What the Beatles Could Learn from My Tax Tips For The Self Employed

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DARRIN T. MISH:   Good Morning this is the IRS Solution Attorney Darrin T. Mish and I’m joined today by Katrina Madewell my co-host.

KATRINA MADEWELL:   Good Morning and welcome to the show.

DARRIN T. MISH:   How are you?

KATRINA MADEWELL:   I’m doing fantastic.

DARRIN T. MISH:   We are going to do something a little bit different today….

Beatles’ song playing

KATRINA MADEWELL:   Yeah that.

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KATRINA MADEWELL:   And Pat George is going to be hosting the show today.

DARRIN T. MISH:   So we are going to do something a little bit different today we are going to talk about the lyrics in the chorus to the Beatles song “The Tax Man”.  We wanted to play it just to kind of remind people and jog their memory actually who the Beatles are cause it’s been awhile.

KATRINA MADEWELL:   Pat could probably play some of those lyrics while you are chanting them.

DARRIN T. MISH:   Well the chorus goes like this:  If you drive a car I’ll tax the street, if you try to sit I’ll tax your seat, if you get to cold I will tax the heat, if you take a walk I’ll tax your feet.  Doesn’t that sound kind of like the IRS?

KATRINA MADEWELL:   Just to freshen up your memory.

Beatles’ song playing

KATRINA MADEWELL:   I thought I heard something about 5% that’s the ironic part it tells you how old the Beatles are cause I don’t think they tax anything at 5%.

DARRIN T. MISH:   That might of been what the tax rate was in England at that time I’m quite a bit positive it’s higher than that now.  So the theme of the show today is what the Beatles can learn from my tax tips for the Self-employed.

KATRINA MADEWELL:   I like it.

PAT:   That would have been probably a longer song then.

DARRIN T. MISH:   Yeah would have been.  Would have been a little bit harder to get that to rhyme to I think.  What rhymes with employed?  Enjoyed.

PAT:   Deployed.

DARRIN T. MISH:   Or deployed yeah, yeah there you go.

DARRIN T. MISH:   So the first lyric here that we are going to talk about is if you drive a car I will tax a street

and actually there’s proposals especially in California right now that they want to put, some politicians want to put a device on your car so that they can tell how many miles that you have driven and they want to tax you per mile.  Which yeah Katrina just went…..

KATRINA MADEWELL:   Like wipe off if you get any miles deduction like on your IRS return that’s going to pretty much eliminate it.

DARRIN T. MISH:  Yeah Katrina you know the real estate agent  she just went crossed eyed when I said that because you know she is driving the Prius and I don’t know probably a lot of miles right?

KATRINA MADEWELL:   At least 3,000 a month.

DARRIN T. MISH:   Ok well I have about 2,000 so but I don’t even have to drive anywhere.

KATRINA MADEWELL:   At least.

DARRIN T. MISH:   So that would really be bad I think but you know just yesterday..

KATRINA MADEWELL:   I know California does some funky stuff like they literally pull some stuff out of you know where but how can they actually get away with that like just blows my mind.

DARRIN T. MISH:   It hasn’t passed but I think some politicians are looking at it as a potentially, a way to get more cars off the road which they need to do out there I’m originally from California and talk about congestion I mean in the Tampa Bay area that we live we complain about traffic it takes me an hour to get to the studio every morning when we do the show, but if we were in LA it would take like 2 hours.

KATRINA MADEWELL:  It’s horrible.  Yeah we’ve been in that traffic before and you sit in I5 for ever like you literally just don’t go anywhere.

DARRIN T. MISH:  Yeah rush hour is like 4 hours and I’ve actually having grown up there going to the airport early in the morning or something, I’ve been in bumper to bumper traffic at 4 in the morning so.

KATRINA MADEWELL:   And how long does it actually take people to get where they are going to go I mean really  when you think about the average commute in our area an hour, 2 hours then you go to work for hypothetically speaking an 8 hour day and already up to 10-12 hours.  So if you are in LA you are talking about 14-16 hour days really?

DARRIN T. MISH:   Potentially but I think there’s probably more people working from home and there’s probably quote more people working from there car you know on the phone doing converse calls and stuff like that.

KATRINA MADEWELL:  Here is an idea how about we incentivize businesses to do the work from home thing.

DARRIN T. MISH:   Yeah I think that is not a bad idea but you know back to the lyric if you drive a car I will tax the street.  Just yesterday I was looking at an audit for a couple that I have been friends with many years actually and one of the reasons of the audit I believe was the amount of mileage this particular attorney had claimed on her Schedule C.  She had claimed like 42,500 miles on her on her Schedule C and Katrina is kind of nodding and making a face like it could be right and so I’m talking to the attorney ok so tell me I mean I understand you have to go to court houses and you have to go to the jail and you have to go to all these places.  She is like yeah I think that number is pretty good so we got the calculator out and when I figured it out I’m like you know that’s a 175 miles a day are you driving from Tampa to Sarasota every day?  No ok another problem on her tax, on her Schedule C was she only, there is 3 places to put miles right, there’s business, personal and other.  Other I think would be like you know mileage for a charitable contributions or maybe medical miles.  All she had was 42,500 miles under business and there was no other you know no other notations.

PAT:   I think that’s…

KATRINA MADEWELL:   Why would you even put it for personal, I don’t understand that.

PAT:    That’s a red flag.

DARRIN T. MISH:   Well because they are trying to determine what the ratio is of your business miles to your personal miles.

KATRINA MADEWELL:   So they are trying to catch that has a flag.

DARRIN T. MISH:   Yeah and I definitely think it is a flag so you just have to be careful  you know don’t claim 100% of your miles as business miles unless in fact you have a vehicle that is purely used for business for example I can think of… Ok maybe…

KATRINA MADEWELL:   That’s me.  I do, we have 3 cars, so my little real estate car that you make fun of cause you drive your big truck, that’s my real estate car.

DARRIN T. MISH:   Like another example would be a Fed Ex truck but that’s… some of those Fed Ex ground guys actually may own the truck…

PAT:   Right there are.

DARRIN T. MISH:   But like a contractor, you have like a construction truck that’s all beat up and ugly and dirty and nasty and it’s got stuff hanging off of it, that very well could be a 100% business use vehicle.  I would be hesitant to advise you to claim 100% business miles unless like in your case Katrina you had other vehicles.

KATRINA MADEWELL:   Right.

DARRIN T. MISH:   So that you can explain well you know if you got audited they would say ok how you get to the grocery store you know with that kind of evil stare.

KATRINA MADEWELL:    I take the truck.

DARRIN T. MISH:   Exactly cause you can fit more groceries in the truck right.

KATRINA MADEWELL:   That’s right because you are not fitting much in that Prius I will tell you that.

DARRIN T. MISH:   So I think there are some things in the mileage arena that are definitely red flags for audits.

KATRINA MADEWELL:  Thinking about that I’m like technically I use the truck sometimes for real estate and I don’t even claim those miles, like when I have to move stuff for people right I told you.

DARRIN T. MISH:   I think another problem in the mileage arena can be you know using multiple vehicles because then it really does become even harder to track and harder to prove because one of those things the IRS is going to want to see in an audit is they are going to want to see ok let’s see the service records for that vehicle because service records have odometer readings on it and that’s a classic way that they catch people.  So if you are claiming 42,500 miles in this case and you are claiming it all on one car.

KATRINA MADEWELL:   They are checking it to make sure it makes sense.

DARRIN T. MISH:   And the car only has 29,000 miles on it you think that might be a problem so.

KATRINA MADEWELL:   It makes sense to me I mean it should be inline anyway with what your oil change is and that kind of stuff.

DARRIN T. MISH:   Exactly you know you are going to have unless you are still out there in the yard doing the oil change in the driveway which in Florida I think is kind of impractical because it is like hotter than the surface of the sun.  You are probably going to have a receipt for the oil change as in routine maintenance and stuff like that.

KATRINA MADEWELL:   So number 2 I know you love to talk about this one we talk about this one all the time:  Watching out for hidden tax cost when you claim a home office on your taxes.  The home office.

DARRIN T. MISH:   Ok getting back to our theme if you try to sit I will tax your seat so yeah definitely watch out for those hidden tax costs when you claim that for sure.

KATRINA MADEWELL:   I was wondering where you were going for that I was looking at it going tax receipt hmm where is that coming from.

DARRIN T. MISH:   Could be your lazy boy right could be your seat in front of the TV in the living room.  I definitely have problems with the home office deduction and I talk about it all the time I think it causes audits.  In this particular audit that I was looking at yesterday there was in fact a home office….

KATRINA MADEWELL:   That may have triggered it.

DARRIN T. MISH:   But they didn’t claim it which I was actually happy that they didn’t claim it but the home office did in that case was there was no commuting miles alright so her place of business was her home and so as soon as she left the home for purposes of business to go to the jail, courthouse or clients you know place then those were all business miles legitimately.  But I think home office deductions can cause audits because it’s really super commonly abused and do it’s just something to watch out for.  It also causes additional record keeping sort of requirements because you have to be able to prove it you have to know you have to calculate….

KATRINA MADEWELL:   Isn’t the space like the percentage of use.

DARRIN T. MISH:   The percentage of the…

KATRINA MADEWELL:   Overall home.

DARRIN T. MISH:   So if you are using one room and the room just say to keep the math easy is a 1000 sq feet and the house is 5000 sq feet then that would be 20% of the house and so you would only get 20% of the write offs on electricity and the utilities and things like that.

KATRINA MADEWELL:   Then that’s what Pat thinks about the home office deduction.  You are listening to the IRS Solution Attorney show hope we are bringing you some great value this morning if we are boring you let us know that to 888-404-1010, 888-404-1010 we will be back in a minute.

Beatles music playing

KATRINA MADEWELL:   Well good morning we hope you are enjoying the Beatles tunes this morning for the IRS Solution Attorney show with Mr. Darrin T. Mish.

DARRIN T. MISH:   That would be me.

KATRINA MADEWELL:   I’m your co-host Katrina Madewell thanks for sticking around.

DARRIN T. MISH:   So we were, we were talking about the home office deduction you know specifically the lyric if you try to sit I will tax your seat.  I just wanted to say that when you take the home office deduction just to recap you have extra forms to fill out, you have extra records, burdens that you have to keep and so it’s something that you should consider taking particularly if there’s you know if you have a bigger house and you have more expenses.  It does trigger audits in my opinion so it’s something that you just really need to have.

KATRINA MADEWELL:   You better make sure you have the rest of your stuff lined up if you are taking a deduction and this triggers an audit, that is what I’m thinking.

DARRIN T. MISH:   Yeah usually what happens  if you get triggered for an audit for you know excess mileage or your home office deduction or something like that they are going to want to take a look at your other things to.

KATRINA MADEWELL:   Probably don’t want to get sloppy with the bookkeeping.

DARRIN T. MISH:    Almost without fail at least the audits that I see there are some problems in some other areas and places you really don’t want any scrutiny if you can help it and I’m not encouraging anybody not to have good records or take ridiculous positions but you just never know.

DARRIN T. MISH:   So the next lyric we want to talk about is if you get to cold I will tax the heat.

KATRINA MADEWELL:   I’m waiting to see where you are going with this one.

DARRIN T. MISH:   Alright back to the home office deduction and keeping with the theme it’s kind of hard to it’s a stretch to plug these things anywhere else.  So you get to deduct a portion of your monthly heating and electricity bills like I talked about in the last segment and it’s based upon the square footage of your house.  You can deduct you know if it’s 20% of your house you can deduct 20% of the electric bill and in Florida we really don’t have separate heating bills you know but in other parts of the country they have fuel oil or something like that.

KATRINA MADEWELL:   It just seems so complicated all of that.

DARRIN T. MISH:   What the heating?

KATRINA MADEWELL:   Well no just like ok I’m going to take a home office deduction and now cause the reality of it is probably not exactly a thousand square feet which means you have to measure your room which means you have to look at different power bills every month which means you have to calculate that exact percentage every month, it just sounds like more of headache then it’s worth.

DARRIN T. MISH:   In my mind it’s for the gluttons for punishment you know the people that just really like to be busy and really want to break out the calculator and try to get every dollar that they are entitled to and I’m all in favor of getting every dollar that you are entitled to but not if…

KATRINA MADEWELL:   The ultra-nerdy’s Richie type, it’s alright we need you guys.

DARRIN T. MISH:   Not if it is going to cause an audit for sure.

KATRINA MADEWELL:   So number 4 on your list is if you take a walk I will tax your feet you got that sentence lined up there.

DARRIN T. MISH:   Well and this is a little bit of a stretch to but if you recently become unemployed you know and you become self-employed because you got laid off and you know you’ve taken a walk, get it so….

KATRINA MADEWELL:   No you are over my head you will have to explain it to me like I am 5 sorry.

DARRIN T. MISH:   Well if you lost your job or you quit your job you took a walk away from the job that’s what we are trying to shoehorn those in today but if you recently became self-employed because of a career change you want to make sure you take advantage of all the tax advantages that may be available to you really being self-employed or being a small business owner is really the last great tax benefit because there’s lots of things that you can deduct if you are self-employed and there’s lots of things that I like to call dual purpose.

KATRINA MADEWELL:   And that’s a funky transition we’ve talked about this before a lot with some of the clients that you help and a lot of them are self-employed.

DARRIN T. MISH:   I would say probably the majority of them are self-employed and what happens is we become this great…..

KATRINA MADEWELL:   It’s weird to make that transition, there’s no nobody teaches you that.

DARRIN T. MISH:   Yeah there’s a great book by an author named Michael Gerber called the E-Myth and he talks about you know that transition in a lot of ways were we become you know that baker opens the bakery because he’s great at baking and he is passionate at baking you know at baking and he decides to open his own business and a lot of lawyers do the same thing they work for the government, I worked for the public defender’s office for a couple of years and you know I went out on my own primarily because I was starving at the salary that I was working for but so I was kind of pushed out as a matter of necessity but we open our businesses because we are passionate about it and then what we are not passionate about is like all the administrative stuff that….

KATRINA MADEWELL:   And when you are a small business you are just starting you are still trying to figure out you know what your income is going to be for the company and you know in his book as you referenced you have all the little pieces, so you have you know the baker, the technician, and whatever the third one is it’s been a long time since I read the book but it’s doing all of those things and it leads to burnout.

DARRIN T. MISH:   Yeah for sure and one of the things that I see not one day goes by without me talking to a small business owner and I say ok how much you know how much money are you earning and they say I don’t know.  That’s scary actually and so a lot of the clarifying questions that I have for them is well is it $2000 a month or is it $20,000 a month and they usually get like a scoff and they say well it’s maybe around 4.

KATRINA MADEWELL:   Well because a lot of self-employed people as opposed to planning their life oh I have money so I will take it now and they don’t save for those up and down times.  Real estate is one we see that a lot you know and this market we are in now everybody’s new cousin is a real estate agent.  They are right so some of these people will be your clients in a couple of years I wonder why you are laughing.

DARRIN T. MISH:   Well they definitely will be my client in a few years cause there is one thing about the tax resolution business and that is that there are people today in a good economy or in a bad economy, there’s people today that are deciding I’m not going to pay my taxes and that decision is not going to catch up with them for a few years typically and so there are people today that are making that decision and in 2020 they are going to come and hire me and that’s great.

KATRINA MADEWELL:   I don’t think it’s intentional, I think it’s I’m living at the top of this wave right now and things are good and then the next thing you know the wave hits the shore and they are like oh where did the money go.

DARRIN T. MISH:   It’s for sure not intentional and I didn’t mean to be sound cynical or anything like that I mean I don’t think they are bad people.

KATRINA MADEWELL:   Every business has up and downs that’s a point, my business, your business anybody that is self-employed you are going to have those up and downs so if you can even try to take an average.

DARRIN T. MISH:   So I think what’s really important is that a small business owner especially if they are just starting out or maybe they are anticipating growth.  You have to have some system really for almost everything and having, not having a system of sorts is just a really bad system so even…..

KATRINA MADEWELL:   They are all saying if you are doing the same thing more than once, more than twice you should have a checklist of some sort.

DARRIN T. MISH:    For sure.

PAT:    I have a question I have a little hot dog cart that I took around about a year and a half ago, but because of this job now I haven’t even since I got the license and I got all permits and all the licensing so I’m on the radar now but I haven’t used it in a year now what will happen someone’s expecting me to pay taxes on something?

KATRINA MADEWELL:   That should be a loss is what I’m thinking if you have expenses and no income.

DARRIN T. MISH:   Yeah you are not going to have any income right?

PAT:   Right, no, I haven’t used it, it’s been parked.

KATRINA MADEWELL:  But you still pay the license fees and stuff right?

PAT:   I paid all the license fees which were totaling something around $500.

KATRINA MADEWELL:   But you didn’t make any money?

PAT:    No do I have to do a Schedule C to deduct that?

DARRIN T. MISH:  I think you do.  I think you need to file a Schedule C I don’t think it’s going to be a big deal because  your loss is really pretty minor, but at some point if you start to….

PAT:   It would be the loss of the license that never got used for the whole year.

DARRIN T. MISH:   Yeah if you start stacking up those losses I think the rule of thumb is 2 out of, you have to  you have to make a profit 2 out of 5 years in order for them to kind of buy that it’s not a hobby business and ……

KATRINA MADEWELL:   Yeah because in 5 years really if you are not making any profit you are probably going to quit and go get a job.

DARRIN T. MISH:   Right the company’s, the endeavor….

PAT:   It’s going to be sooner than that if I don’t get that cart out.

DARRIN T. MISH:   I think one of your problems is you know you have to run the cart so you have to decide that you  want to do and you have to decide that you enjoy it enough to want to go do it on your off time right.

PAT:   Exactly right.

DARRIN T. MISH:   And up to now…..

KATRINA MADEWELL:   I think you should just stay in the parking lot Pat between the morning and the afternoon shows and just sell hot dogs to all the employees……

PAT:    I  only have about a day and a half off you know you are just getting ready to come back on a Monday, you don’t really want to be doing it on a Sunday so it’s really a day, that’s a full day of doing that so you ah that’s not going to happen.

DARRIN T. MISH:   Incidentally are the profits good on a hot dog cart?

PAT:    The profits are ok you know I mean some people think and you sell a hot dog for maybe 2 or 3 dollars and some people say a hot dog for $3.00 that’s a good hot dog.

KATRINA MADEWELL:  If you are hungry and you are walking into Home Depot you will buy that $3.00 hot dog.

DARRIN T. MISH:  It’s a gourmet hot dog, the best hot dog.

KATRINA MADEWELL:  It’s kosher.

PAT:   It was really a great idea and a great job venture and then all of a sudden radio came back into my life so you know the hard part is done.

KATRINA MADEWELL:    Well I had this chick on my show awhile back and she like helps businesses kind of explode that is what she does and so she took these people that have food trucks and literally like boomed their business.

DARRIN T. MISH:   Interesting.  You know Pat needs to talk to her.  He needs to have a booming hot dog business.

KATRINA MADEWELL:   No cause then he will leave here I don’t want to have to talk to her.

DARRIN T. MISH:   I was just thinking like I’m super grateful that he is our producer.

KATRINA MADEWELL:   I will be selfish and say no.

PAT:  It’s really my 401K because I need money in the future.  I have a hot dog cart there.

KATRINA MADEWELL:   It’s a retirement plan.

DARRIN T. MISH:   We are on money talk I’m sure there’s people that talk about better 401K’s then the hot dog cart.

KATRINA MADEWELL:   You know.  Realtor’s 401K plan is properties.

DARRIN T. MISH:   You know when you are self-employed there’s some other tax deductions and money saving benefits like you can buy health insurance…

KATRINA MADEWELL:   These are probably things that people miss right making that transition.

DARRIN T. MISH:   Yeah even if you are actually low income while you are making the transition you know you can get Obama care or you can get on Food Stamps, you can get low cost electric service, you can get an Obama phone, there’s low cost auto insurance, there’s all kinds of things that are available….

KATRINA MADEWELL:   You have to say Obama phone you just can’t say public assistance, it has to be Obama phone I love it.  Spit it out.

DARRIN T. MISH:  That was not (inaudible)  I mean that is what people call them right?  I just want to make sure people understood what I was talking about.

KATRINA MADEWELL:   For really real we will get through this list when we come back after the break.  You are listening to the IRS Solution Attorney show we are trying to keep this stuff fun for you all now.  You can call us at 888-404-1010 we are glad to have you with us this morning 888-404-1010 back in a minute.

Beatles music playing

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

KATRINA MADEWELL:   And I’m your co-host Katrina Madewell and that was oh bumping lyric was just for our caller over the break thank you.  Her question was about the part in the song one for you and 19 for me what’s your fix on that one Darrin?

DARRIN T. MISH:   My take is it seems like it’s one for the tax payer 19 for the tax man doesn’t it?

KATRINA MADEWELL:   That’s how it feels to me.

DARRIN T. MISH:   Well there’s another way to look at it and it’s if you are self-employed you can actually flip that around potentially in some cases where the tax deductions are so significant that it’s more like one for me and you know or one for you and 19 for me because you either so many dual purpose you know deductions that people take rightfully so and…

KATRINA MADEWELL:   What do you mean by dual purpose deduction, break that down.

DARRIN T. MISH:   Well you know if you are self-employed you need a computer right so I actually happen to be kind of a computer nut I like to have the latest, greatest, coolest thing so that computer is going to be a tax write off for the business because I’m going to use it in the business.  I’m actually have this laptop right in front of me and do I use it at home sometimes sure  but it’s primary purpose is I take it in to our conference room where we have consultations…

KATRINA MADEWELL:   Laptop looks a little beat up there Darrin, time for a new one.

DARRIN T. MISH:   Well it’s actually the case is beat up.

KATRINA MADEWELL:   Well the case good for you.  Good for you.

DARRIN T. MISH:   And then the latest greatest cell phones, the latest greatest technology.  I mean I know people that have rental houses and what not and they you know they’ve never bought a garden hose for their own home because the garden hose that they buy at Home Depot is always for a rental.  I mean that may be a little bit aggressive right…

KATRINA MADEWELL:    I was going to say that’s kind of asking for an audit with the….

DARRIN T. MISH:   There are people that do that.

KATRINA MADEWELL:   Talking this kind of stuff. So to get back to your list cause it is kind of relevant we could kind of run through it real quick and then chime in on it but some of the money saving things self-employed people get like your health insurance, food assistance, low cost gas and electric, phone service, auto insurance, unclaimed funds….

DARRIN T. MISH:   These are really you know a less for  people that are just starting out as self-employed and are perhaps low income so this is really more of a list that if you are low income the benefits that you can get.

KATRINA MADEWELL:   What do you mean unclaimed funds?

DARRIN T. MISH:   You know when there’s every state has a list of unclaimed funds where like the true owner of the money if they can’t find them…

KATRINA MADEWELL:   Like to the state of Florida and they can’t…..

DARRIN T. MISH:   Yeah so in some states those funds can go to low income people, there’s also…

KATRINA MADEWELL:   After what period of time do you know?

DARRIN T. MISH:   No I’m not really sure but I know that that’s a kind of option in some places.  Earned income tax credit obviously if you are low income and you have children you are going to be able to take the EIC child tax credit I mean hopefully…

KATRINA MADEWELL:   That’s at any income bracket that you get that one.

DARRIN T. MISH:   Yeah hopefully, kids are so expensive you need that break you deserve that break you should take it.

KATRINA MADEWELL:   And what’s savers credit I’ve never heard of that one like the government doesn’t they don’t benefit you for earned income, was that a snafu on our list?

DARRIN T. MISH:   Yeah I think so I’m not sure what was up with that…

KATRINA MADEWELL:    Cause you definitely don’t get compensated for you know retained earnings if you will.  So if you want to catch up with Darrin just so you know how to reach him cause I know a lot of the times the people that listen to the IRS Solution Attorney show, you don’t want to call the show we get that so you can reach Darrin at 888-get-mish, 888-get-mish or you can catch up with him on Twitter @darrin_mish.  So we had a couple of questions or you did from some of your folks I will read it and you can chime in an answer it and this is a pretty good one I think she says ” My husband owes a lot of money to his ex-wife in child support and the IRS sent a notice that they are going to seize our taxes it doesn’t seem fair that they are taking part of my refund to is there anything we can do to protect my part of it?”  That’s from Lisa in Tampa, thank you Lisa great question.

DARRIN T. MISH:   It seems like over the years the IRS has become the preferred collection agency for a variety of different kinds of debt and child support, back child support is one of those.  Student loans actually are another one of those, there’s a couple other things as well that the IRS can take your refund and offset those incentive to those agencies.   What Lisa actually needs to do is she needs to file form 8379 that’s the form 8379 and that’s for injured spouse, now let’s not confuse this with an innocent spouse, an innocent spouse is something entirely different.  An innocent spouse is where you have one spouse is trying to claim hey I’m not responsible for that joint tax liability….

KATRINA MADEWELL:   Like my husband had a gambling problem kind of thing or something like that.

DARRIN T. MISH:   Yeah and we really don’t have time to get into it to  far because we are not talking about innocent spouse so much what Lisa is she is potentially an injured spouse meaning Lisa’s part of that tax refund can be recaptured and she can actually get it if she files that form 8379 so now if Lisa didn’t work and only husband who worked then it’s not going to help but if Lisa had a job and had some withholding and would of had a refund coming but for the you know this problem that they have where there he’s not paying his child support then she is going to go ahead and get that if she files that form.

KATRINA MADEWELL:   So is that like half of the tax refund or is it just essentially her part of I’m splitting here.

DARRIN T. MISH:   It’s her part it’s not necessarily half you know it could be the majority maybe husband doesn’t work then she does all the work then she’s going to get it all.  So it’s something that comes up quite a bit it’s a common question especially at this time of the year because people are just realizing that they are not going to get there refunds and you know it’s just something that is really timely for right now.

KATRINA MADEWELL:   We have one more question from Joe and I think Pat has one to. Joe wants to know can I receive a tax refund if I’m currently making payments under installment agreement or payment plan for my 2014 federal taxes.

DARRIN T. MISH:   Well Joe I got some sad news for you.

PAT:   It’s always sad news.

DARRIN T. MISH:   It’s not always sad news every time we do a show we have a happy segment at the end.  The IRS train wreck of the week which is coming up in the next segment.  But Joe I have sad news and that is that if you are on a payment plan also formally actually formally known as an installment agreement you are not going to get your tax refund.

KATRINA MADEWELL:   Swoopy Swoopy.

DARRIN T. MISH:   Because they are going to go ahead and take it then they are going to use it to offset what you owe them however if your tax refund is an enough to completely pay what you owe them then you will get the remainder as a tax refund.

PAT:   And I will tell you another way the tax man gets there money, I was buying a lottery ticket and this little lady came after me and said why do are you wasting your money on that, I said well you know I want to you know win, I don’t want it all I just want a little bit and she goes well I won a little bit I won $32,000 and I went down to collect my money and the first thing they did was ask for my driver’s license, I slid it under the window, they took it and made a copy of it, gave me back my license and said alright come back and get your money tomorrow and she said why can’t I get my money today and when she came they said well we have to do a little research and when they did the research she came back and she got like $4800.

KATRINA MADEWELL:   She owed tax money?

PAT:   She had been getting free daycare from the government and been getting unemployment and because of all of that it wasn’t free anymore now that she had won the lottery they took all their money back.

KATRINA MADEWELL:   Good story Pat.

DARRIN T. MISH:   What the government giveth the government can taketh away that’s the problem right?  Is there is no such thing as a free lunch.  The other thing that is interesting about gambling and gamblers in general is that you have a silent partner, it’s your uncle, your Uncle Sam.

PAT:   I asked her about why she let her Uncle come down and get it if she knew she owed money, she didn’t trust any of her family.

DARRIN T. MISH:   Well in my story your silent partner is uncle and Uncle Sam is only your partner in your winnings he doesn’t want to be a partner in your losses but you know for sure you are going to have to pay taxes on those gambling winnings as well.

KATRINA MADEWELL:   Drop you like a hot potato.

PAT:   Can you keep your tickets and really claim those if you are a chronic lottery player? Can you really do that?

DARRIN T. MISH:   You can actually you can offset your winnings add to the losses in that particular tax year.  I see people you know at the horse track right after the end….

PAT:   I know where you are going I thought about this…

DARRIN T. MISH:   At the end of the race everybody goes aww shoot I didn’t win and they throw their tickets on the ground, I don’t recommend you know going and picking up those.

KATRINA MADEWELL:   Collecting off those tickets.

PAT:   No but I thought about people probably do doing that.

DARRIN T. MISH:   Yeah you know they are going to have foot prints all over them and stuff and it has a tendency to be a telltale sign that you picked it up off the ground at the track.  I don’t know I’ve never had a case where somebody tried to use you know losses at the horse track as losses to offset some other kind of winnings.

KATRINA MADEWELL:   I do actually buy lottery scratch off tickets and we give them away as a little thank you if someone like introduces me or refers me.

DARRIN T. MISH:   Ok…

PAT:   Well how about that? I didn’t want to tell you but I won $17,000 from your ticket.

KATRINA MADEWELL:   Did you really?

PAT:   No.

KATRINA MADEWELL:   Oh man.

PAT:   That was very nice I won $4.00 so.

KATRINA MADEWELL:   Yaay.

DARRIN T. MISH:   There you go.

KATRINA MADEWELL:   So Pat sent me a referral he introduced me to somebody that lives in my neighborhood and I sent him a little just handwritten thank you note because nobody does that anymore.

PAT:   And she sent the good tickets though.  I said wow look at this, nice tickets you spent a lot of money there and…

KATRINA MADEWELL:   That’s a write off I mean…..

DARRIN T. MISH:    I think that’s a business gift.

PAT:   When you purchase this much at this price you got to win.  And I got $4.00.

KATRINA MADEWELL:   Well they are random.

DARRIN T. MISH:   You did in fact win.

PAT:   I did win.

DARRIN T. MISH:   You just didn’t win what you wanted to win.

PAT:   So my wife took the $4.00 and bought 4 more tickets and……

KATRINA MADEWELL:   Oh maybe we will have a new story for you tomorrow, you never know.

DARRIN T. MISH:   Yeah it sounds like it didn’t work out so well Pat.

PAT:   So if I do have the $1.00 ticket do I get that whole dollar?

DARRIN T. MISH:   As a loss?

PAT:    If I added it in my taxes do I get that whole dollar yeah?

DARRIN T. MISH:   Sure.

PAT:   Oh wow ok.

DARRIN T. MISH:   Yeah you get your actual losses as it pertains to the winnings.  I have had a father and son and you know the son was grown and they were both professional gamblers and when I first met them about 10 years ago they came in and said they were professional gamblers and I got a big smile on my face and I said hey how is that working out because  I expected them to say well we lose our shirts you know every year and both of these guys playing slots just locally at the, at Seminole were always winners and so we had a problem that we were trying to offset all these winnings because they gambled so darn much, and so what the law says you have to have a contemporaneous log of your losses, you don’t necessarily have to have receipts to because especially like slots you are not going to have receipts you might have the statement nowadays modernly you know your players club card will have a receipt.  Incidentally the casinos don’t really want you to see your losses….

KATRINA MADEWELL:   I was going to say I have never seen that.

DARRIN T. MISH:   And so they are not very detailed.  And it’s because they don’t want you to really realize how much money you are losing but so what I had the client do is I said Ok what I want you to do is I want you to go to the casino and I want you to take a little notebook, I want you to write it down, so you can have your contemporaneous log in case you get audited again, cause actually the son actually did get audited eventually and…..

KATRINA MADEWELL:   So did they really put on their tax return professional gambler like that was there profession at the bottom where you sign your name?

DARRIN T. MISH:   He had another profession as well be he earned a lot he earned the majority of his money from gambling.  So I sent him into the casino with a log  to write down you know how much you played during the session, we just decided to identify a trip to the casino as a session and he actually was asked my casino security politely or not to stop doing that, so he was in a catch 22 what was he supposed to do you know we have to keep track of these losses because we know there’s losses to offset these you rather significant gains and I’m still not sure if they came out net ahead in there gambling activity I just know they did a lot and they had a lot of money running through there any given year.  I did win the audit issue because  I was able to demonstrate that you know he was going there quite a lot and there was no way that he had no losses to generate that kind of winnings so he probably paid more tax then he should have but due to lack of records that’s what happened.

KATRINA MADEWELL:   Because most people think ok I’m going to spend hundred bucks or thousand dollars and I’m either going to come out ahead or behind but really you lose some, you gain some.

DARRIN T. MISH:   These guys weren’t on that level it was like a thousand dollars a day or more.

KATRINA MADEWELL:   Yeah I’m sure.

DARRIN T. MISH:   You know and so then sometimes they will be down 3 grand and sometimes they will be up 5 grand and so in lots of ways a gambling case is very similar to day trading stock case kind of the same thing.

KATRINA MADEWELL:   Well you are listening to the IRS Solution Attorney show we will be back in just a few minutes if you have questions you can call us at 888-404-1010, 888-404-1010 thanks for listening to the money talk family we will be back in a minute.

Beatles music

DARRIN T. MISH:   For there was a great line there I’m Darrin T. Mish the IRS Solution Attorney…

KATRINA MADEWELL:  If you were zoning into the music like me and didn’t hear what was the line?

DARRIN T. MISH:  It something about taxing the cat and if you think about it they do in fact tax cats right you have to have a license in most jurisdictions for a cat, you know we think of cats you know like low maintenance almost trouble free pet but you are supposed to have a collar and a license for the thing and you are supposed to be able to prove that you know it’s had all it’s shots and all those types of things so in fact your cats are even taxed.  Dogs to.

KATRINA MADEWELL:   You know I didn’t even think about that till you brought it up and it’s just going to irritate me so thank you for that.  Thank you very much for that.

DARRIN T. MISH:   If you look at the real tax burden in the United States between income tax, state income tax in most jurisdictions you know county fees you know, local taxes.

KATRINA MADEWELL:   Tax for your car.

DARRIN T. MISH:   You know in the city of Tampa my office is no longer in the city of Tampa but there is like a $200 per lawyer tax per year.  So if….

KATRINA MADEWELL:   Is that occupancy or just attorney tax?

DARRIN T. MISH:   It’s literally just an attorney tax there is no reason for the attorney’s to pay $200 which is way more than most professions.

KATRINA MADEWELL:  Isn’t that discrimination?  Of some sort?

DARRIN T. MISH:   Well…

KATRINA MADEWELL:   Seriously attorney’s put up with that?

DARRIN T. MISH:   We are not the most sympathetic group but guess who  ultimately who ends up paying that it’s not really the business owner it’s really the customers end up paying those taxes..

KATRINA MADEWELL:   Any expense has to be passed on.

DARRIN T. MISH:   So I don’t expect anybody to feel sorry for me but the tax burden in the United States is actually quite high when you think about property taxes, sales taxes, used fees, income taxes it’s really pretty high.  There are people that disagree with me that it’s high.  I wonder to talk about this news story right now that’s pretty interesting to me at least and that’s the 18-34 year olds are actually more afraid of filing there taxes than any other generation isn’t that wild.

KATRINA MADEWELL:   All those ah Millennials.

PAT:   It’s because they don’t know how.  They were never taught they don’t understand any of that.

DARRIN T. MISH:   Oh please you know these are kids, these kids were raised with an iPhone in their hands and they can type with their thumbs faster than…

KATRINA MADEWELL:   That’s not far from the truth really.  I don’t know Darrin like my daughter she went to the career thing day where everybody had a job and that kind of stuff and she come home and she was almost in tears, she is like mom I had a job and I made this and I had 3 kids and I had to support them and I didn’t…. and I go welcome to life.  She, it’s so stressful mom how do you do it.

PAT:   Realized it’s not going to be like the Boston tea party.

DARRIN T. MISH:   So maybe you ought to clean your room and stop talking about what a bad parent I am.

KATRINA MADEWELL:   No her room is actually clean.  It’s not that one wrong kid, wrong kid.

DARRIN T. MISH:   Well I think you know what this particular news story that we are talking about on our store says that it’s really all the  stories about the aggressive and threatening phone calls that people are getting by criminals you know calling up and impersonating the IRS, I actually think it’s fascinating that 18-34 year olds as a group the Millennials are more likely in my opinion to vote for big government, big government programs, they want handouts, they’ve feared the rich yet there the one’s most afraid of filing there taxes you know wake up who do you think’s going to be collecting all these extra taxes that you are voting for.

KATRINA MADEWELL:   Problem is they don’t understand that.

DARRIN T. MISH:   Yeah exactly wake up it’s you know big government is not going to be your friend, it might be when you are 18 or you know or 22 but probably not when you are 52.

KATRINA MADEWELL:   But when you think about politics really there’s no way to educate yourself other than reading and reading and reading and reading and listening to shows and podcasts like you don’t learn that stuff in school, they don’t teach you the difference between a Democrat, a Republican and an Independent.

DARRIN T. MISH:   Well it’s about that time for the IRS train wreck of the week.

KATRINA MADEWELL:   Just saying prance over go ahead.

DARRIN T. MISH:   Hey I liked your end you know I think it’s true the other way to you know learn more about politics is just you needing more life experience, you got to get out there and see what is happening you know school, particularly colleges are like little laboratories for liberal thought and that is the only thought that is actually tolerated. But back to my train wreck of the week.  I had a really nice gentleman he was a younger man actually he was probably a Millennial, he was an immigrant from another country and he got a job here and he ended up being self-employed and he ended up owing quite a significant amount of money to the IRS he was I guess he was afraid to file his taxes like a lot of these Millennials are and we got his tax return filed and he ended up owing $44,026.  He’s now working and supporting himself full time parking cars and we  filed an Offer in Compromise and remember an Offer in Compromise is that program that the IRS has you offer to make a deal to settle your tax debt for less.

PAT:   What was the first thing he said when you told him that he owed $44,000?

KATRINA MADEWELL:   There is a little stain in the chair.

DARRIN T. MISH:   Yeah it was a foreign expletive I’m not even sure I can say that you know on the air but it wasn’t a good thing.

KATRINA MADEWELL:   Yeah we had to throw away the chair he was sitting in that’s all.

DARRIN T. MISH:   Yeah I don’t think he was real happy about it he was upset and you know he is parking cars for minimum wage and I’m not sure what minimum wage is now it’s just low I know that and so we filed an Offer in Compromise where we were offering the IRS to make a deal to settle for less and remember I’m going to go over the math real quick.  An Offer in Compromise is calculated taking this formula, monthly disposable income times 12 plus S, S equals the amount of your offer so let’s say our taxpayer in this case had a $100 in disposable income….

KATRINA MADEWELL:   And some people’s eyes are glazing over..

DARRIN T. MISH:   Totally understand so let’s say they had a $100 in disposable income, 100×12 is 1200 bucks, let’s assume they had no assets at all so you can make an offer to settle whatever size tax liability really for $1200, well in this case I was able to demonstrate that he actually had negative monthly disposable income was zero…

KATRINA MADEWELL:   Oh please tell me you got a refund, please tell me you got a refund.

DARRIN T. MISH:   Well he didn’t get a refund but he was pretty close we offered $250 to settle this $44,000 tax debt and the IRS took it with virtually no questions asked.

PAT:   And what did he say to you?

DARRIN T. MISH:   It was the opposite of a foreign expletive it was something like Olay or Bravo I’m not really sure but I just talked to him the other day and he is pretty happy about it.

PAT:   Is he your new best friend?

DARRIN T. MISH:   Yeah so he has to pay that $250, he actually didn’t have to make any kind of deposit because he was so low income and he has to pay that $250 within the next 5 months he is sending in the check this week.

KATRINA MADEWELL:   I was going to say it would be like the same day, where can I wire the money please.

DARRIN T. MISH:   One of his obligations is that he has to file and pay his taxes for the next 5 years.

KATRINA MADEWELL:   On time?

DARRIN T. MISH:   On time.

KATRINA MADEWELL:   And if he doesn’t then they renege that agreement?

DARRIN T. MISH:   If it doesn’t then all of that tax money comes back with penalties and interest.

KATRINA MADEWELL:   Oh snap, that’s pretty smart.

PAT:   Where can we find you because people like him need you?

DARRIN T. MISH:   Yeah so you can find me at getirshelp.com, you can listen to my podcasts from ITunes or you can reach the office at 888-get-mish, 888-get-mish, 888-438-6474.  I love helping people in these situations it makes me feel really good.  I sleep very well at night.

KATRINA MADEWELL:   Call Darrin he loves to talk to you. 888-get-mish.

DARRIN T. MISH:   888-get-mish is the phone number.

KATRINA MADEWELL:   If you have a tax problem get Mish.  888-get-mish.

DARRIN T. MISH:   So I was really happy for him he feels like he has a fresh start on life, he feels like he is not going to be buried under that tax debt for the rest of his life.

KATRINA MADEWELL:   And how old was he?  He was a Millennial. right, 20 something?

DARRIN T. MISH:   Yeah he was 20 something and so I felt that was  the right thing for the IRS to do in that case and you know surprisingly or maybe not so surprisingly actually they went ahead and went for it because we were able to prove there was absolutely no way he was ever going to pay that.

PAT:   I learned so much on this show.

KATRINA MADEWELL:   Definitely fair enough I love that, me too I know.  Well you know if I had a tax problem Darrin will be my guy I’m just saying.

DARRIN T. MISH:   So tune in next Thursday at 9am on 1010 money talk or the podcast at ITunes.

KATRINA MADEWELL:   And don’t forget to catch Tampa home talk Friday’s at 9, I’m your co-host Katrina Madewell, Mr. Darrin T. Mish thanks for joining us.

DARRIN T. MISH:   And we’re out.

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