Options When Owing the IRS | Refresh Your Wealth with Mark Kohler & Mat Sorensen

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Independent ideas on building wealth. It's the Refresh youh Wealth show with Mark Kohler and Matt Sorenson.

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Welcome, everybody, to today's podcast, Stitcher, Spotify YouTube event. We're trying to bring this to you.

Itunes. Itunes.

Itunes.

Have you heard of that one?

Fair enough. Fair enough. I'm backing off. Yes, definitely. Itunes. We're excited to be with you today. My name is Mark Kohler. I'm with my amazing co host and law partner Matt Sorenson. Also co executives in Directed IRA Trust Company. And we are just, for the last 20 years, been helping clients with their tax and legal planning. We're lovers, not fighters. Now we'll fight the irs. That's part of the topic today. But we're not going to do your divorce. It's just not the way it works.

Yeah. And we are recording on July 15th.

That's dedication, buddy. Dedication.

Yeah, we care. Who cares? We care because we are getting this message out today. It's also the retirement account deadline in addition to your tax return deadline for 2019. It's been a weird year and there's a lot of people out there struggling and worried about. 2019 was great. I'm going to owe a lot of money to the irs, but I don't got it now. It ain't so hot in 2020. What do we do if I owe the IRS? And so we're going to hit that topic today. Some of the tried and true strategies on managing a debt with the irs. That's like the one person you do not want to owe money to, right?

Yeah. You know, I'm the co host from Idaho, but I love Matt's grammar. I made a bunch of money last year and this year ain't got it. I don't have the money right now, boy. You know, I mean, I've been hanging

out with you too much, I think.

And I'm the one with the tan. Matt's in Phoenix and look at this tan. I've been working it, so whatever. See, I've got a. I got a pose. I'm a poser. If you're from the 80s, no one

goes outside in Arizona in the summer. You don't go outside. I got a tan in the winter.

Okay, fair. Touche. How hot is it there in Phoenix, it's like 110.

Like the high. Last week on Saturday I was on the freeway was 118.

Oh.

Oh, it's painful.

My wheels just melt.

It hurts like the heat hurts. I don't know how to explain it. But you know what I make it through. It's soldier through. I don't have to scrape my windshield, you know, or anything like that, or shovel a driveway ever. So if I can make it through a few months of this, then it's bliss.

The rest, you can only get so naked when it's that hot. See, in the winter, I can put on a scarf. I can put on a stocking cap. I can put on a coat. Ooh. It's a whole other wardrobe, Matt, you don't own. I just can open that the closet door. And it's exciting times. Okay, now some of you that are already listening to this broadcast are stressed out. You saw the title, I Can't pay the irs, what Do I Do? And so you're not here to hear, you know, wanting to us joke around and keep things light. But we do, we try to keep it light. Life's too difficult and short. And owing the IRS is a significant stress in so many people's lives. It's. We had a client about 15 years ago that came to us for help that was owing the IRS and committed suicide on April 16, the morning after tax day. And we didn't do his taxes. We were trying to help him out. But it can be really, really significant. So first of all, we want to tell you our heart goes out to you. We're going to give you every tool in the toolbox we're aware of and the steps to take if you owe the IRS money. We have IRS negotiators on our team. We do not advertise for these flat fee AM station.

Yeah, radio crap where we pennies on the dollar. We don't do that with the IRS for pennies on the dollar.

Yeah. And we're not that expensive when you put it out there. But we're not one of those ambulance chasing IRS folks. So. But we do this show every week. We do a little tax and legal tip because we want to help you moving forward as well. So if you'll be so patient, we want to do a little tax and legal tip that may be generic. A lot of people listen to our show just to get that tip and they may stay for the main topic or not. So we're going to do that first and then we're going to dive into what to do if I owe the IRS money. Matt, how's that sound? Yeah, love it.

Let's, let's dig into the tips. I'll go first with the tax tip.

All right. It's all you, baby.

Okay.

A tax tip you can actually understand and won't put you to sleep.

A tax tip that could save you thousands.

All right. Now this is a simple tax tip, but it's one that I've just even realized myself over the last few years and I think could be helpful to any of you self employed people out there. One of the most difficult things when you're a small business owner is staying up to date on your payments. And it goes right in line with today's topic. I know I'm giving a tip in line with the topic.

Which payments are you talking about to the irs?

I wanted masturbated income tax payments. Okay. You know, it's funny, I was watching Kevin Hart talk about when he first became a comedian. He had success and he was so excited. He got his first check, spent every penny, and he's like, I spent the next two years working for free just to pay the IRS because I was behind having to pay last year's taxes, But I still need to make money this year to live off of, to pay this year's taxes and last year's taxes. When you're at a 35% tax rate, what's left?

Yeah, it snowballed.

It's a snowball. And so. So it's brutal. It's funny. I was watching a little clip from an MMA fighter that was after his victory. He was complaining about how all this prize money just goes to the government and to the irs and how he never knew that no one told him that. When I give you a check, he says, no one at. What's the MMA league?

Ufc.

Ufc. He's like, no one at UFC told me that I'd have to send the government money. They gave me a check. I thought that was my money. And I think a lot of small business owners fall into that trap of not being proactive at first.

Yeah, And I want to my own kids, this is just for years. I've had my kids from age 10, literally a workshop of mine on a Saturday selling books. If you've ever been to a little workshop of mine over the years somewhere, you may have met Dylan or Sydney or Ali or Molly, and they'd be selling books. And I, as a dad, I had this crazy idea or premonition or expectation that while they were sitting back there, they were actually listening. So my kids, we start their small businesses in high school and first year of college. And of course, I'm doing a lot of the stuff behind the scenes so they can be successful at their little business. And all my kids have had little businesses they've ventured into. And it was funny. Each one of my kids have done this. I remember when Dylan did, you know, he's in his early 20s and now he's more and more off on his own under the Kohler independence plan topic for another day. And I go. And he goes, now I owe the irs. What do you mean? I got to file taxes. I'm like, where have you been? You're a Kohler. Did you ever listen to my workshop? Well, you know. But anyway, it's true. So many young people, for the first time after leaving home, start a business or go work somewhere and they see their paycheck and they're like, what the hell? I'm paying taxes. And the financial literacy that's in homes around America and in high schools, it's not there when it comes to paying taxes. It's a rude awakening. So, Matt, I just wanted to say that that's even happened my own kids,

I'm like, yeah, I see it with clients too, that have came from corporate America and they've had W2s and it's just withheld out of their paycheck. They don't even think about it. They just get to tax time.

They.

That get a refund. Yeah, they basically have the right withholding. They deduct some home interest and some charitable, you know, and it's. It's a little straightforward and simple. But then you venture off into the small business world and you're taking money, you're living off of it, and you're not sending to the irs. Now, this is the tip there, are you. Obviously, you get an accountant, you can have automatic payments set up. There's the electronic federal tax payment system that you can get on and send payments. If you are lazy or if you have a big month where you make money or a quarter, you log on to the IRS and just make a direct payment on the IRS's website. Just go to IRS.gov, make a payment, click on it, enter in your bank account information, your. Your routing number and account number. Tell them what year you want that, you know, you put in your social and everything. It will just hit your account. You can pay as you go like that. And so it. That's just a good way that if you feel like I. I don't have this set up or I need to just be sending the IRS money. It is actually very easy to go to irs.gov. they have done one thing and made easy at the IRS how to send them money. That's it. Everything else is complicated. So go there.

That's the first thing they're good at do. We'll make it easy for you to give us money. Everything else. Good luck. Yeah.

If you need something else, two hour wait.

Oh my gosh. It's like, okay. But you know, it's better than the dmv. You can't even give the DMV money, you know, without it being a headache, you know. All right, I'm going to add a little financial writer to that tax tip. And Matt, this is another show we need to record in the near future. And I kind of call it, I've been calling it the four Tens. The four Tens. And a lot of people come to me on a phone call or conference call and all of our tax attorneys and go, how much do I need to save for taxes? What should I be doing with my money? And I teach college students this all the time. And just, I'm going to give you a little teaser here, people, then we'll do a show on it. If you make 100 bucks, I want 10 to go to tithes or charity. If you, that if that's something in your life, another 10% to short term savings. You want to save up for that trip, that boat, that, that car, something special, you're going to save, you're not going to go buy it and then pay for it later. We're going to follow Dave Ramsey. You're going to put another 10% away in long term savings. I want us to be doing our IRAs, our 401ks. If you're brand new to saving, we're going to start out with your acorns. We're going to just start saving money. It's an acorn app I love. So there's our three tens. The fourth ten is out of the gross. Take home pay. As a small business owner, I want you to put away 10% for taxes. Now you may say, well, I'm, I'm not in a 10% bracket. I pay more than that. Yeah, but I'm saying 10% off your gross. So after all your little write offs, we might have you down to around 10% and at least you have some deposits going on. So if you can live on 60% of everything you take home and put away those other four tens, life is going to be A lot more rewarding. So that's a little teaser, but that's kind of the same concept every month. Take 10% of what you took home, send it to the IRS, be done with it. Yeah, yeah. And it'll bless your life later.

Bless your life.

All right, now I got a legal tip. All right, Okay.

A legal tip that you can actually use.

A legal tip where you don't feel like you have to take a shower after.

Now this legal tip comes from an experience I had just 12 hours ago. I was teaching a workshop last night and one of the students in the class who's been doing a lot of real estate deals over the years came up to me and it's like, hey, I've got this deal. I'm trying to figure out what to put in the LLC or not. And I've got an agreement. And you just started spouting all this. We got one partner that put in money, we got an IRA in here, but then it's gonna go in the name of my other partner. Then I'm like, slow down. What the freak do you have just an LLC for this project? Well, now we got some contracts and this is Wheeling dealing real estate. 101 out there is, well, I got a JV agreement and then this person did a note, but I'm going to give him a percent of the deal on the back end. I'm like, stop. And of course he said, well, we can't have an LLC because we've got it to close. And then in one of the owners names for the bank or for the hoa, I'm like, fine, but on day two, you better be deed in that to an llc. Can you do that?

Sure.

The due on sale clause. Rarely one out of the 100,000 deals are ever going to get to that point. Put it in an LLC the day after closing so that you can manage the partnership. This is the part of the legal tip. So the tip is. And what I said to him and I went ballistic. And it was nice and we had it. We hugged afterwards as I like, stop doing this. I am so sick of. Especially those in California that are scared to death of an $800 franchise tax that they're doing land trusts and they're doing statutory Delaware trusts and they're doing joint venture agreements and they're doing everything they to stay away from a freaking llc. And it ends up costing them a lot more than $800 because it's a disaster. The accountants charge far more than that to piece together the bookkeeping. You Got general liability exposure too. Because I told this guy you don't have an LLC and something goes wrong on that deal, I'm suing everybody. I'm suing everybody. A lawyer, they're gonna say you don't have an llc. I'm suing everybody. And the person with the deepest pocket pony up.

Yep.

But if you have an llc, you're only exposed to what you put in. Well, it's California, Mark. You don't. I lived in California. I'm sitting in California. Do you think these trees grow in freaking Idaho? I'm in California right now. I've got a place here that we come visit on a regular basis. But I don't live here full time because I don't want to pay the freaking taxes and I know how expensive it is here. My legal tip is quit cutting corners. Do it right and it's going to save you thousands of dollars in potential lawsuits, legal headaches with partners and tax prep fees and taxes when you do it freaking right. And watch out for these. Fly by night. Oh, I can set up a trust for you and you can avoid the $800. Let's do it in Nevada. Or let's. The list goes on and on. If you don't like our firm, fine. Our law firm. We kick butt. We are turning around. You got a problem, you call me or Matt. We'll take care of it.

We.

We can set up entities in all 50 states and do it right. Do not cut corners. Matt, anything you want to add to that?

Yeah, I mean I just say amen. I mean I don't want to. Where do I go after that? Geez, you left me nowhere to go. You know, just. You ate the whole thing. So. But that if you couldn't tell, that is a little bit of a pet peeve. And it's one we spend a lot of time deshaun deconstructing and kind of mediating between the partners and what the heck was supposed to happen. And just even if the deal goes well, it's still a pain in the butt and nobody understands what's going on. Yeah, let's think about it. When it doesn't go well and you had someone else had to throw in some extra money and all this stuff or there's somebody gets hurt on the property, or a contractor's bent and is in the mix now and won't let you sell, you know, all those things that happen, it's a wreck. So do it the right way. Use the llc.

Alright,

let's jump into the main event. I guess what do I do if I owe the IRS money? I guess is the first. I mean, that's we're going to talk about here. So there's a lot of solutions. Everybody's going to be in a different situation. Let's run through it right now, Mark, because people are filing. What would you tell someone right now that's like just filing? It's July 15, they owe, but they're broke now because 2020, it's been rough. But 19, they made good money.

And we usually save this topic for October for people. But because of COVID there's people right now, even with the July 15 extension, that still owe for last year and they don't have the money. Covid beat the crap out of them. A lot of small business owners and our hearts go out to you. Okay, so first resource down in the content below there is a link to an article titled how much should I send with my extension July 15th. Now you may say, well, Mark, I'm listening to this on July 20th or August 13th, that time's past. Still read the article because in it, and I'm going to give you a little summary here of penalties and interest that can come to bite you. But that article really kind of lays out what your options are and what the possible penalties and interest payments you're going to have. And you want to understand that. So that's the first point. There is a resource right there. And we've got other articles down below. I've got a second one that I've updated titled what to Do I Owe the irs. And so those articles are going to be a big help to you as we go through this. But okay, first, Matt, is okay, I'd make one more comment here and then you follow up. Yeah, here's the first thing. This is so important, everybody. This is probably the biggest tip of the day. So many people when they owe the IRS, go into paralysis. They do nothing. I want to make a couple comments from the heart and give you your first big recommendation. My first from the heart is it's going to be okay. It's don't so many people have lost sleep and so much worry over a letter they got from the irs. My gosh, people, the IRS is so disorganized and dysfunctional and there's people like us that do this for a living that know just who to call to get them off your back. No one's going to take your home. No one's going to take your bank account. No one's going to do all these Terrible things. If you get proactive and get involved.

Yeah, if you get big.

Big if. Okay, so that's the big tip takeaway today is mine is don't stress out and get proactive. Get some help. And that's not by calling a 1-800-person working in a cube that's 23 years old. Get a professional that knows what we're doing. We'd love to be of service in all that. We've got team members, even outside of a firm we refer to. But get involved. Do not put your head in the sand. That's my first big tip. Anything global that you'd say, too?

Yeah, you have to get ahead of it. So once the IRS has, like, a process and your, you know, file, for lack of a better word, moves along in a different spot and you have more flexibility. The sooner you get on top of it and less pain, the more you stick your head in the sand, you're talking to a more. Then you get moved up to someone who has more enforcement authority then. And then you delay that one. Now you've got someone who can do even worse things to you, you know, and so. And you're not dealing with better people. Okay, these. So you want to get in front of it early. Be proactive. You'll have more options, less penalties. And I know it's one of those things that you just don't want to deal with, you know, like, you start that day and you know you got to do it. You're going to find everything else to do in that day. But this. This is one of those things. You've got to just eat the frog.

Do it.

Get to it early, get on top of it. Just be proactive.

Okay. Second big global tip. Always file even if you can't pay. Now, this brings us to the penalties. Whether you didn't file on July 15th or you never filed an extension, and you just are listening to this, hoping with a hope and a prayer that something's going to happen in the show that will help you. One of the biggest things we can recommend is if you haven't filed yet, do it. And you're like, but, Mark, I owe. I can't pay him. That's okay. You don't want to ghost the irs. This is like. This is like ghosting the boyfriend or girlfriend. If they don't know what's going on, they're going to assume the worst. And that's the same with the irs. If you owe them, at least file so they know what the hell is going on. If you ghost Them, they're going to think you're a crook and it's going to get more and more ugly and the penalties add up faster. Not filing is worse than filing and not pain. The penalties double essentially is what's happening because they're going to really rip into you because you didn't even file. And if you say, well, Mark, I missed the deadline, the sooner you file, the better. The penalty for not filing on time, whether you didn't use an extension on July 15 or April 15, as the years may come forward again back to normal or October 15th, let's say you didn't file. The penalty is a half a percent per month plus interest and it's half a percent per month or part thereof. So on April 15 or October 15, if you didn't send your tax return in by November 1, there's your first half. Then in November it's another half percent penalty. So just by going 15 to 16 days, you're now paying 1% penalty. And you can't get out of that without a really good story. And those country songs of my wife scratched my truck and my dog left me and all that did nothing. Usually your dog leaves you and your wife scratched. It could be the other way around, but both country songs, both are sad.

Yeah.

But anyway, in summary, the penalties are really, really bad and the interest if you don't file. Okay.

All right, so we're going to file now. Let's say, okay, I got my crap together, I filed now and I owe. Okay, now here's what the process,

number one, and I love Matt, Matt is all over this. This is, Matt loves to talk about this. This is your number one thing you do when you get that letter you owe.

Yeah. So you're going to eventually get a letter from the irs. Okay. Then it almost kind of looks like a bill, you know, this is the first one. It's like, hey, you filed, you owe us some money. Yeah. And there's this, there's a bunch of other things in the, in the letter there that are like, if you don't respond to this, we're gonna start doing all this nasty stuff. It's like this first letter. Okay, this is your wake up call. Okay, this first letter, this is Kay, get on the ball. What you're gonna do is call the IRS or you can go online. You have the first option is you can request 120 day to pay four months.

Four months.

Yeah, you can, you're going to buy yourself four months now you can, even when you call up, you can say I'm going to pay everything on day 120. You don't have to do monthly payments or anything. They're just going to, they're just going to put you in a status that hey, they reached out to us, they requested 120 days. We're going to automatically grant it. We're going to not proceed any collection efforts. We're not going to garnish your bank, your wages or zap money out of a bank account or throw a lien on your house. Okay, you've got now 120 days to pay. Now I've even done that myself. I like all my clients. If you owe immediately upon filing, you get your first letter call, get the 120 day to pay. Now you're figuring out how to get your crap together and what you're going to do in the next phase if you can't pay it in 120 days. And a lot of people are able to just be like, I got four months, I bought some time. I'm going to really focus on getting that paid because the IRS is the last person I want to owe. And if you can't stay tuned, we're gonna hit the next option. Remember the 128 to pay.

Yeah. And two thoughts. First of all, you'd be shocked. No, probably many of you wouldn't. How many times I have clients come in, I got problems with the irs. I'm like, alright, have you got any notices from the irs? Oh yeah, I got a whole bunch. And they'll bring them in to my office or they'll scan them all and email them to us, which is typical because we consult people around the country. And I'll get this email with notice, notice, notice, notice, notice. And I can go all the way back to the first one and I'll go, what'd you do when the first one came? Nothing. Put it in the drawer.

Now this first, this 128 a pay too. There's zero fee on it. Okay. When you get farther down the line here, you start to start paying fees to get some of these installment agreements or other deals in place. So this first option is there's no fee for it even and if you don't pay it 120 days, there's no, there's nothing, there's no harm.

Yeah. Now this is important for everybody to know, okay? When you owe the irs, when you file. Remember we just got rid of all the failure to file penalties. Those are gone now because you filed. See. So you just got half of the Crazy train. You just pulled it and that train just went off into this. That's gone. You just kept the train going, but you got rid of half of the problem. So when you file the failure to file penalty and the interest that comes with that, gone, it stops now. What you're dealing with is the failure to pay penalty, which is not as bad, and interest. So when you get this 120 days, you may say, well, Mark, you said I had 120 days to pay. Oh, you do. And they stop collecting. No nasty call. And we'll come to calls in a minute, but no nasty grams or letters from the irs. But you're still going to pay some penalties and interest. So you don't want to let it snowball too much. At this point, when we have clients in 120 days, probably half of our clients, we get rid of it. We say, go refinance your home. Go borrow money from mom. Go borrow money from your rich aunt. Go hawk this, hawk that, put it on a credit card, do something. Because we want to stop the penalties and interest, pay it. Half of them would get rid of it. So during that 120 days, don't think you're not paying penalties, interest. You are. But they're only half as bad because you filed. Yeah. Now, I got to say this, Matt. And then you take them to step two. But the irs. Everybody focus. The IRS will never, ever, ever call you on the phone. Never. Never. The IRS does not make outbound phone calls to taxpayers. The only time they might is when they're calling your attorney, your cpa, negotiating a problem that's in mediation or. But they're never going to call you. Yeah, they're not going to call you. My mom last year called me. She goes, mark, I got a call from the irs. I owe him money. Oh, I was pissed. One of those scammers came after my mom about three years ago. I get the call. All of you have gotten this call and you.

Yeah, I've gotten. Yeah.

Now, here's a little tip, too, I want to throw out on that note. We interviewed a guy on the show that deals with white collar crime. It was about five years ago on the Federal Justice Department going after scammers and things like that. And they said the most important thing you can do in a situation like that is just say, thank you very much for the info. I'll take it into consideration and hang up. You never want to go at them. Oh, I wanted to. Once I got that call, I started to go, where are you at? Who Are you, are you okay doing this scam? I mean I just called him out and then I stopped because this guest that was on our show and we got to go back and maybe have them again, said you don't know how what these people can do to you if they're, if they're already calling you.

They're criminals.

They're criminals, not antagonize them. Just get off the frickin phone and know it's not really the IRS. Okay Matt, step, step two, I call and get my 120 days, alright?

Now you can go for an installment agreement. Okay. The 120 days has passed. I wasn't able to pay it. I need more time. I can get an installment agreement up to six years. Okay, I'm gonna get a time of over six years. I'm gonna make a monthly payments now under this arrangement and I got six years to pay it. Now if you. There's a threshold though on the 50,000. If you owe more than 50,000, you're going to have to put in a lot of financial information. Really show them why you need time to pay this. You got to show them I don't have the cash to just pay it. All right, now here's my income, here's my expenses, here's why I need six years to pay it. Now if it's under 50 grand, you can still get the six years to pay. But you don't have to go through that financial analysis of I need the time to pay where you kind of got to show everything, so to speak. So it's a little easier if you got less than 50.

I like how Matt calls it a financial analysis. Some people refer to it as a financial enema, a coloroscopy, common term.

Pass on that.

If you've had a colonoscopy. Those are much more enjoyable than what is called the 433A form where you have to tell the IRS everything you've got. It's not fun. So now I'm going to. Now that's right. Matt would. Matt's correct. In general you've got this 120 days you just bought. And then you can go to the installment agreement process right after that or during that period. Yeah, but here's a couple other points. The IRS cannot collect from you and lien your house or levy your bank account or garnish your wages. If during this period you're communicating, what is happening on your little screen at the IRS is it's saying pending and once you're in pending, the IRS can't do anything. So you want to keep that dialogue open, you're going to bake. We've seen sometimes clients get another three months after four months. That could happen.

Yeah. So you're at the end of your 120 days, you call them up and say, oh, I just. I need to buy a little more time. I need a few more months. Now, you got to be careful with that. Let me just say. And don't have an expectation you're going to get that. Because there's a lot of different personalities at the irs, if you haven't noticed, when you call and you don't get the same person you talked to last time. So don't be planning on that. But we do see that. And generally. And if you really feel like you can pay it. I don't want to just be like buying time with the irs. Buying time with the IRS and stringing them along if. Because the penalties and interest are accruing anyways. If you can't pay after the first 120, you know, but you think, if I got another three months, I could do it. Ask for the three months. But if you're like, man, I need the six years, just move the installment agreement now.

Don't worry, we're coming to the nuclear options of, you know, getting a payment, a penalty waiver, also offering compromises. We're coming there. But these are your first stages. Yeah. And if you don't communicate with the irs, those stages go by a lot faster. So, you know, they get pissed quick. So you want to take, you know, like Matt said, as soon as you can pay it, do it. But you want to be communicating with them. Another thing that's interesting, I like what Matt said is different personalities at the IRS. Now, after 20 years in a career as a tax lawyer, I can't count how many times I've been on the phone with an IRS agent or in person helping a client out. Always put on your Southern charm. I cannot emphasize this enough.

Yeah.

They hate your job. Just know they do.

The last call they got off of that someone was. Was a total jerk, and they were a jerk back. You would be the same.

Yeah.

I mean, think of yourself and taking those calls, how you're going to respond.

Yeah. You can buy yourself so much more. I'm not kidding. I've had the same situation with the client and the same fact pattern. Dollar amount almost to the penny. And I've called one agent, and I was a little testy, and I was kind of a jerk, and I didn't get my client as much benefit and options. And then I called the other one, and I'm like, yes, sir. Yes, ma', am. You got it. No problem. Thank you so much. I hope you're having a good day. And it almost puts them off. They're like, who are you? And I've even said, I know this. This is just your job. I'm not here to beat you up. Just. We're just trying to help this person out, you know? And I've.

I've joked with IRS agents, too. When I call, I'm like, why did we both decide to do taxes, man? What are we thinking, the travel industry or something? And we get better job perks, you know. Dude, this week.

This is so funny. I was on with estate agent four days ago, and I got on phone with the agent, and I could tell he was a little younger. And I'm like, whoa, hold it. The penalty. No, that's not right. And I was about ready to start talking down to him, and I said, dude, so are you an accountant? He's like, no, I just got this job. I've been through training. I've only been here a year. This is who I'm negotiating with. I'm like, dude, let me give you a tip. So I started giving him tax tips on how to deal with this. And he's like, oh, my gosh, I'm going to go talk to my manager. Goes and talks to his manager and comes back and says, yeah, you're right. I think we can do this. He was calling me back and he was stoked. He's like, oh, my gosh, that. Thank you so much. So I was given the agent tips on how to do his job, and he was. He was grateful. But see, again, you start fighting, they're going to fight back. Don't do it.

And they hold all the power. They're judge, jury, and executioner.

So they're like, what are you going to say? This is true story. One other true story. I was on the phone with an agent, and I was trying to do my best. I was like, yes, sir, absolutely. Yes, sir. I'll get that right off to you. Yes, sir, absolutely. Thank you. Thank you so much. Da da, da, da da. Yes, sir. Yes, sir. I used to the end of the call, and then they go, it's, yes, ma'. Am. I was like. I was like, oh, no, I'm sorry. Your voice was very deep. I. Sorry, hung up. And then I called the client. Yeah, I didn't go, well, you're screwed. I don't know. The agent was just pissed off that day. I don't know why.

I don't know what I did, man. But

it worked out. And right before I hung up, she's like, no, I get it a lot, you know, and she had like, this autonomous name like Tony, you know, you're like, yeah, yeah. Is that with an I or Y or what? I don't. I don't know. You know? Anyway.

Ouch. Okay. All right, let me. Okay, so the installment are given. Let me remember, it's six years. Okay. You're gonna be making monthly payments. There's a $31 fee. Okay. Yeah, it's not bad, but you're gonna. You haven't got to pay a fee. Now, the interest that accrues, that's a prime. Yeah, that's the interest that'll accrue on the amount owed, of course, as you're paying. And that's it. That's the installment agreement. Now, you're not getting a discount on anything. They're not going to waive something. You know, you're paying what's agreed. You're paying the penalties, you're paying the interest that's going to continue to accrue. So that's the installment agreement. But stop collections. You're not going to have to worry about waking up one morning and your bank accounts being garnished. You're not going to have to worry about embarrassment and your wages getting garnished at your employer or anything like that either. Not going to lien on your house. Okay? Your the irs. As long as you keep sending the payments, you're good.

Okay? Now, on that note, I want to say some people are like, you're oversimplifying it. That's not the experience I had. Okay, let's do a couple of detours here. One of the first ones is you might get a waiver. Sorry, intent to levy letter. This is a letter that's really nasty that says, we're going to levy your bank account. We're going to come garnish your wages. And you're like, what the freak? I got a. I got an installment agreement or I got my 120 days. Why is this happening? Keep in mind your accountant didn't screw up. No one's picking on you. We're not wrong. The IRS is not as organized as you may think. Their computer system might spit out a levy notice even though you're in a pending status. That happens. Now, this is the point where, if you haven't already engaged a professional, you really want Them because we can call them up and go, whoa, if you go ahead and Levy, feel free, there's gonna. Heads are gonna roll. You've now just violated the Taxpayer Rights Act. This is not appropriate. We are in a pending status. I want that removed in 24 hours. And boom, it's gone. So we can stop Levy and liens. They start to happen. And they could, they could. So don't think the sky's falling. It's just the way it happens sometimes.

So, yeah, I don't think anyone's surprised by that. The IRS is, you know, a lot of times the irs, you know, they, they will print their notices and like two weeks later, they actually end up in the mail. You know, and with COVID happening right now and the IRS and them having people working from home too, I mean, it's a. All the laws they've had to change. They've got some relief provisions under the CARES act too, which I'm going to mention here in a moment. Also, it's tough at the IRS right now. And so just bear that in mind.

I love it. And Matt, before you go to those CARES act provisions, and then we'll finish with the creme de la creme offering compromise type strategy, but let me throw out another one that can come into play. Some of you may have penalties that are off the chart. Maybe you didn't file for a while. And so the non filing penalty is really bad. The failure to pay penalty is added up and you're. It's bad. What you can file for is called a penalty abatement request. So in the middle of all this time, you're doing your installment agreement, you're trying to get your crap together to pay this off. 120 days, who knows what, six years, blah, blah, blah. But you're trying to get rid of some of these penalties. You can do this. Penalty abatement request. This is the country song story. You're going to write up a letter with your counsel to help say I had cancer, my spouse died, this happened. And you want to emphasize medical issues, financial issues. Covid, you want to.

You.

It's not a comfortable letter to write, but you need to describe it as the sky is falling letter and then just pray, please, please abate some of my penalties. 50. 50 shot. Well, I can't guarantee they're going to waive them. Sometimes they do, sometimes they don't. Part thereof. But the better your crybaby letter is, the better.

Yeah.

Second, I'm going to just throw this out. There's also called the Spousal type problem where innocent spouse provision. So you're saying, well, my husband was the jerk off that never paid her tax bill, or my wife, she was in charge of the books. I never knew what was going on. And it's not a male or female thing. I've seen both common. It's the husband's responsibility or the wife's responsibility. Taxes are owed, and the other spouse had no idea. That's called the innocent spouse provision. And you've got to write a letter for that. And you would. You've got to be able to document. I didn't know what.

There's a formal process for the innocent spousal relief.

Yeah. And that's an option. So you've got all these little detours that can happen here, people. You may have gone through a divorce and you want to push this all on your spouse. That's where you're going to go. Innocent spouse provision. And try to pull this off. They're not going to be happy about it, you know, and they're going to fight. Just like going through divorce court. This is another fight. So you got to figure that out. But, Matt, what did Covid give us? What did the CARES act give us? I'm going to turn my.

Well, what they did, they call. It's called the People first initiative. Okay, how's that? People first initiative.

I want to be first.

I know. We're putting people first. And so what they did is they allowed. If you were already on an installment agreement and now you had to miss payments, they allowed you relief. So anyone that's on an installment agreement right now, if you can't make payments, it's okay. They won't blow up your installment agreement. You can buy yourself more time to get back on track later. So now you have to communicate again with the IRS to get that. They've halted a lot of their typical seizure of assets. They're not pursuing levies on personal residences right now, or they're actually forec. Closing on tax liens and such like that, which they do do. Okay, that happens. All right. If you stick your head in the sand and this is like, you just. You got a home with equity in it, and you owe the IRS 100,000 plus you owe them enough money where they're gonna go do something that happens. Okay.

So, you know, I'm surprised at this point because I thought a little forthrightness and honesty would have been appropriate in this show. But I've got to call out my partner because I just. I just don't think it's fair you don't know this. Matt prosecuted tax cheats in his earlier career. Now, I don't. Maybe you didn't want to share that, but I'm going to throw it out.

That's true.

You want to maybe give a story here? I don't know.

Let's.

Yeah.

I mean, there are. There's a couple people, I think they're out of prison now that went to prison because I. Tax fraud.

Okay.

So. But these were. These were crazy constitutionalist people setting up tax schemes and tax shelters and saying if you set up this trust and put all your assets into it, you don't have to pay the government, the state or federal government taxes. And so I worked in the state attorney general's office, prosecuted them for tax fraud. They went to prison. You know, we won. It's actually my first jury trial was a tax fraud trial of all cases. It wasn't my normal caseload, but I was the first one I got to go to trial on. So now experience.

Yeah. And now he and Wesley Snipes, they share Christmas cards. He's happy.

Yeah. Yeah. So Wesley Snipes went to prison for tax fraud, if you didn't know. Not my case. I had. I had a different case, but it's serious. I'm just saying, you know, this is. And why people lose a lot of sleep and they stress over it is there's criminal action that happens here. We're not just talking about levies, too. At a certain point, this can get criminal. So you got to be proactive about it. Like we said, start early, go through these steps, go through the process. There is like, you know, right now, with all the COVID stuff going on right now, and frankly, the IRS is limited resources. They are giving you more time, but again, you've got to communicate with them.

Anything else on Covid matter, I'm going to throw some.

That's pretty much it. The biggest was if you're in an installment agreement and you can't pay, you can buy yourself more time. You can get a temporary suspension of making payments.

Okay. Another little diversion on our path before we maybe do an offer and compromise, which we'll explain in a moment. Another interesting step in all this is that I forgot what I was going to say.

Maybe the collection due process appeal, so you can request. That'll. That's another thing that'll stop collection efforts is you will get a letter that says, and this is a good idea. Let me say this, too. If you are disputing, maybe the IRS reviewed your return and they disallowed some deductions or things that you did on your return and sent you a bill and said, actually you owe us money. Okay. There's, there's a lot of hearings you can request in the process to dispute the IRS's determination. And so, so those are things that keep in mind you should have and those are deadlines. So if it's a determination where the IRS has reviewed your return and disallowed some things or added income and said you didn't claim this income that we know you had, and here's some 1099 you didn't report, you know, you've got to be on the ball on that stuff. And you can request hearings to dispute that, where you go through a hearing process with the irs. And then if you lose that, which I help clients through, then you can then go to the tax court and request a hearing in tax court and get a real judge who will actually really look at the case and do something.

Yeah, and I want to on that. I'll remember what I was gonna say in a minute.

I was buying you time.

To me on that. I just think that when you're buying yourself time and your gosh, my brain has just gone. I've been, I'm trying to think of what I was gonna say. And we're not gonna edit this. I'm. We're gonna leave it the way it is. Um, let's just.

Okay. You know, you're having a senior moment.

Yeah. I need more Rockstar. I'm out. And I'm drinking Monster today instead of Rock Star.

That's the problem.

It is. I'm off my game.

Our sponsors, they gotta step up.

They gotta step up. Okay, so let's say I've gone through all these steps and I still can't pay the irs. So now I'm going to get into this, some sort of offer where I want to say, can I pay you pennies on the dollar? Now this is the part where really makes me mad because there's a lot of companies out there that make it sound like it's a no brainer. It's easy. Everybody can get it. You just have to pay us. Wrong, wrong and wrong. They take time in this. The concept is, with an offer in compromise is that you're going to say to the IRS, I may owe you 50 grand, but I can only pay you five. Take it or leave it. And IRS is going to say, all right, prove it. So you're going to have to show that you're not going to be making money in the future that your life is. You know, you've lost a limb, your business went down the toilet. You're completely toast. The IRS has to think in their mind, there's no way we're going to get our money. They can't. There's no asset to go after. There is nothing. And they're going to make you sit around and wait for about a year. They're going to go, really? You want an offer? Let's see you squirm for a year. Because a lot of people are like, oh, I'll get an offer and then I'll start my business next month. Or I'll do this.

Yeah, you start having income coming in. Yeah, you got to update that and tell them. And now the offer, when you submit it, here's a couple of notes on it. A few things. All your tax returns have to be filed, okay? You've got to have all your prior tax returns filed, okay? The IRS wants to resolve everything. They're not going to do an offer and compromise and be like, well, we'll resolve 16 and 17. But you still don't file 18 or 19 yet. No, they want everything. They need to know what's on the table here. So you got to file all prior returns. There is a fee of 205 bucks. That just went up in 2020. It's 205 bucks. That's the filing fee.

I remember what I was going to say. Keep going.

Okay.

All right.

And the second thing is, when you're submitting the offer on compromise, there's two ways you can approach it. Mark talked about doubt as to collectability or. Sorry, doubt is to ability to pay. Okay? So that's one avenue you can say I'm broke. I have no assets that you can seize anyways. No big paycheck you can garnish. You know, here's. Maybe I got a family member that'll give me. Give me five grand so I can pay off this debt, but ain't gonna give me 50. You know, you gotta have a story of why they're gonna take a smaller amount. That's ability to pay. The other is doubt as to liability. Did I even owe the IRS money in the first place? Did the IRS miss something on a return of yours? Did they disallow some deductions? So you can do an offer and compromise as to the liability and say, actually, irs, you're wrong. I don't owe you this money. And you can file it that route.

Yeah, and I had. Those were the two comments and I'm going to pick up on this one first. I've got another big, important one, I feel. But if you're using the offer and compromise to complain that you don't owe him money, you're a little late to the party. The IRS is not enjoying that. They're going to be like, hold it. We were sending you letters freaking two years ago, and now you're offering compromise, and you're going to claim that you really don't owe us. This better be a good one. And they sit back, let's everybody here, let's hear this guy out. You know, this is going to be good, you know, because you waited two years to claim. I really don't owe you.

Let me say, if you have a doubt as to liability, like if you really are trying to challenge something the IRS assessed on you, request your. You just request a hearing. Okay. And an appeals. An appeals hearing to go to the IRS appeals office. And then you go to Tax Court. And I've done that. I've had some Tax Court cases. Tax Court is actually good. The judges know what they're talking about. The attorneys on the other end are really good. They're responsive. They have a manageable caseload. You can talk to them and work things out. And both of the cases I had, we stipulated I never went to court on either one. And so that's way better than the IRS offer and compromise process.

Yeah. And the last Tax Court case I had, which was just last year, by the time we got to the U.S. attorney, they were like, who the freak was this agent you had? That guy was a woman at the time. He's like, freaking idiot. Here's the deal. We did settle for a lot of. And we didn't go down the offer and compromise route. We went to the. I don't freaking know this route. But you don't want to wait to the last minute to play that card.

If you lose your rights, actually, you lose your rights. So some people have lost their time windows. They don't have the right to request a hearing. They don't have a right to go to Tax Court. Their only hope left is this offer and compromising.

Now, another point before I get to my big one. It just reminds me before I forget, if I don't say it now, some of you. And this is another thing that hurts. I know some of you have already paid an online telephone solicitation company several thousand dollars and got nowhere. Happens all the time. And it hurts. I've had people come to me saying we owe the IRS X and already spent five getting nowhere with this loser company. And it happens. Don't blame yourself. They took advantage of you. Write some nasty reviews, call the consumer protection agency, Fed and state go everywhere and broadcast the fact they ripped you off, but probably not going to get your money back. And it's better we move on and start fresh and get back on track with the irs. And I hate to say, but that happens all the time. So if some of you are like, well, I paid someone. They're working on it, you might want to get a second opinion as to where you're at in the process and what they're really doing, because they could be blowing up for you on these deadlines and you don't even know it. Okay, now, my last major tip on this is we're talking about income taxes. So important that I say this. This is all about owing the feds on your income tax return. If you owe the IRS payroll deposits because you've got employees and you use that deposit to pay the bills, or you've been collecting sales tax and you use that money to pay some bills because you couldn't make it. And there's people right now in the COVID mess that said, screw it, I'm not making my IRS deposit. And they went and spent money that was not income tax. It was withholding on payroll or withholding for sales tax or other things. That is sacred money.

We're talking someone else's money. It's like your employees in particular. That's their money that is supposed to go to the IRS to pay their taxes.

And this IRS isn't gonna pick the bill. They're gonna go to them and want the money, and they're gonna come after you criminally, and these people are gonna sue you. It. We've had people in our office scared to death that have done this. And we're like, buckle up. Do you have the money? No. And two out of three guys I remember sitting in the conference room, two of them ended up in prison. Good people generally. But they got in a bad business situation and decided to use their payroll deposit and not send it in that month because it was the only money they had and they justified. Well, I'm going to use it to pay payroll so that I can stay in business another month. A scary path to go down. Now, if some of you are in that boat, you need counsel right away because you can't even oftentimes get a payment plan with that. I mean, they're gonna want blood. So it be. Don't take that Lightly, either. It's a whole other. Whole other ballgame. You would just went from, you know, the high school football team to the NFL right there, and they're hitting harder.

Yeah, for sure.

Most people aren't going to do an offer and compromise. They're not. I'd say out of 100 people we might consult with, we might take five down that path. There's so many diversions off the freeway that are better, simpler, faster. You're offering compromise. Nine times out of 10, they're not even going to work because you're trying to rebuild your life. You're trying to make more money. If you're trying to make more money and get back on top, the IRS is going to wait for their money. And if they see that, they're going to wait. So just. Yeah, but I'm starting to get a suntan here. You've noticed if you've been watching the show, the sun has gone now. So I'm going to take my shirt off any moment and start getting some sun.

And we better end the show.

Yeah, we do not want that.

Well, I would just say my last comment, too, was the state agencies, okay, you're going to have a lot of times they're more aggressive. Yes, state tax agencies are more aggressive. They're better staffed. They go after you. They're quicker responding. So a lot of times when we have clients that owe state and fed, many of them are prioritizing paying the state first because the state's gonna be Johnny on the spot. They're like, right there, they're like, I just. I just filed my tax return two days ago. I already got a letter from the state saying I owe them and they're gonna come collect, you know, whereas the IRS is gonna be a couple months down the road. So, see, now every state's a little different, but most states have these similar processes. They have a similar process of you call, you say, give me a little bit of time, 90 days, 120 days, I can pay it. Put me on a payment plan like the installment agreement or. Almost every state has an offer and compromise process, too, where you can basically piggyback your federal offer and compromise to the irs, to the state. But just keep those two in mind. You got to worry about both dragons, unfortunately.

Yeah. Well, everybody, thanks for watching. And if you watch this show, regrettably, you know, someone or you yourself may have a problem with the irs. And for some of you that don't, and you just were learning this for future cautionary planning, God bless you, that's good. Smart move. But share this podcast the articles down below. Share all of that with someone you know that might be having a hard time. Because knowledge is power. Knowledge reduces fear. The more you know and how the IRS works, the less scary it is. And it's almost like a sporting event, you know, the more you know about your, who you're playing against, the more confident you become. So you want, you want to get that those tools, know them well and be using them. So. But we love you. Thanks, everybody, for listening. Matt, any final words?

No. Keep living the American dream, baby. I know we know it's tough out there and this is a tricky topic, you know, and my heart goes out to those that have to deal with paying the irs. Mark and I have been there, too. You know, I've had to, you know, learn some of these things, unfortunately for myself. And I vowed never to do it again. So just be proactive. That's my final tip. Be proactive. Be on the ball. Even though it's hard, it's not going to get better. But you're not by waiting. You're not going to improve your situation. Just get on the ball.

Thank you. All right. See everybody.

Thanks for listening to another hour of refreshing strategies to better live your American dream.

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