wrong and I want to open a Swiss bank account.

DARRIN T. MISH: All that cash at the bank…

JEFF:   You can’t do that anymore.

DARRIN T. MISH: So if you a client comes and pays me $3,000 in hundred dollar bills, potentially their bank is reporting that as a potentially suspicious withdraw.

KATRINA MADEWELL: How does that affect you as an attorney?

JEFF:   I don’t think as much as the person who withdrew it.

DARRIN T. MISH: When I was doing criminal defense work, there could have been some conflicts because a lawyer cannot take money that he knows is the result of criminal behavior or activity. So when you’re doing a lot of drug representation and you get paid 3 grand and it comes in in 5’s and 10’s. It used to happen, especially with the fly by repeat customers. Which is one of the reasons I don’t do that work anymore. I just didn’t feel good.

JEFF:   Well, how would they know that’s drug money? It doesn’t say this is drug money. It’s money. It’s currency.

KATRINA MADEWELL: We get that too, the people that want to pay cash. I’m like “nope”. Let’s go to the bank, I’ll get you a cashier’s check.

DARRIN T. MISH: Just to go farther down the rabbit hole than we already are.

KATRINA MADEWELL: Why not, we’re already there.

DARRIN T. MISH: If you test most currency in the United States it has traces of cocaine on it. So I don’t know if you could use that particular fact for any reason. It’s not a problem for me to get paid in cash given the nature of my work. The percentage of cash is actually kind of low. But also another interesting thing is we’re starting to see audits where the percentage of cash is not high enough given the type of business. So the IRS has…I’ll give you an example in a second. The IRS has all kinds of stats on what types of businesses and how much cash they should bring in. I thought I brought this up a few weeks ago and that was my liquor store owner who had a 1099K that reported all of the credit card transactions and that’s the number he used on his tax return as the gross income for the business. Well, what’s the problem with that? There was no cash at a liquor store? None? In year? So he was audited.

KATRINA MADEWELL: Well, yeah, that would make sense.

DARRIN T. MISH: What happened is, to go further, they went and looked at some of the supplier invoices and those were paid in cash. He was attributed more money as a gross because they knew roughly what the percentage of cash should be. So that’s where we’re at. As we move into a more electronic currency based system, more and more businesses are going to have a lower and lower percentage of cash so those audits are really interesting to me. It’s caused me to encourage more people to pay in cash. Because I don’t know, I don’t know if my ratio is right here.

KATRINA MADEWELL: Weird, that is so weird.

DARRIN T. MISH: Even in my practice we’re getting mostly credit and debit cards, the next would be checks and the last would be cash. So in the next segment I want to talk about an example of an attorney who actually went down this tax evasion route.

KATRINA MADEWELL: We’ve got some great questions too. You’re listing to the IRS Attorney Show. If you have some of those questions, you can call Darrin, the host with the most, at 888-GET-MISH. 888-GET-MISH. You can also catch him on Facebook and Twitter.

DARRIN T. MISH: @Darrinmish or don’t forget the website it’s getirshelp.com.

KATRINA MADEWELL: Stick around, we’ll be back in a minute.

 

Commercial break

 

KATRINA MADEWELL: And welcome back to our last segment. You’re listening to the IRS Solution Attorney Show. We’ve had a question from Barry in Michigan. He actually caught the show via the web. His question is, if he’s behind on his state taxes as well as federal taxes can you help him with both issues, Darrin?

DARRIN T. MISH: So, just to be clear, you said his state taxes and it sounded like estate taxes. Well, I do not…

KATRINA MADEWELL: Well, it says he’s behind on state, my state taxes as well as federal taxes.

DARRIN T. MISH: No, I understand, I’m trying to just make the distinction between estate, estate, like a death. I don’t handle estate taxes, but I can and do help people with their state tax problems. Typically what we would do is the state tax problem is going to be relatively minor. We make a deal with the state first, get them on some sort of installment agreement, then we can actually use that installment agreement payment to show the IRS that he has a diminished ability to pay them back and work out an Offer in Compromise and make some kind of good deal with the feds.

KATRINA MADEWELL: We don’t talk about this a lot but you can represent anybody anywhere in the U.S.

DARRIN T. MISH: Yes, I can and do have clients in all 50 states. One of the things that’s challenging about state taxes is that every state has their own laws pertaining to taxes, so it can make it kind of challenging. Being down here in Tampa, I have lots of clients that came from Michigan, Ohio, New York, New Jersey, Connecticut, all over the place up north.

KATRINA MADEWELL: So was your attorney thing you were going to talk about, was it the Wichita attorney that was sentenced for federal tax evasion?

DARRIN T. MISH: Yeah, you know there’s always some attorney in Wichita getting popped for tax evasion. In this cash what he did was really kind of not that intelligent, but it’s probably a situation where he had some money pressures and he just got behind. He didn’t intend…well…in this case maybe he did intend. What happened is he was found guilty of failing to pay income taxes in 1998, 2000, 2002-2005, 2007-2008, and there was also a payroll tax penalty from 1999. That in and of itself is not really a problem. Not paying the taxes if you can’t pay is really not a problem and not a crime. But in this case what this particular lawyer did, probably using some of his lawyerly skills was he interfered with the government’s efforts to collect the taxes he owed by putting his law firm in the name of an nominee, so the name was someone else. He terminated his own payment agreement with his law firm. So he basically fired himself from being paid at the law firm and then he had his firm pay his personal expenses. So the government figured that all out and ultimately decided to charge him with a crime. The reason they charge people like this. This lawyer in Wichita is because they don’t have the resources to charge all of us or as many people as there are that are committing different various tax offenses, they can’t charge everyone because they don’t have the resources. What they try to do is to charge higher profile people in the community-judges, lawyers, doctors, that kind of thing. Politicians. So it ends up in the news and some guy in Tampa Florida on the radio starts talking about how the IRS prosecuted him for federal tax evasion. They’re really getting a good bang for their buck in this particular case. He has been sentenced to do the next 3 years in federal prison. I’m sure that’s not going to be the worst thing, but it won’t be the most enjoyable 3 years of his life.

KATRINA MADEWELL: Doesn’t sound like fun to me.

DARRIN T. MISH: Given the fact that he’s 67 years old, probably not going to be a good time.

KATRINA MADEWELL: I think it’s about that time.

DARRIN T. MISH: Hopefully you can hear my smile. This is actually my most favorite segment of the week. It’s the IRS Train Wreck of the Week. This is where I get to talk about people who came into the office that nervous wreck that had the biggest problem in their lives. We sat down we figured out a game plan, we implemented the plan and ultimately it worked out. In this particular case a husband and wife came in. They had been non-filers for many years. We didn’t even know how much they owed. We ended up getting all of their tax returns prepared and filed. Turns out their balance due was over $209,000.

KATRINA MADEWELL: How many years was that?

DARRIN T. MISH: As I recall it was probably 10 or 12 years. It was a good long time. They had gone through a period in their life in the boom times when they were in the real estate, roughly related to real estate. So they were making good money. When the recession came, their income crashed and now they’re much lower income. Ultimately we made an Offer in Compromise for these folks and it ended up going through…it was $209,000, but they had some assets. So you guys are used to me really saying they owed 209 and I settled for a thousand bucks. This story is not like this at all. What happened is they had some assets. The IRS found some horses and some other things like that. I was trying to argue to the IRS. Look, a horse, unless it’s a race horse or some kind of stud breeder, is not an asset, this is a liability.

KATRINA MADEWELL: Vet bills.

DARRIN T. MISH: In this particular case, the deal we worked out is we roughly settled for about 48 grand and they were able…we never talked about this…we worked it out so they were able to pay that at roughly $2,000a month over the next 24 months, interest free, penalty free. So 48 grand on 209, really great deal, 25 cents on the dollar less. More importantly, these people are really really nice people. They have a plan now and as long as they meet their end of the bargain, this IRS nightmare is over for them. I worked on that case for over four years. I filed the offer, it was rejected. I filed an appeal. I worked the appeal for the better part of a year. Year and a half. We never gave up. And by the way, that settlement officer in IRS appeals and I are tight now. I got her on my side, she wanted that case to go as bad as I did. So when you can do that you can really do magical stuff. You got to sway people to your way of thinking if you can. In an honest and moral ethical way.

KATRINA MADEWELL: Well, the IRS thinks all of 48 thousand is better than 0 of 300 thousand.

DARRIN T. MISH: Compared to most of the deals I work out, they did really well on this one. The client was happy. I thought the client was going to reject this proposition just because of cash flow and what not. And he goes, you know since we filed the offer, things started looking up so yeah, I think we can do that. So that’s the IRS train wreck of the week. If you want to get in touch with me, give me a call at 888-GET-MISH. That’s 888-438-6474. You can hit me up on Twitter or Facebook or visit our website at getirshelp.com.

KATRINA MADEWELL: Darrin Mish, two i’s. “I” in Mish, “I” in Darrin. So much for this week. We’re out!

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