DARRIN T. MISH: Good morning. Welcome to the IRS Solution Attorney Show. I am the IRS Solution Attorney, Darrin T. Mish.
KATRINA MADEWELL: I’m your co-host, Katrina Madewell. We’re sorry for those of you who are watching us on Facebook Live. One of the streams just went kaput right before Darrin said good morning. We’re here!
DARRIN T. MISH: We are, in fact, here. It’s a great day.
KATRINA MADEWELL: It is.
DARRIN T. MISH: There weren’t very many people on the road today, so I’m in a good mood.
KATRINA MADEWELL: I have a feeling this is going to be a wild show.
DARRIN T. MISH: Really? What’s the topic today?
KATRINA MADEWELL: I don’t know. Are we changing up what our outline says? I think we are.
What Should You Never Do if You Have an IRS Tax Problem?
DARRIN T. MISH: I don’t know if we can do a full hour of what we were talking about pre-show, pre-production, but we can launch into that right now if you’d like. We can talk about some of the things not to do, ever, if you have a tax problem.
KATRINA MADEWELL: Let me back up. We talk about this all the time on Tampa Home Talk, maybe not so much on the IRS Solution Attorney Show, but sometimes the off-air conversations are better than the stuff on the air. So, to bring that back in front of the microphone when we’re live, that’s when the magic happens I think.
DARRIN T. MISH: There’s frankness going on before the show. There are some things you can’t say on air. I’m not talking about swear words and stuff like that, but you hear more of the complete story. That’s a better way to put it.
KATRINA MADEWELL: Or rants.
DARRIN T. MISH: Right. I may have been ranting just a tiny bit.
KATRINA MADEWELL: Let’s talk about this. I told Darrin that this would make a fantastic topic and information for the show. One of the things I want to mention is on Tampa Home Talk, we talk about this a lot. A lot of times, toward the end of the week, the real estate tip of the week might end up being related to don’t shoot yourself in the foot. We say all the time, don’t go buy a car for your garage that you don’t own yet. Don’t go buy window treatments and appliances for a house you don’t own. The same thing is true in your world, but we never talk about that.
DARRIN T. MISH: One of the things we talk about on the show all the time, you can’t even get in the car and listen to the radio anymore without hearing commercials from companies that do what I do. Which is settling IRS debts for less.
KATRINA MADEWELL: But not all are created equal.
DARRIN T. MISH: For sure, it’s just like any other profession. There are differences in quality in body shops. If you had a Porsche, you’re not going to take it to Cars Medics. I’m not saying anything bad about Cars Medics, but it’s a different market.
KATRINA MADEWELL: You might rethink that.
What is a Dissipated Asset?
DARRIN T. MISH: One of the things we talk about on the show a lot is offers and compromise. It’s where you potentially make a deal to settle for less. I have a challenging case right now where my client owes about three or four hundred thousand. I can’t remember. A lot. This is stretching out over 10+ years. He makes good money. More than six figures. We filed an offer in compromise for this gentleman and it was ultimately rejected by the IRS. The reason it was rejected was because of a concept called a dissipated asset. We’ve never uttered those words on the show before.
KATRINA MADEWELL: What is a dissipated asset?
DARRIN T. MISH: A dissipated asset is a situation where you have an asset that you know you either owe tax debt or you’re going to owe a tax debt.
KATRINA MADEWELL: That’s not an asset, that’s a liability.
DARRIN T. MISH: Well, no. Let’s say you have a retirement account. You have six figures in the retirement account and you know you have a tax debt because you’ve filed returns with big balances or you should know you have a tax debt because you’re self-employed and you haven’t filed a tax return in ten years.
KATRINA MADEWELL: Or you haven’t paid your taxes monthly or quarterly.
DARRIN T. MISH: Exactly. Then you take that retirement account and squander it.
KATRINA MADEWELL: Ok.
DARRIN T. MISH: That’s called a dissipated asset. In the offer context, what will happen is the IRS will say, we’ll still consider your deal according to the normal formula. That’s your monthly disposable income times twelve plus your income, equals the amount of your offer. We’ll still consider that math, plus the amount of your dissipated asset. In this gentleman’s case…
KATRINA MADEWELL: What’s that mean? Plus, the amount of your dissipated asset.
DARRIN T. MISH: Let’s say the monthly disposable income for this gentleman is a thousand dollars a month. So, a thousand dollars times twelve is $12,000. Let’s say he has no assets now because he dissipated them, but he dissipated $125,000 in assets. What the IRS will say is sure, you can have a deal, it’s $12,000 because of the equation, plus $125,000. Which is still, $137,000 on $300,000 by all accounts is a pretty good deal, but not the deal people are looking for.
The point of this opening segment today is, if you have assets and you know you the IRS significant tax debt, you should see counsel before you do anything with those assets.
KATRINA MADEWELL: Let’s back up and talk about that. In this case, he did get counsel, but he didn’t tell you everything?
DARRIN T. MISH: What happened here was he had already done this in year’s past. Several years ago. It’s very challenging when you’re doing an initial consult to ask every possible question under the sun. If you did, every consult would take ten or twelve hours. It’s just impossible to do. It never occurred to me, to say did you ever have six figures in your retirement account and did you squander it on nothing?
I won’t go into the details of what he spent it on because it’s a little bit too personal, but it was nothing.
KATRINA MADEWELL: I guess this was my question when we were talking about it, what’s the IRS look back period? In my world, I can tell you if you got any craziness going on in your bank statement for around a three-month period, the bank and underwriter is going to see that and ask you about it. But in your world, it’s much longer time frames because these things take a long time to settle. What’s the look back period?
DARRIN T. MISH: Remember, the statute of limitations for collection is ten years. So, a look back period is going to be ten years. But ten years for each liability. So, if you had a 2010 tax year, it’s ten years from 2011, assuming the return was filed on time and if you had a 2011, it would be from 2012 and so on and so forth. So, it could be a long time. That would be the absolute look back period would be the ten years. My experience says that the IRS is less aggravated by assets that were dissipated more remotely in time. If that makes sense.
The longer ago you did this, the better. That makes sense. If you did something irresponsible eight years ago and the IRS only has two years left to collect versus if you did it last month. That does make sense.
KATRINA MADEWELL: The big takeaway from this, would be A: really talk to your attorney about any of those details and issues and maybe for you as a learning experience to ask that question as well. By the way, did you squander anything in the last decade. The bigger takeaway is it must be your biggest priority. Some of the money that was spent was clearly not a good use of money. Would you agree?
DARRIN T. MISH: Yes, I absolutely would agree.
KATRINA MADEWELL: I don’t know what the guy bought, I’m just saying the priorities are skewed.
DARRIN T. MISH: Let’s put it this way, there’s nothing left.
KATRINA MADEWELL: Ok.
DARRIN T. MISH: It’s not easy to spend six figures and not have some asset to show for it if you’re spending money responsibly. By the way, this was an early withdrawal from the retirement account.
KATRINA MADEWELL: There are tax penalties on that as well.
DARRIN T. MISH: Right. This was done knowingly and knowing it wasn’t particularly responsible. I’m not judging the man, that’s not what this is about.
KATRINA MADEWELL: For you, sometimes you want to take them and shake them and say hello, wake up, let’s get this thing figured out. I can’t do it by myself; I need your help.
DARRIN T. MISH: When you have a tax problem of any magnitude, now if you owe $4,000, it doesn’t have to be the most important…
KATRINA MADEWELL: That’s easy to fix. It should be.
DARRIN T. MISH: If you owe 400,000 dollars and you make 50,000 dollars, it needs to be the most important thing in your life.
KATRINA MADEWELL: Just a curious question for me. If someone owes a tax bill, a $400,000 bill, generically speaking, what’s the value of their home?
DARRIN T. MISH: It’s all over the place. It could be anywhere from a renter to a million dollars. It’s just all over. I cannot identify a trend. That’s because of the history we’ve had. Pre-2008 that person would have had a lot of equity in their house because there was an appreciation and run up, then there was a crash in 2008.
KATRINA MADEWELL: you mean 2006. 2006 was the peak of the market; then it started going down.
DARRIN T. MISH: Ok, 2007 or 2008. Now so many people were accustomed to making good money and living kind of the high life and now they’re plateaued at a much lower level so they may not have anything. They may have lost everything. I’m not happy those folks lost everything. It does make their IRS case somewhat easy to handle.
KATRINA MADEWELL: I think the mindset is people would think they can earn their way out of this. Then when something like that happens, like a global collapse, that pretty much never happens.
DARRIN T. MISH: I have a lot of respect for people who just say look, I’m going to grit my teeth and earn my way out of this. I have tons of respect for those folks. That’s great. That’s what I think should be everybody’s first choice if they can do that. Because you’re going to be better for it at the end because you will have built the momentum and velocity and just pay your way out of the IRS problem and you’ll keep going. That would be great if most people can do that, but most people can’t.
KATRINA MADEWELL: We have one more thing we’re going to talk about after the break.
DARRIN T. MISH: What’s that?
KATRINA MADEWELL: Wasn’t this a recent case, something that happened?
DARRIN T. MISH: That’s going to be the train wreck.
KATRINA MADEWELL: Ok. Spoiler alert.
DARRIN T. MISH: We’re going to try and get positive here for the next three segments.
KATRINA MADEWELL: It is positive. We’re just saying, pay attention to the priorities. I think sometimes your brain gets rewired if you have that much money.
DARRIN T. MISH: The takeaway is, you shouldn’t be handling your tax problem. You need to get advice, and you need to find someone who knows what they’re doing.
KATRINA MADEWELL: You’re listening to the IRS Solution Attorney Show. Our call-in number is 888-I forgot. Pat will tell you.
DARRIN T. MISH: 888-GET-MISH.
(bumper music “Take the Money and Run”)
DARRIN T. MISH: I cannot imagine a better producer than Pat George.
KATRINA MADEWELL: One of my favorite artists. This is the Steve Miller Band; I know that. And I know the call-in number too. Sorry, I forgot that.
DARRIN T. MISH: The call-in number for the show is 888-404-1010.
KATRINA MADEWELL: Because Darrin looked at it.
DARRIN T. MISH: I thought I would help Katrina with that this morning. This is the IRS Solution Attorney Show, and I am the IRS Solution Attorney.
KATRINA MADEWELL: I’m your co-host, Katrina Madewell. Thank you for joining us today.
DARRIN T. MISH: The whole topic of the show today, despite the first segment, is What Do You Do when the IRS Seizes your Bank Account.
KATRINA MADEWELL: Is that where we’re going next?
DARRIN T. MISH: That’s like right up there with people’s biggest fears. I would say the people that contact me with a tax problem, their first fear is, am I going to go to prison and the second fear is, are they going to take the money I have in my bank account? The third fear is, are they going to take my paycheck? We usually address those three things right off the bat. Once those people can breathe again in the consultation room…
KATRINA MADEWELL: They offer oxygen masks.
DARRIN T. MISH: We have a box of tissues in there because that’s not uncommon. I’m sympathetic to it, I am. But we must get over that emotional hurdle. We’ve had some shows where we’ve talked about that kind of stuff. We have to get through that emotional barrier so we can get to a solution.
Today we’re going to talk about what are you going to do when the IRS seizes your bank account. It’s scary.
How do You Know the IRS is Going to Seize Your Bank Account?
KATRINA MADEWELL: How do you know it’s coming?
DARRIN T. MISH: That’s a good question.
KATRINA MADEWELL: People get probably a lot of mail superseding this, and a lot of it goes ignored or unanswered or unopened. What’s in those letters that they’re not opening that tells them it’s coming?
DARRIN T. MISH: The IRS has to send the taxpayer something called a final notice of intent to levy before they can levy your bank account. Levy just means seize. A lot of times people use the word levy and lien interchangeably and that’s wrong. A levy is a seizure and a lien is a public notice in the courthouse that says you owe the IRS money.
KATRINA MADEWELL: You’re not doing anything until you pay this money.
DARRIN T. MISH: Right. The lien keeps you from buying and selling houses and stuff like that. The levy is the seizure. That’s why I used the word Seize in the title of this show because I didn’t want to use the word levy because it’s confusing.
The IRS can’t seize your bank account unless they’ve sent you a final notice of intent to levy. They keep changing the numbers on us. It used to be a letter 1058 and now it can be one of two different letters. It can be an LT-11 or a CP-90. Those number designations will be in the upper right-hand corner of the letter. This letter has to come certified mail. If you get a certified letter…let’s say you’re at work and in your mailbox, you get that little orange slip from the Postal Service that says you have a piece of mail and have to come pick it up. Do not ignore that.
KATRINA MADEWELL: Or in my case where you’re so busy you don’t get it. They won’t let anybody else pick it up because I have to have my I.D.
DARRIN T. MISH: It’s a challenge, but you have to go down and pick up that piece of mail.
KATRINA MADEWELL: At least pay attention to whose name is on it. Otherwise, you might have a problem.
What is Your Last Known Address?
DARRIN T. MISH: As a society, we’re conditioned that if it’s certified mail don’t pick it up because what you don’t know can’t hurt you, or something crazy like that. I would venture to say if you ever get a certified mail slip, you need to go to the post office and pick it up. Either somebody’s suing you, somebody’s trying to collect a bill. There are a lot of reasons you can be getting a piece of certified mail and I think you should go pick it up.
Anyway, the IRS has to send it to your last known address. Why is that a problem, Katrina? Have you learned anything in two years?
KATRINA MADEWELL: Oh, yes. All your people never live in the same place they did the last tax return filed because it was so many years ago.
DARRIN T. MISH: In IRS lingo, your last known address is your last address that was on the last tax return you filed.
KATRINA MADEWELL: Which in your case might have been ten or twenty years ago.
DARRIN T. MISH: For my clients, it could have been five, ten, twenty, the record is around forty years I think.
KATRINA MADEWELL: In the Bay area, we move every five to seven. I can see where that might be a problem.
DARRIN T. MISH: You can send a change of address to the IRS. It’s a form 8822 just for giggles here.
KATRINA MADEWELL: Or they do it for you? I got something random in the mail because my address did change and they sent me a letter.
DARRIN T. MISH: You don’t have to file the change of address if you change it on the return. If you’re a typical filer…
KATRINA MADEWELL: They sent me a notice about it.
DARRIN T. MISH: They’ll send you the notice because they’re worried about I.D. fraud, finally.
KATRINA MADEWELL: That’s interesting that I’m always writing them a check, worried about I.D. fraud.
DARRIN T. MISH: If you haven’t filed for years, you still may want to file the change of address form to make sure the correspondence comes. Most people don’t think like that.
KATRINA MADEWELL: If they owe money, why would they do that?
DARRIN T. MISH: The bad stuff is going to happen regardless if they know where you live or not.
KATRINA MADEWELL: How do these people fly off the radar for so long? You hear about people that have never filed taxes in God knows how long and they’re totally off the grid.
DARRIN T. MISH: There are a couple of reasons. One, if you’re a self-employed kind of cash basis business. I don’t mean like all the money you get is in currency. I just mean you’re not getting 1099’s or W-2’s. If you’re in that kind of business, the IRS is remarkably bad about knowing you ever got the money. Although we fear Big Brother is peeking in our bank accounts, they’re not. Not on any large scale. Lawmakers in the IRS are having dreams at night about being able to do that to everyone all the time. That’s why you see this trend towards trying to eliminate cash. They’ve done that in lots of other countries where they’ve basically eliminated cash. I don’t see that happening in the next ten years for sure in the United States.
That’s one of the reasons. The IRS just doesn’t know. This happens in the trades a lot. If you’re a tree guy and you don’t get any 1099’s because the homeowner or business isn’t going to 1099 you most likely.
KATRINA MADEWELL: We don’t think about this stuff. I’ll pay people sometimes, and my accountant will ask if I gave the person a 1099 and I’m like, no. Or a W-4?
DARRIN T. MISH: W-9. The rule as I understand it is if you’re making out a check to a corporation that has an EIN, you don’t have to issue a 1099. Although Congress did pass a law that said you had to issue 1099’s for any commercial transaction over $600. You know what happened? Potentially, they were talking about billions of said 1099’s. Think about how many commercial checks as a business owner you write in a month. You probably aren’t writing checks because you’re younger. I’m talking about debits and credits and that kind of thing.
KATRINA MADEWELL: I still write checks.
DARRIN T. MISH: Let’s call them payments. Think about how many payments you make to vendors in a month. Multiply that by twelve. Multiply that by millions of businesses and vendors. It became unwieldy. We don’t have the computer power yet to deal with that. That’s what they want to go to.
KATRINA MADEWELL: Of course, they do.
DARRIN T. MISH: The other reason is, let’s say you are getting 1099’s so the IRS supposedly does know about the gross money that’s flowing through the account and you still haven’t filed in ten years, why isn’t the IRS doing anything about it? I think the simple answer is, they just don’t have the manpower. Something like 10% of the population that should be filing tax returns doesn’t bother. That’s an astounding number.
KATRINA MADEWELL: out of that 10%, which ones are getting these notices, do you think?
DARRIN T. MISH: What will happen eventually for the people who get the 1099’s, eventually, the IRS will prepare a substitute for returns. T hat’s when the IRS does it for you. They just take the gross number, multiply it by a tax rate, equals big fat number. Then they’ll go ahead and do what they have to do to collect it. Eventually, in that example, they would issue a final notice of intent to levy. They send it certified mail. You have 30 days to appeal. That was the whole point of telling you about the final notice. You have 30 days to appeal. If you do not appeal within that 30 days then the IRS is free to levy your bank account.
KATRINA MADEWELL: Ok. Why would they do that? What are some of the reasons that would make them do that? There are some instances more than others, right?
DARRIN T. MISH: If you had unpaid taxes, they’re obviously going to do it. If you had unfiled tax returns and a small balance. Let’s say you owed $2,000, but you hadn’t filed in eight years, they might levy your bank account.
The point of the levy is trying to get your attention more than to try and get the money that’s in your bank account. Let’s face it; most people don’t have much money in the bank.
KATRINA MADEWELL: And that money is gone. You’re not getting it back, right?
DARRIN T. MISH: The bank has to give the taxpayer 21 days to dispute it with the IRS. The bank holds the money for 21 days. The taxpayer has 21 days to get in touch with the IRS and try to get it worked out. On day 22, the bank sends the money to the IRS, and it’s gone. You’re not ever going to get that money back; it’s just gone.
Can You Get Your Money Back?
KATRINA MADEWELL: Have you had any times where you can get any of that money back?
DARRIN T. MISH: Yeah, but it’s rare.
KATRINA MADEWELL: Like you don’t owe the taxes?
DARRIN T. MISH: That could work. If you didn’t owe. Or if it was the wrong person. If you can demonstrate, this is difficult, but if you can demonstrate if you don’t get that money you’re going to face an economic hardship t hen you might be able to get the money back. Now, what is economic hardship mean? That’s one of those lawyer terms.
KATRINA MADEWELL: I’m already 60 days behind in my house, I’m going to be 90 if I don’t pay it.
DARRIN T. MISH: Yeah, but it’s worse. I’m already 60 days behind, and I have a foreclosure notice, and there’s a sale date.
KATRINA MADEWELL: In recent years, the banks haven’t been quick to do that.
DARRIN T. MISH: not in Florida.
KATRINA MADEWELL: Now, in 90 days it’s coming.
DARRIN T. MISH: Another example of economic hardship is you have utility disconnect notices they might go ahead and release that.
KATRINA MADEWELL: That wouldn’t be hard not to pay.
DARRIN T. MISH: They may release it if you come to them with a plan. If you enter into an installment agreement.
KATRINA MADEWELL: That’s not that fast, is it?
DARRIN T. MISH: It could be. It depends on how much you owe and how complicated the situation is. If you owed $5,000, you may be able to enter into an installment agreement and they’ll release the bank levy. The problem with the bank levy is you don’t have any leverage. You can’t force them to do it. You’re in a situation where you call them up and you’re begging. That’s not a situation I like as a professional. I don’t like to be in that situation. I like situations where I have leverage. Where I can force the issue. I can make what I want to happen, happen.
I always compare it to people pushing me in a war, they stick me out there without a gun, and they go, go ahead, take the bullet. Well, thanks.
KATRINA MADEWELL: When we come back, we’re going to tell you one more thing you didn’t know about this stuff. Back in just a second.
DARRIN T. MISH: Welcome back to the IRS Solution Attorney Show. I am the IRS Solution Attorney, Darrin T. Mish.
KATRINA MADEWELL: I’m your co-host, Katrina Madewell. Talking a little bit about money this morning.
DARRIN T. MISH: Today we’re talking about what do you do when the IRS seizes your bank accounts. On the Facebook Live feed, we got a good comment from a good friend of mine, Larry Weinstein an enrolled agent in Houston, TX. He wanted to correct me. I said the money is just gone when the IRS swoops the money out of your bank account. I meant it’s just gone from your bank account. He says to remember to tell them you get a credit towards the taxes owed. Obviously, yes, you do.
KATRINA MADEWELL: that’s not obvious to most people.
DARRIN T. MISH: There’s $25,000 balance, and there’s $5,000 in your bank account, and they get the $5,000, you owe $20,000 now. Then there’s penalties and interest.
KATRINA MADEWELL: At least they don’t take it, it goes somewhere. What if you do the offer in compromise, you’re making a deal to settle for less. Does that $5,000 come off the top? Or does it come off before you make the deal?
Will the IRS Keep Taking Money Out of Your Bank Account?
DARRIN T. MISH: It comes off before you make the deal. That’s a good point. If you’re in an offer in compromise, the IRS cannot take any levy action against you. You get a collection hold so they can’t levy you while you have a pending offer in compromise. That would be one of the many and assorted reasons to file an offer in compromise.
KATRINA MADEWELL: Just because they swoop your bank account doesn’t mean they’re going to keep doing it or taking it out every time money goes in there.
DARRIN T. MISH: That’s a good point. We hear almost every day that there’s a freeze on their bank account. That’s not how it works. An IRS bank levy is not continuous. It’s a one-time levy.
KATRINA MADEWELL: Frozen would be it’s still there, you can see it.
DARRIN T. MISH: It’s in an iceberg. It’s not a continuous levy. It’s a one-time levy. The IRS can only get the money that was in your account on the day the levy was processed by your bank. We’ll call that day one. Day one, the bank receives IRS levy from the bank. Your account is not usable on that day, that is a true statement. Although let’s say it processes it at 8 am and you went in at noon and made a deposit, I wouldn’t advise it, but I would argue that the money you deposited after the bank levy was processed is not the IRS’s money, it’s your money.
On day two, you can put more money in the bank account and use it.
KATRINA MADEWELL: Can you imagine how this whole thing is going down? I have a visual in my head that somebody’s strolling through the teller line, they’re getting ready to make this $5,000 deposit, and they get their statement back, and it says well, you have zero.
DARRIN T. MISH: Or you have negative $5,000.
KATRINA MADEWELL: They’d be like, wait a minute, give me that check back. The teller can’t just cancel the deposit they just put in, right?
DARRIN T. MISH: One wouldn’t think so. I don’t know the banking rules as far as that goes. I wouldn’t recommend depositing money on the same day the IRS levy was processed.
KATRINA MADEWELL: I would imagine if something like that happened, your clients before they have even seen you have opened another bank account, or pulled money they’ve had in an account and kept it in cash.
DARRIN T. MISH: You said that, not me. A lot of people do stuff like that.
KATRINA MADEWELL: I’m not saying you said that I just imagine if I was a person that owed money and the IRS just swooped my bank account, what would I do other than freak out? I would probably pull any money I had out of any other account or open another bank account somewhere else.
DARRIN T. MISH: Common sense, which is not common anymore, dictates that the IRS is going to have an easier time finding a bank account to levy that’s been opened for longer than a bank account that was opened yesterday.
KATRINA MADEWELL: Do they always do the ones that link to your bank account for your tax return?
DARRIN T. MISH: I’ve never seen a correlation. I think they have a computer system that can find the bank accounts. After the patriot act passed in 2001, or whatever it was, you remember that a social security number or EIN is mandatory to open a bank account. That’s so they can do this. That’s why that’s there.
The IRS will go ahead and…
KATRINA MADEWELL: That’s funny, they told us it was because of 9/11.
DARRIN T. MISH: Yeah, they told us all about terrorism, and it was only going to be used to prevent international terrorism, and it wasn’t going to be used against Americans. Anyone who has any common sense and experience in government and the law could see what was happening. It was another power grab to grab more liberty and freedom from the American people.
KATRINA MADEWELL: Let’s not go there this morning.
DARRIN T. MISH: The IRS has some computer system. They put the EIN or social into the computer, and it pops up what bank accounts they know about. Sometimes they issue bank levies to accounts that haven’t been open or have activity in them for ten or twenty years. What does that mean to the taxpayer? It means nothing. If there’s no money in there, it doesn’t make any difference.
If a taxpayer has $50 in there, let’s say it’s between paychecks and there’s $50 or $100 in the bank account and the IRS levies them and the bank processes it when there’s $100 in there. What does that mean? It means they get $100. That’s it.
KATRINA MADEWELL: Are you successful in getting that money?
DARRIN T. MISH: I don’t even try. It’s not worth my time to call the IRS, wait on hold for two or three hours to get $100.
KATRINA MADEWELL: If it was a big deposit, maybe?
DARRIN T. MISH: Maybe. Usually we just kind of move on. It’s one of the things we do cover in the initial consultation. You may not want to be keeping large amounts of money in the bank because it will be subject to levy because you’ve taken so long to deal with this. I have seen illegal levies. I’ve seen them where the IRS levied bank accounts and paychecks without issuing a final notice of intent to levy.
KATRINA MADEWELL: How do you know that?
DARRIN T. MISH: I can get the transcripts and see it was never done. That’s kind of a fun phone call because I call them and go this was a violation of the law, and you can’t do that. Typically, they look and say oh, yeah, you’re right.
KATRINA MADEWELL: They put the money back quick?
DARRIN T. MISH: Our bad, sorry. They issue the release and fax them to the right people. It works out pretty good.
What if You Have a Large Amount of Money Hitting Your Bank Account?
KATRINA MADEWELL: We have a question from one of our listeners, which is timely. They said they have a big chunk of money coming in, how will this affect their offer in compromise?
DARRIN T. MISH: Probably not good.
KATRINA MADEWELL: What do you mean about that?
DARRIN T. MISH: I’ll give you an example. You owe $300,000 to the IRS; we file an offer of $5,000. Let’s say we had a good shot at that happening. And now you have $100,000 inheritance coming. It’s not good.
KATRINA MADEWELL: Can you say, just wait on the inheritance?
DARRIN T. MISH: Not if the person is dead.
KATRINA MADEWELL: What if it’s close to the amount? Like they’ve offered $5,000, and they’re getting a $5,000 bonus of some sort. Does that matter?
DARRIN T. MISH: If it was a bonus at work if the IRS were to see the bonus come in on the bank statements or pay stubs, it’s going to average out, and it’s going to mean their income was slightly higher over whatever period we’re averaging.
KATRINA MADEWELL: They’re looking for big chunks?
DARRIN T. MISH: I don’t think $5,000 would make hardly any difference.
KATRINA MADEWELL: What amount would get their attention? $20,000?
DARRIN T. MISH: You start getting up into…if it’s a work bonus, it’s different than if it’s a windfall. If you won the lottery and won $20,000, now your offer is whatever you offered plus $20,000. Minus taxes on the $20,000. Do you understand what I mean?
We talk about this before we file the offer in compromises, you probably shouldn’t have any big windfalls occurring while the offer is pending. I do have gamblers that are clients, and we talk about, don’t go to Vegas, stop going to Seminole. That’s easier said than done. There are people who have problems with that, and they can’t stop because they’re addicted.
KATRINA MADEWELL: I’m going to win the big one!
DARRIN T. MISH: I have this dear client I’ve represented off and on for around fifteen years. He’s a professional gambler, or he was, and one time he was leaving the office and said I’m going to go down there and win the pickup truck playing the slots. I laughed at him and wished him luck. I saw him a couple days later and asked him what happened and he said he won the truck. There are some people who are born lucky. I’m sure there are people listening who can disagree with me, but is there a skill to playing slots?
KATRINA MADEWELL: I don’t think so, I think it’s all rigged.
DARRIN T. MISH: Isn’t that supposed to be purely random?
KATRINA MADEWELL: Yeah.
DARRIN T. MISH: I get poker.
KATRINA MADEWELL: I’ve heard some say some slots are better than others.
DARRIN T. MISH: Sure. You go to Vegas; the slots are much looser, the payouts are a much higher percentage of the amount that goes in than at the Indian casinos, for example. Indian casinos are not as tightly regulated as like in Nevada.
KATRINA MADEWELL: Yeah. It’s private. There are whole separate rules.
What if You are Experiencing an Economic Hardship?
DARRIN T. MISH: Sovereign nation and all that kind of stuff.
Back to the IRS bank levy. If you can demonstrate that it’s economic hardship, the IRS will release the levy. But it’s hard to demonstrate. We talked in the last segment of some examples. If you’re going to be evicted, if your house is going to be foreclosed, if your utility bills are in arrearage and they’re going to turn off the power, they may consider releasing the bank levy.
You need to get a copy of the levy from the bank. The bigger banks are going to give you a hard time about it. I don’t know why, but they do. You need to get a copy of the levy from the bank so you can show your professional that it’s a bank levy because there are lots of other things a bank can receive a levy for. People don’t think about this.
You could have a child support garnishment, judgment garnishment, student loan garnishment. There are a lot of different kinds of garnishments that could come up. People think it’s the IRS.
The student loans, that’s administered by the IRS but it’s not for taxes. That wouldn’t be my problem, I have a guy for that, but that wouldn’t be the kind of problem I would handle. Fairly routinely we have clients call up and let’s say there’s an offer or appeal pending so they shouldn’t be open to a bank levy and they call irate because somebody tapped their bank account. They’re screaming at us because they think it’s the IRS. Everybody in the office is trained, please will you get a copy of that from the bank?
KATRINA MADEWELL: So, you can make sure it’s not child support instead of the IRS.
DARRIN T. MISH: 99 times out of 100, it’s not the IRS. It’s something else.
KATRINA MADEWELL: That big of a number?
DARRIN T. MISH: If we’ve done our job to put the barriers in place to prevent them from being levied, it works. It’s almost always something else.
KATRINA MADEWELL: if it is the IRS and you have this whole hardship thing going on, I’m just guessing there would be enough money in there they’ve taken to make a difference in that hardship status, but if they were, they go alright, fine I’ll make a deal. How lucky are they to get that money back?
DARRIN T. MISH: It depends on the compliance history. If this was one year, you have a pretty good chance. If it’s 20 years in a row, you probably don’t have much of a chance.
Another reason to get a copy of the levy notice is that the phone number to call is on the levy notice.
KATRINA MADEWELL: Imagine that.
DARRIN T. MISH: If you’re going to handle this yourself…
KATRINA MADEWELL: There are only two phone numbers at the IRS, right?
DARRIN T. MISH: No, there’s a bunch.
KATRINA MADEWELL: I’m just being funny.
DARRIN T. MISH: You’re going to want to call the phone number yourself, and you’re going to want to try and tell them the sad story. If they don’t release it, here’s what I want you to do. The IRS employees listening are going to cringe when I say this. I want you to call them again.
KATRINA MADEWELL: If they don’t release it, call them again?
DARRIN T. MISH: If they don’t release it, just call back.
KATRINA MADEWELL: If they don’t release it a second time, call them again.
DARRIN T. MISH: Just keep calling. Keep telling the sad story until you get somebody who has a heart who will go ahead and give you a release or a partial release.
KATRINA MADEWELL: You might want to call at different times of the day.
DARRIN T. MISH: You might want to call at different times of the day. If you call first thing in the morning here in Florida, typically you’re going to get somebody in Philadelphia. Are people in Philadelphia known for being nice?
KATRINA MADEWELL: Depends on if it’s football season or not.
DARRIN T. MISH: We’ve talked about it a lot. There’s a jail in the football stadium. That’s because people in Philadelphia not terribly nice as the stereotype. So, if you call later in the day, you tend to get people on the West coast. You’re going to get Fresno or Seattle. Are those folks nice? People are nicer.
KATRINA MADEWELL: I wonder what it is that makes Philadelphia people so cranky.
DARRIN T. MISH: It’s the weather.
KATRINA MADEWELL: If you’re from Philadelphia and you’re listening, you can call and tell us all about it. 888-404-1010.
DARRIN T. MISH: There are so many opportunities to bash Philly right now, but I’m not going to do it.
KATRINA MADEWELL: If we’re off air you can call Darrin and tell him about it at 888-GET-MISH.
DARRIN T. MISH: That’s 888-438-6474. Seriously, if you’re calling about Philly, don’t call the office, you can call us at 888-404-1010, though.
KATRINA MADEWELL: I was just playing. But if you have a tax problem, Darrin’s your guy. 888-GET-MISH.
DARRIN T. MISH: Getirshelp.com.
KATRINA MADEWELL: We’ll be back in a minute.
DARRIN T. MISH: Welcome back to the IRS Solution Attorney Show, I am the IRS Solution Attorney, Darrin T. Mish.
KATRINA MADEWELL: I’m your co-host, Katrina Madewell if you’re following that bumper music…
DARRIN T. MISH: Money for nothing and your chicks for free.
KATRINA MADEWELL: Wait is it chicks or checks? That sounded wrong. Go ahead and straighten me out.
PAT GEORGE: In your case, the fix was free. Coming up in the train wreck.
DARRIN T. MISH: Coming up in the train wreck of the week, we’re going to tell a story, and that’s what the bumper was about. Listeners would probably be happier if they could hear all the back chatter during the breaks.
KATRINA MADEWELL: But you can tune in Live on Facebook.
DARRIN T. MISH: you can tune in live on Facebook. Although we are once again having challenges with Facebook. I wish they would fix that because it’s a pretty neat platform.
Today we’re talking about what do you do if the bank levies your bank account.
KATRINA MADEWELL: Call Darrin at 888-GET-MISH.
DARRIN T. MISH: Yeah, you should probably call us at 888-GET-MISH. 888-438-6474. If you can’t do that or won’t do that or don’t want to do that it’s cool. You can enter into an installment agreement, potentially, with the IRS. They may very well release that bank levy.
KATRINA MADEWELL: Call them call them call them.
DARRIN T. MISH: you can sometimes convince them you’re going to file an offer in compromise within the next 30 or 60 days and they’ll sometimes release the bank levy.
KATRINA MADEWELL: A little bit off topic, but right before you left we were talking about calling at different times of the day and getting different people that live in different climates and demographics. Why would they get Philadelphia at 8 am, does St. Pete never take calls?
DARRIN T. MISH: That’s a good question. The IRS has giant call centers where there are hundreds, if not thousands of people in cubicles just taking these kinds of calls. By the way, I have some sympathy for those folks that have that job. That is not a very appealing sounding job to me.
KATRINA MADEWELL: I wonder if they’ll do home-based work. You know how a lot of companies have let people work from home? Do you think the IRS will do that?
DARRIN T. MISH: I can tell you this, revenue officers and appeals officers do work from home because they tell me they do. The other giveaway is you can hear the parakeets and the dogs barking.
KATRINA MADEWELL: That you’re not supposed to hear.
DARRIN T. MISH: I don’t know about the ACS people, which is the automatic collection system, the people that you call if there’s a bank levy, typically. I don’t know about having those folks work from home. It’s already a quality control nightmare.
KATRINA MADEWELL: I wonder what it’s going to be like when people in the Philippines start answering those calls.
DARRIN T. MISH: That would probably be great for business. I’m not all about that. I’m about what’s best for the taxpayer, I promise I am. The question was, why would you get different people? It’s all based on time zone. The IRS has is open from roughly 8 am Eastern to I think 8 or 9 pm Eastern. Those people aren’t working 12-hour shifts, they’re working probably eight-hour shifts with an hour for lunch. Later in the day what happens is the people on the East coast are logging off and going home and the people on the west coast are just sort of picking up mid-day. You potentially could call at say 11 am or 12 pm and get somebody in California. It’s just the odds are, you’re going to get routed somewhere else.
It’s purely random where you end up if everything’s open.
IRS Train Wreck of the Week
KATRINA MADEWELL: Here comes the train, we’ve been waiting on the train all morning.
DARRIN T. MISH: This is my favorite segment of the show. It’s the IRS Train Wreck of the Week. this is the segment of the show where I get to talk about somebody who came in with a big tax problem and after working with us, it ended up being resolved. This one’s kind of interesting.
KATRINA MADEWELL: This train wreck’s a little different.
DARRIN T. MISH: There’s a gentleman that came in a couple years ago. He was referred by an attorney friend of mine whom I’ve known for about 20 years. This taxpayer was in dire straits. He had a revenue officer, the revenue officer was talking about shutting down his business, really putting this guy in a bad spot. My attorney buddy pretty much vouched for this guy saying he was his client in the past and always paid his bill and I think he’ll pay his bills if he goes with you, Darrin. I’m thinking, I don’t know about this case. It just doesn’t feel right to me. He basically said do me a favor and represent this guy.
I start working with the guy, we have to prepare an offer in compromise right away because his revenue officer is going to blast the guy. The client did pay for his tax preparation because he was six or seven years behind. He did pay for the tax preparation, we filed those returns, then we prepared an offer in compromise and we filed it right away.
This was against office policy because we usually do not file the offer unless we’re paid in full. It makes sense. If you think about this pragmatically. These are people who owe money to the IRS, the most feared collection agency in the world and if they’re not afraid of the IRS, they’re not going to be afraid of me if they don’t pay me.
I don’t have anything against these folks, I love my clients, I really do. But we filed this offer for this gentleman without being paid first. Several months went by and he did not pay his agreed upon payment schedule. Eventually, we withdrew from the case because he wasn’t upholding his end of the bargain. We had 90% of the work front loaded and already done.
He called yesterday because he wanted copies of the tax returns. We were happy to oblige him with that. He mentioned, hey, I owed $100 grand to the IRS and with that offer you filed, I just settled it for $16,000.
KATRINA MADEWELL: How does that loop around you?
DARRIN T. MISH: What do you mean?
KATRINA MADEWELL: Don’t you get the letter at the same time?
DARRIN T. MISH: No, because we had withdrawn from the case. He used our legal work to go ahead and settle his case, more power to him, he just didn’t pay for it. Some people were asking me if I was mad about it.
KATRINA MADEWELL: What was your learning opportunity, Darrin?
DARRIN T. MISH: My learning opportunity is not to strictly adhere to our policy; the learning opportunity is you just got to pick your battles. some people are not going to do the right thing. That doesn’t mean you shouldn’t do the right thing.
KATRINA MADEWELL: Follow your gut, though.
DARRIN T. MISH: I try to do the right thing 100% of the time. It would be easy to be mad at this guy and I’m not mad, it’s just time to move on. It’s my understanding we have a call on the line?
KATRINA MADEWELL: We do, I think they’re looking for your number and they probably want to talk off air, it’s 888-GET-MISH. If you want to hold on, we’ll pick you up after the show.
DARRIN T. MISH: 888-438-6474 or you can visit the website at getirshelp.com. We have an app at both stores, the Google store and the iTunes store and we have a podcast called the IRS Solution Attorney as well.
KATRINA MADEWELL: Or you can complain to Darrin that I don’t talk fast enough. Or get to the point fast enough.
DARRIN T. MISH: The complaints I hear is that Katrina talks too much.
KATRINA MADEWELL: Yeah.
DARRIN T. MISH: But I love her.
KATRINA MADEWELL: I keep the show fun.
DARRIN T. MISH: You do.
KATRINA MADEWELL: If it weren’t for me, it would be boring. You’d have to talk to pat the whole hour.
DARRIN T. MISH: I think she just said I was boring.
KATRINA MADEWELL: No, I’m just saying the topic could be boring.
PAT GEORGE: What I’ve learned on the show this week is that no good deed goes unpunished.
DARRIN T. MISH: Well, sometimes that is true. But you know what, after we found out yesterday and I chose not to be angry about it, we ended up getting a great case almost immediately because karma works.
KATRINA MADEWELL: Yep. We have a special guest in the show today, he’s hanging out with us. One more time, you can get Darrin at 888-GET-MISH.
DARRIN T. MISH: That’s 888-438-6474.
KATRINA MADEWELL: And…
GUEST: Pay your taxes or Darrin will fix it.
KATRINA MADEWELL: Our little guest co-host this morning.
DARRIN T. MISH: Katrina’s daughter, thanks for joining us.
KATRINA MADEWELL: We’ll be back, same time, same place next week.