When’s the right time to clean up an IRS problem if you have one?
That depends on on your circumstances of course. But the correct answer is almost always sooner or later.
Listen in to a recent episode of my show , The IRS Solution Attorney Radio Show to find out why that is. Or if you prefer to read the show’s transcripts those are below too.
This is the Tampa Talk Radio Network.
The opinions, thoughts, and observations on the IRS Solution Attorney radio show are not legal advice. Facts and circumstances differ in every case. Do not take anything said on the show as legal or accounting advice. Always consult your lawyer or accountant before deciding how to handle any legal issue.
Darrin Mish: Welcome, I’m your IRS Lawyer, Darrin T. Mish. It’s a little bit unusual day today, this is going to be my first day, my first show that I don’t have my lovely and talented cohost, Katrina Madewell. She’s kind of my anchor when it comes to this radio stuff and she’s the stuff that helps me go on the breaks and come out of the breaks and whatnot, so if I fumble around a little bit, please give me a little bit of slack because I’m the content host here and she is the professional radio host.
We’re going to do things a little bit different today, one of the things we’ve been talking about over the last several weeks are some hard technical facts about how we go about solving IRS problems. What we’re going to today is we’re going to have a special guest on the line that actually has an IRS tax problem. His name is John. Just yesterday…Let me set this up a little bit better. John and I were talking yesterday and we talk – or chat – probably every single day. We have a professional relationship and over the course of the last year or so, we’ve really become close friends. And just yesterday after about a year, he finally came clean and told me he has an irs problem. We’re going to have John here on the line, John, are you there?
John: I’m here, Darrin, how are you doing?
Darrin: I’m doing good, your phone as usual is not sounding real good so we might have to let you go at some point. But hey, John, I’m glad you called you. Why don’t you set it up for us a little bit? Can you tell me a little bit about the background of your tax problem and if I need to ask some questions, I’ll just go ahead and do that.
John: Yeah, absolutely. Well, I’ve had a tax problem probably for the last four years. We had a couple of really big years where we had all kinds of money coming in that was…we went to making as much in a two week period as we used to make in a y ear. You can imagine that was quite a bump in income.
D: Yeah, we call that a quality problem where I come from.
J: It was great, but it did create a lot more problems than it solved and one of them was getting in trouble with the IRS. For the last several years it’s really something that’s been weighing me down. We’ve been dealing with the IRS and we’ve been communicating with them. It’s held me in bondage in a way that I really didn’t realize it was until we spoke yesterday.
D: So, set us up. About how much do you owe? Just a rough figure?
J: About $130,000, $125,000 was the final tally.
D: Ok. From what tax year roughly, do you know?
D: This has been going on for 3,4 years, is that fair to say?
D: You told me yesterday, at some point in time, your business took a real big downturn around 2012, 2013 and ultimately you contacted the irs and they agreed to place your account into hardship status, is that right?
J: Yes, correct.
D: Hardship status, for the benefit of our friends listening, is when the IRS determines the taxpayer has no present ability to pay on a monthly basis. It’s kind of like a temporary get out of jail free card. Kind of. Putting your account into hardship status usually for a year or two at a time, sometimes it can go in there semi-permanently. Really, the only way that hardship can benefit you is because it can take the pressure off. Isn’t that what happened at first, there was kind of some pressure, and then when you dealt with them they kind of backed off?
J: Yeah, tremendous pressure left after they backed off and put us into hardship status. Unfortunately, Darrin, it put us into hardship status. (laughs) In more ways than just one.
D: Yeah, I think what you’re saying is it’s actually a hardship to be making as little money as you’re making right now.
J: Yeah. It seemed like it was a godsend because I didn’t have the worries. When you make a lot of extra money, not only do you have to deal with taxes, but also all the problems that come in with the extra money. The extra customers and all that and to have a tax problem on top of it and then to have the business slow down and then to be put into hardship status, it felt like it was a safe haven, but it really turned out to be a trap, kind of.
D: Remember, there’s a 10 year statute of limitations for collection of a tax. What that means is, the IRS only has 10 years from the date the returns are filed until it expires for good. In a way, it’s good that you’re in hardship status because let’s say a 2011 return was filed in 2012, plus 10 years, in 2022 this is going to be gone if you don’t do anything else. That’s still seven years and there’s probably eight years left on the 2012 liability, presuming it was filed on time in 2013. In a way it’s good because they’re not levying you, they’re not seizing your assets and they’re not seizing your bank account and they’re not trying to garnish your wages or levy your income sources so that’s good. It probably helps with your emotional state and the state of your marriage and stuff like that. Is that right?
J: Yeah, after we got put into that status I could sleep at night without worrying. I really felt like I was going to be raided in the middle of the night and the IRS was going to send in agents and arrest me in front of my children so when the hardship status was granted to us, that dissipated and that made sleep a lot easier. Yeah.
D: Did you happen to listen to last week’s show where I talked about my rock star client who had an appointment on a Monday and the Saturday night before his appointment, he was having trouble sleeping and he heard some noises outside his window and he was convinced it was the IRS coming to raid him?
J: Yeah. It’s real. I mean, it gets to the point where every little noise you hear, every phone call, every, even emails and I hear a chime come in my email and I receive hundreds of emails a day. Even the sound of the emails was scary. I didn’t realize it was happening, but it was really shameful and fearful for the route I went after that happened. I just wish I would have talked with you a lot longer, that conversation we had yesterday about taking care of this business so I can move on with my life, it was great, it was eye opening.
D: You know, John, I really appreciate you calling and sharing this information with our friends that are listening because this is a really really common thing that it takes people awhile to understand how they should go about handling this problem. Which, for most people really is the biggest problem in their life. Do you think this is the biggest problem that you have right now in your whole life?
J: 100% for sure, yes.
D: So, yesterday, we’ve been dealing with each other daily, multiple times a day in the course of business – and you know a little bit about my business now – yesterday it finally comes up where you admit to me that you owe about 125 grand. So tell me if you can, share with me – or share with us – why it took you so long?
J: I was ashamed and I knew that you and I would have this conversation at one time, but…first of all I wanted to feel out what it was you did and what it is that you do and what the process was and I was kind of using that hardship blanket as something to hide behind and I figured that I was going to pay my tax bill as soon as I could figure out what I needed to do to start making more money in my business. So I was waiting for the money to return so I could pay my taxes. Instead of just talking to you about it. There’s a lot of things wrapped into why I didn’t do that, but it was shame and I didn’t want you to know that I had a problem. We do business together and it’s not something I like people to know. It’s not something I like to lead off with. You don’t lead with your weaknesses. Then you try to hide your weaknesses, I tried to hide it from you and fix it on my own and I just realized I can’t fix it on my own.
D: Yeah, the fear that people have wrapped around having an IRS problem, tax problem, is really pretty significant. I like to think that I have a special insight to that because not only do I deal with client’s fears dealing with their problems every day , but I’ve shared with this audience, I’ve shared with you…I’ve had at least two irs problems in my life. One was a very…two of them were a really long time ago. One of them was just within the past few years. I had a really good business going that was a side business and I made a lot of money and my attitude, foolishly…I really do know better…but my attitude was, I’ll just write a check for this balance due at the end of the year or when I file the return and then that business collapsed and I didn’t have the money to pay that bill. I had about $50,000 at the time so I got to experience that fear and anxiety and the shame again. At the time, it really honestly didn’t feel all that good, but I know now that I was meant to feel that and the reason is I got to go through those emotions and it allows me to me to be a more compassionate person today. So I think that the shame you were dealing with is really common. But you know, if you had any other problem in y our life, we’re typically not ashamed of those problems. If your car was broken down and you didn’t have the money to fix it, but you needed a ride to get to work? Would you be ashamed?
J: Absolutely not, it would just be a problem that needed to be overcome.
D: Yeah, it’s just kind of is what it is, right? I’m not going to be able to solve the audiences shame wrapped up in having a tax problem here today on the radio but it’s really nice to have somebody else validate that it’s something people go through. The other thing is the fear. I was just listening to another show on the way here to the station and the host was talking about fear and how we need to face our fears. We don’t need to face the fear of crossing the street, trying to walk across the interstate because if you face that fear, you’re going to get run over by a truck. But there’s other fears that are very healthy to face. I think one of the fears that people need to face if they have an IRS problem, is they need to go get some advice. There are problems that I can’t solve. I can’t solve economically. If you owe $8,000 I’m probably not going to take that case because you’re probably going to end up into a hardship status or into a small monthly installment agreement. If you’re John here and you owe $125,000 and there’s still 7 or 8 years left on the statute of limitations, it’s probably something we ought to have a discussion about. You were thinking something that I think is really logical and that is hey, I should wait until my finances get better before I can really afford to solve this tax problem. Isn’t that what you were thinking?
J: Yeah, for sure.
D: Can you tell me, because it makes no sense to me because I’m too close to this business, can you tell me why that makes sense to you? Because it probably makes sense to our audience.
J: Because what happened was, like my business, like your business that when the bottom fell out of it, I was in the same industry when the bottom fell out of it. The bottom fell out of it at the same time for both of us, and when it fell out, it fell out at the end of the tax year when I was getting ready to pay all my taxes. In fact, I had it in my plan where I was going to pay all my, instead of paying installments, I was going to pay my entire tax bill in November, but it hit November and there was no money. So I’ve been working like a maniac, and you know I’m a workaholic and I’ve put effort in, and I’ve been working 60 hours a week to get that money back. To me, that was the issue. It wasn’t the fact that I owed taxes, it was the fact that my money dried up and I’ve been working so hard on getting my money to come back that I’ve let that problem just fester. What’s happened is the money hasn’t come back, I haven’t been successful at doing that, I haven’t been running at 100%. I used to be a possibility thinker and having this IRS issue on my mind, it just slowed my thoughts down and it just really put me into a fearful status and I don’t want to keep saying that, but it really was bondage and I just didn’t want it anymore. I have to be successful for my family and this is the step after knowing you for a year that I finally decided to take that step and just ask for your help.
D: Yeah, you said something that was really sort of interesting, you said you were an optimist and you kept thinking that the business was going to get better. I think you should continue to keep thinking that, I think absolutely there’s no doubt. After we got done talking, we talked about the possibility of you filing an Offer and Compromise. An Offer and Compromise is when you make a deal to settle for less with the IRS. Without getting too complicated, I’m going to explain how an offer and compromise is calculated. An offer is calculated by taking your monthly disposable income, multiplying that by 12, adding in the value of your assets and that equals the amount of your offer. So monthly disposable income sounds like kind of a technical term but what it means is the difference between your actual incomes minus your allowable expenses. Allowable is the key word in that sentence. What that means is, things that the IRS determines are allowable. Food, clothing, misc., your housing and utilities expense, your transportation expense, your taxes, your out of pocket medical expense, your health insurance, things like that. So when we got done talking, didn’t you say your annual income is about $65,000 a year?
J: Personal annual income is about $65K.
D: You have like, I forget how many kids…6 or 7 kids?
J: I forget too every day. We have 7 kids but 6 are at home so we’re a family of 8.
D: So you’re a family of 8 living on 65 grand and when you told me that, we weren’t face to face but I got a big smile on my face because I got really excited. I think there’s an extremely high likelihood with a family of 8 in the area that you live in, living on $65,000 year, you’re going to have a negative monthly disposable income. There just isn’t any money left. Is that fair to say?
J: It’s very fair to say.
D: We can laugh at it because it’s kind of a sad story, but I have a very sneaking suspicion that after we get this thing settled, it’s going to turn into one of the happiest stories of your life. You have no assets, is that fair?
J: Yeah, I…nothing. I have a beautiful family, those are my assets.
D: I know you’re a really kind hearted guy, you run a company and you employ like a dozen relatives or something like that and everybody is kind of struggling. When we go to the math equation of the disposable income times 12 plus assets, your monthly disposable income is negative. That’s a pretty strong presumption that I have. You have no assets, so if we try to do the math, your number would come out negative. Well, that makes no sense that means the IRS would pay you to settle your $125,000 tax problem and that’s kind of nonsensical. What we do in this situation, John, as we go ahead and we pick a number that we’re going to offer to the IRS. It’s really awesome. I have friends around the country, I’m not this brave, but I have friends around the country that are offering $1, $10, things like that. I did have one case where I offered $20 and it went through. I did that because I was kind of upset at the IRS agent and the situation and I did it just to see what happened. It did go through. But in your case, we’re probably going to offer like $250 or $500, you’re going to have to pay a filing fee of $186 and a 20% down payment. So if we offer $500, you have to come up with $186 filing fee and $100 down payment, so $286. I didn’t tell you this yesterday because I forgot, but you’re probably going to be under the federal poverty guidelines for a family of 8 at $65,000 so there’s actually a really good chance that all of the filing fees and down payment are going to be waived, which is pretty cool.
J: Oh, wow, that is cool.
D: Then we’re going to go ahead and we’re going to prep the offer, you’ll get a bunch of documentation from you, we’re going to basically prove to the IRS that there is no chance in heck that you’re going to be able to afford to pay back $125,000. We’re going to file the offer. The offer’s going to sit around at the IRS, probably for 6-12 months before it ends up in somebody’s queue and they end up working on it. That irs employee is going toe eventually call me and then we’re going to have to answer some questions and provide some back up documentation and some updated documentation and what not, and then they’re going to come up with a number most likely, typically. That number might be what we offer, it might be the $500, it might be $1200, I don’t know. It might get rejected, there might be some fact that you haven’t told me about that I don’t know. Anything can happen. But there’s a pretty good chance based on the facts that we’ve discussed that this offer is going to go through under $1,000. After that offer is accepted and we get that formal letter, you’re going to go ahead and have five months from that acceptance to pay that offer off. That sound good?
J: Absolutely. You were saying also that’s contingent upon me paying my estimated taxes.
D: Yeah, brilliant question because I had forgot to say that. You do have to be current with your ongoing tax obligations. In your case, you’re self-employed so you’re going to have to make some estimated tax payments because the irs frankly cares much more about the fact that you’re getting current and getting back into the system then they do about collecting that old money. I’m not going to have much trouble, I don’t think, in demonstrating that you can’t pay back the old tax, but I have to be able to demonstrate to them that you and I have had this conversation and that you get it and you’re going to be making estimated tax payments and remaining current forevermore. One of the conditions of the offer and compromise is that you have to remain current. File your tax returns on time, and pay them for 5 years. Are you going to have a problem with that?
J: Absolutely, no I won’t.
D: Seems like a pretty good deal, right?
J: Yeah, I learned the value of paying my taxes on time.
D: I have some notes here because I knew we were going to be talking about this today. One of the other reasons why people end up not dealing with their tax problems right away, is because they’re procrastinators. That’s sort of the personality profile of most people that have tax problems is because they’re procrastinators. They didn’t file their returns on time because they didn’t want to deal with the accounting, they just didn’t want to deal with it so they have a tendency to procrastinate until almost the world falls out from underneath them. In fact, today I was talking to a gentleman, who had come in, hadn’t filed for about 20 years. He’s going to owe about $125,000. He didn’t do anything until the IRS actually levied his income source. That’s really not a good idea because what happened is they levied his income source and now what’s he going to do? He doesn’t really have the money to hire professional help, he doesn’t have the money to get caught up on his estimated tax payments, he’s actually in a bind. Procrastinators are one of the types of personalities that end up with tax problems for sure. Did you file your returns right away when you were supposed to?
J: yeah, because my frame of mind at that point was I just didn’t want to go to prison and that seemed to be what was scaring me more than anything so I said listen, I’d rather, if there’s such a thing as going to prison for not paying your taxes that’s fine, but I’m not going to go because I didn’t file my taxes. Or I tried to hide money. I always always report 100% of the money I make and it’s all easy for me to figure because it’s all electronic payments, but I had no worries there. I don’t have that many deductibles that I was trying to take. Long way to say yeah, we filed all that on time.
D: Well, that’s really good, you wouldn’t want to have the shame and the fear AND the procrastination all wrapped up in one person, that would be very bad. But I do run across people like that. In fact, one of my favorite procrastination stories is one time I had a gentleman come into the office and he was very, he was very nervous. He was visually shaken. He was sweating. He was trembling. He was an older gentleman in his 60’s and he sat down and I kind of just wanted to put him at ease so I said a few nice things, weather kind of conversation things. Then I asked him what was going on and he said well, I think I’m going to go to prison over this tax stuff. I asked him why and he said “I haven’t filed a tax return since 1960.” Let’s just say I was born several years after that and I got a big grin on my face and I actually, kind of smiled. I was pretty happy because I knew I could solve the problem for the guy. Ultimately he owed maybe $75,000 or something. We filed an Offer and Compromise, we got him all taken care of. That’s my favorite procrastination story. I don’t know if I’m ever going to meet someone that procrastinated for 55 years or whatever. Procrastination is definitely a big problem. Then I guess there are some people who are just oblivious to their tax filing obligations. You think that’s true?
J: Yeah, I was. I didn’t even think I was going to owe tax. This is how out of my mind I was. I was used to getting a little bit of money back every year with earned income credit with the amount of children we had. I was shocked when the guy said, not only was I not getting money back, but I had to pay money. It was something that I was oblivious to. It’s embarrassing for me to say. If you’re not used to having a tax bill, when one comes, it’s a surprise. It was a big surprise.
D: Well, John, we’re at the bottom of the hour, this is a hard break, I’m going to put you on the spot, do you want to stay over, do you have anything else you want to talk about, or are you good?
J: I’m good. If you need me to stay over, but I just want to say I have a lot more hope, waking up today because I feel a lot lighter because I handed that off to you and I know it’s in good hands. Now I can get busy building my life again and just handing you the baton, feels pretty darn good.
D: Outstanding. You’re going to give me an opportunity to do what I do best. And that’s help people with the biggest problem in their life.
D: Welcome back, this is your IRS solution attorney, Darrin Mish. I think I’m being joined by my cohost, Katrina Madewell. Katrina, are you there?
D: We might be having some technical difficulties with Katrina.
Katrina: That’s right, you know we have to show up in our real job. We don’t always get to do the fun stuff every day.
D: Yeah, for sure for sure. Hey, were you listening in our last segment where John called in?
K: I missed the last segment, I’m sorry. I had appointments to move around. What did I miss?
D: No problem. We’re going to go ahead and recap it anyway. The situation is, John and I have known each other for about a year. We have a close professional relationship and that’s turned into a friendship. We chat or communicate many times every day, so we have this close relationship and yesterday he finally lowers the boom on me and he goes…hey dude, I got a tax problem. And I’m like “really? How come you haven’t told me before this? You know what I do for a living, you listen to the show, you can probably recite what I say verbatim”. He says “well, you know I owe $125,000 from 2011, 2012. I had a downturn in business, and I was ashamed Darrin, to tell you about the problem.” And so, we chatted about it and it turns out that he’s at… you know when you’re a business owner you have upcycles and down cycles?
K: Of course, yeah.
D: So, he’s right in the middle of one of those troughs that us business owners really dread. But he’s in the middle of a trough and he’s an entrepreneurial guy, he’s a naturally optimistic guy and he’s just fired up that he can out-earn his way out of this $125,000 tax problem. But he confided in me that he’s in this trough and he’s making about $65,000 a year supporting a family of eight…EIGHT…and we discussed it and we decided that now is the actually…the opportune time for him to go ahead and file and offer and compromise. You got to take advantage of the challenges you have in life. I believe very firmly that every challenge that we face in life is really an opportunity in disguise, you just have to find out what the opportunity is. His opportunity here is, when you’re earning $65,000 a year and supporting a family of eight, it’s not going to be real hard to convince the IRS that you have no ability to pay.
K: I can image the hardest thing for him, say our friend, would be just to tell you that he had a problem but I could see you’re very humble, taking that with grace and like “hey”…
D: You just cut out Katrina. You know, when we were talking on the phone yesterday, I was actually a tiny bit hard on him. The only reason I was a tiny bit hard on him is because we’re buds…we’re friends. I was kind of giving him a hard time about it. Come on, man, I understand you’re an optimistic guy and that business is eventually going to turn around for you, and I know it will. But now is the time to go ahead and just face this fear, let’s give it a shot, the worst thing that could happen is the IRS says no. The best thing that could happen is the IRS says, we could settle for some small amount that he can swing.
K: What’s the time period usually that they actually come back and give you an answer? How fast or slow is that process, I forget?
D: If you’re self-employed like he is, it’s usually running somewhere between 6-12 months, which is kind of a drag, right? Once you do this, you kind of want to know. But in 6-12 months, sometimes faster. The great thing is, during that time that the offer is pending, there’s actually a collection hold on the account. That means the IRS has to leave you alone. Now in his case, it was kind of a cool fact, was that they had already placed his account into what’s called a hardship status, so they’ve already done financials with the IRS and the IRS has already come to the independent conclusion that he has no ability to pay on a monthly basis. If you’re making $65,000 a year and you’re supporting a family of eight, I don’t think it takes a brain surgeon to realize you can’t afford to pay anything. But that’s the time to take advantage of this. There wasn’t a real dispute about he couldn’t afford to pay, so I was a little bit hard on him. We got to do this offer, we got to do it pretty much now and we have to get this thing in. What happens if his business really does turn around and he makes $200,000 or something, well then the offer’s going to be…
K: Yeah, that’s what I was thinking…what happens since it takes so long…in that 6-12 months and that offer’s on the table and he’s just…let’s say he gets a good six month period in a few months. Aren’t they going to be able to freeze his back account or (?) any money or any of that crazy stuff?
D: Well no, because what will happen is the offer will be rejected. It doesn’t mean they’re going to immediately levy the account or anything like that. But I have a story I’d like to tell about this situation. I once represented a realtor, right as the boom was about to happen in southwest Florida. He owed about $75,000, we submitted an offer and compromise because he was struggling. Right before we filed the offer, he says, “Darrin, I think I’m going to start making about $50,000 a month.” And I said “Well, I think you would agree with me, if you start making $50,000 a month, that’s a quality problem and paying $75,000 really won’t be that big a deal.” The client said “yeah, ok, I’m down with that, I can agree with that.” So we filed the offer and lo and behold, that’s what happened. He started selling lots of high dollar stuff. High volume, high dollar stuff and he made a lot of money. So his offer was rejected and so he called me when the offer was rejected and we had a conversation. He was kind of complaining, he was kind of pointing fingers and stuff. And I said, wait a minute, let’s go back to that conversation we had on day one and you agreed if you were making that kind of money that would be a quality problem and he kind of sheepishly agreed and he ended up paying the bill.
K: So you’ve got to look at the (?) and say it could be so much worse. If you don’t have any money, of course you want to settle, but the worst case scenario is you’re not making the money and the IRS still wants the money.
D: So, yeah, I think this is a really important point. This might happen in John’s case and that is sometimes, after the offer and compromise is filed, then that background anxiety, that background fear that he’s been committing mental and emotional brain cycles to, that gets significantly alleviated and sometimes see the entrepreneur type, his business really start to skyrocket ahead of time, ahead of schedule, so to speak because he’s not dealing with it, he’s not crippled by it anymore. I know John pretty well and John’s pretty much crippled emotionally by having this problem in his life. It’s a pride thing, he’s the provider for not only his family of eight, but for his extended family. He employs about 10 or 12 other family members, they live in a very small town, and he has a lot of pride wrapped up in the fact that he owes the IRS a lot of money. I don’t blame him for that. I kind of hope it doesn’t work out like that. What, my ideal outcome for John would be we file the offer and compromise, it settles in 4-6 months, and then in month 7 his business takes off and he’s off to the races.
K: Like you said, I think you hit the nail on the head earlier when you said it’s about what you’re going to take away from the experience, not about the present moment.
D: Yeah, I don’t think…knowing John as well as I do…I don’t think he’ll ever have a tax problem again. I really don’t. I think if he ends up making a half million dollars a year or whatever, like he did in the past, that – especially through our help – we’ll make sure he pays his taxes on time. He’s going to be grateful to pay his taxes on time. When you end up in a problem, this seemingly insurmountable where you owe over six figures to the IRS, you need a break. Most people need a break. There’s not a lot of people that are going to be able to use brute force to go ahead and work their way out of this. I happen to know John really well, he works six and a half days a week and he’s working 12+ hours a day. We had a talk about that too, and the fact that he’s working so hard he’s reached the part of diminishing returns and effectiveness. That’s how dedicated he is to his family and to try to out-earn his problem and that’s just not going to happen. We need to use an alternative administrative sort of solution.
K: You can’t always out-earn stupidity either, can you? You have to learn from those things.
D: I think he’s listening, and John, Katrina just called you stupid I think.
K: No, No, NO. That’s not what I said at all. I said out-earn your stupidity. When I say that, I’m digging on myself because I was there, in my young 20’s and my take-away from that is you can’t out-earn your stupidity. Meaning ok, you make a stupid mistake, everyone’s done it, but let’s – what are we learning from this? Let’s chop this up and move on. More importantly, what can you teach your kids to take away from this so they don’t end up in the same position?
D: Yeah, absolutely, and make sure – I mean we all do stupid things – we all make mistakes and whatnot. I think it’s a demonstration of a mature person, when we do something stupid and we manage to get our way out of it, somehow, that we keep the lesson. We make sure that we learn a lesson out of that hardship that we had and make sure that we emerge better people. I think that’s- there’s a lot of opportunities – there’s a lot of people frankly in our society that don’t do that. They make dumb mistakes and they make similar mistakes over and over and over. But I think it’s a sign of an enlightened mature person where they make a mistake and they grow from it.
K: Well, the crazy part is, when you owe the IRS money, maybe I’m wrong, Darrin, but I don’t think there’s a whole lot of resources out there to really get help. If you’re trying to get out of debt, there’s a million books you can read about getting out of debt and building well. But owing the IRS money and how to avoid that whole situation, there’s just not a lot of resources for it. I think sometimes that’s one of those things where if you do earn a lot of money and you have those valleys and you weren’t prepared for that, that’s the life lesson that you get.
D: Yeah, that’s why I have so many videos, that’s why I’m doing the radio show, frankly, that’s why I do a podcast is because there’s not a lot of resources out there. If you go to my website at getirshelp.com, I think there’s over 200 videos where I explain in really clear detail, how to handle every IRS problem under the sun pretty much. I haven’t told you this story because it’s kind of cool, but I had a guy from Phoenix, AZ wrote in last week and he told me that he had actually solved – he had a wage levy, he had a bank levy – and he didn’t have any money and he went on YouTube and he searched for those subjects, he watched my videos, he followed my instructions in painstaking detail, and he managed to get his own levy released. There’s some people that think that I wouldn’t like that because he didn’t pay me any money. NO, actually I was pumped, I was stoked, I thought that was the coolest thing ever, that I actually introduced value into the universe and someone benefited from that value. That sounds kind of corny and it might even sound insincere, but I have a firm belief that there’s plenty of people out there with irs problems, something like 10% of the population has a tax problem and I just know that if I just put value out there to people, some people solve their own problems and plenty of people give me a call and allow me the opportunity to help them as well.
K: Everybody has to have their mission in life, you know. Not only should you know a lot about what you do, but I think when you love what you do and you’re – it just comes natural. You don’t mind stuff like that because that’s why you’re here, you’re here to serve people like that. You know as well as I do that you represent people all over in every state, not just here in the bay area.
D: As a matter of fact, John is in another state. Hey, Katrina, we’re coming up on another break. When we come back we’re going to answer some questions that we got on Twitter, ok?
K: Sounds good.
D: Welcome back, I’m your IRS solution attorney, Darrin Mish, and I’m joined by my cohost, Katrina Madewell, on the phone. Katrina, are you here?
K: I’m here, welcome back!
D: So this is kind of a gratuitous question but I’m going to go ahead and ask it anyway. From someone who wants to remain anonymous, her question or his question is, what’s the best way to get in touch with me? I need your help? The first thing I would say is hey, call in! 727-441-3000. That’s 727-441-3000. If you’re shy or if you’re not as brave as John was today to talk about your problem in real time, you can call the office at 888-GET-MISH, that’s 888-4386474 or you can always kind of visit our website at getirshelp.com and you can do what we call the slow yes. Katrina, I’ve not ever mentioned this on air, but I have a book called the Seven Secrets that the IRS Doesn’t Want you to Know About and if you visit the website at getirshelp.com, you can just for your first name and your email address, we’ll go ahead and send you a free copy of that eBook, it’s only about 30 pages long and it tells you over seven secrets that the irs doesn’t want you to know. So some of that fear and that anxiety can be dissipated because frankly, the reason we are fearful of things is because we have a lack of knowledge and I think that’s why most taxpayers are afraid.
K: Of course, fear of the unknown, fear of Big Brother all the horror stories you hear.
D: I have another question, it says I’m behind on my taxes for 2015 as well as 2014, can I lump both years together in an offer and compromise or do I need to get current on this year first? This is really a good question.
K: That’s a very good question.
D: Yeah, I know that John is in this position and I talked to another gentleman today that’s in this position as well. We just started the 10th month of the year and if you haven’t made any estimated tax payments through the year, it could be a considerable amount of money, it could be. In fact, in the situation where the gentleman came in today, it was $6,000, so in order to file an offer and compromise with the rest of 2015, you would have to come up with $6,000 to basically cover the 2015 liability. So I made his day when I told him, hey, I think you’re probably behind the eight ball on that I don’t know that you’re going to be able to come up with that. Why don’t we wait until January, then we’ll just have to get caught up for your estimated tax payments for January, just one month, and then we’ll file an offer and compromise then. We’ll just lump 15 on top. Needless to say, he liked that answer very very much.
K: I bet he did. Is that what…I get what you’re saying about the tax payments being behind, but what about the tax return, is that ever an issue?
D: Well, you have to file all of your tax returns in order to file an offer and compromise for sure, that’s part of being current. What he would need to do…and that’s a good question by the way…what he’s going to need to do is he’s going to need to file his 2015 pretty early in that cycle. You have until April 15, or October 15 with an extension, but especially if you’re self-employed you can file your return in January. You’re probably not waiting on W-2’s and 1099’s. It’s just a matter of, do we have the information to file it? So, yeah, we’d have to prepare the return pretty early in the filing cycle and make sure that got on there so we could put it on the offer.
K: So file the return, don’t pay whatever you owe, figure it out, lump them together, settle whatever it is, then that’s your reset button basically.
D: Yeah, it’s kind of like bankruptcy. When you file bankruptcy. What’s bankruptcy there for? Bankruptcy is there to give the debtor a fresh start. And the concept of bankruptcy has been in our culture for 100’s of years. It’s a well-known and sort of understood fact that some people get themselves into such debt problems that they just can’t pay their way out. The offer and compromise program was set up by congress, to deal with a very similar situation, it’s to give the taxpayer a fresh start. It’s really to get the taxpayer back into the tax system. If there isn’t some way out, what’s the normal taxpayer going to do? They’re just going to go in the shadows, they’re just going to stay out of the system and it might go another 5, 10, 20, 30 years. It allows them to go ahead and just get a fresh start.
K: That’s a good point for people not to lose sight of. That makes total complete sense that they want you to basically reset so that you’ll get back in the system, you’ll start repaying because if you forever dig that hole and you never come back, that’s just not how our country’s set up to operate.
D: Yeah, it’s not fair. Our country is predicated on a concept of fairness. It isn’t fair to allow some people to get so far behind on their tax debts, they really can’t get out of it. That’s why congress set up this system, it’s basically fundamental fairness. Did they make mistakes to end up owing over $100,000 in taxes? Sure, nobody is going to dispute that. John from earlier wouldn’t even dispute that. He made a mistake, I’ve made a mistake, you’ve shared that you’ve made a mistake and end up owing taxes. Fortunately between you and I we were able to pay our way out, but some people… Our train wreck of the week is coming up here in a minute and I’m going to tell a story about someone, there’s just no way this guy was ever going to get out of the problem he created.
K: The crazy thing is, Darrin, I actually pay my tax payment before I pay myself.
D: Well, that’s kind of what you have to do, you know. I’m sure as a realtor you counsel people when they buy a house, now listen, you’re going from a renter into a homeowner. You have to put that mortgage payment right at the top of the stack, man. It’s like your electric bill, what happens if you don’t pay your electric bill? Well, you’re hot, down here in Tampa, you end up really hot and you end up in the dark, they just turn it off. It’s kind of similar with a mortgage, if you don’t pay your mortgage, eventually we’re going to kick you out of your house. Same thing with a tax bill, if you don’t pay your tax bill eventually you’re going to end up with this anxiety and this giant problem that we’ve been discussing. You just have to…especially with estimated tax payments…you just have to put the priority really high.
K: Yeah, but like you said, it’s a matter of…I was in that issue, you were in that issue and we learned from that issue and that’s why I haven’t written my paycheck yet, but the irs got their money.
D: So, I have a really really funny question before we go to the train wreck of the week. It says no question for you just wanted to let you know I love your show…are you and Katrina partners? I’ve got to tell you I got a good chuckle out of that one. Well, I guess we’re partners on the show, we’re certainly not life partners, right?
K: No, we have our own spouses and we’re mentally partners with this show. No, my business is completely independent of Darrin’s, but that’s a great question.
D: Yeah, I like that, and you’re such a good partner that even though I thought I was flying completely solo today and I was kind of fumbling my way through, you ended up calling from the car to help me out and I want you to know I really appreciate that.
K: Me too, I’m sorry I had to rearrange stuff a little bit I had a lady I had to reschedule from yesterday to today and it ran late so..I’m still here!
D: Yeah, you know it’s all about helping people and that’s what you needed to do, you needed to be gone so you could help.
(train whistle blowing)
D: Ok, so we’re going to talk about my favorite segment of the show. I had to scratch my head today, honestly, I didn’t have someone right on top of mind, but I actually got an email from this gentleman yesterday. He was self-employed for a number of years and he ended up racking up a tax bill of $396,897. Now, that is a lot of money. He went through and suffered the downturn in business that we were discussing. The recession. I guess the recession kind of started in 2008. Is it over yet? I don’t know, I think it is officially, but I don’t think it is in reality.
K: I mean, it’s you know, we still have a bunch of stuff lingering, like that property I was at earlier, it’s a really weird mix. There’s foreclosures in there. The prices are over 100 grand spread all over the board. It was a really tough one to pinpoint a value on, so are we out of the recession? That’s a loaded question, I don’t think we are.
D: I think politically we have to say we are because we’re not…we are growing, albeit at the slowest rate in the history of any recovery, I think it’s around 2%, but I’m not here to talk politics. So he suffered a downturn in business and then he had a double whammy and this is fairly common. He ended up with some kind of debilitating illness where he basically can’t even really go out on his own out of the house. He can go out and pick the kids up from the school, he can work but only remotely, he can’t really travel like he used to. So we ended up filing an offer and compromise from him, I think in 2013. I forgot what we offered, not a lot because we were able to show that he had these problems and he had almost no ability to pay. You know what happened, Katrina? The IRS actually came back and they rejected his offer. It was really a bummer, he was really disappointed, I was disappointed. They had some cockamamie theory that he had the ability to pay the whole thing, which was crazy, so we did what we have to do sometimes, which is we went ahead and filed an appeal with the irs. That appeal took about 7-9 months, quite a while. But you know the train wreck of the week always has a happy ending. So what happened was, in April of this year they actually came back, accepted it, $1221. So he had to come up with $1221 to settle $396,897. So almost $400,000, he settled for just a little over 1200 bucks.
K: That’s so amazing because that’s more than most people’s house in the bay area.
D: Oh, the $400,000?
D: Yeah, absolutely. HE owed a tremendous amount of money but when it came right down to it, with the health problems that he has and the limited income that he had. What are the odds that he was ever going to be able to pay that? The odds were infinitesimal. I was very pleased, we were able to convince the IRS appeals that that was the very best deal that the IRS was ever going to get out of him. And I know…he just contacted me the other day…he made his last payment and he’s just waiting for all those tax liens to be released so he can get on with his life and I know he’s jazzed about it. I’ve got to tell you, those cases are a lot of fun. I say this a lot, but it’s thrilling to be able to be trusted to help people with the very biggest problem they have in their lives.
K: I’m sure. I can’t even imagine. I wish the one tax problem I had in my whole life, I wish I knew you then. I didn’t unfortunately but you know… I do now. I was thinking, your show is right on time and I don’t normally promote my show, but I have two shows lined up this week which I think tie in to…I can’t image the burden people feel when they come in to visit you initially. So the guy I have today on the 5 o’clock show, this whole quest for organic happiness I thought that would be a little uplifting. And then Rachel Cruise, Dave Ramsey’s daughter, is going to be on Saturday at 5 talking about teaching your kids how to win with money.
D: That’s awesome, I’m glad you went ahead and told us about that. One of the things I focus on more than can I solve the problem because I’m usually very confident that I can, I try to focus on the people and their emotions and their anxieties and the trouble they’re having. I want us to be able to put them at ease so they don’t suffer needlessly any longer.
K: It’s a long process, two years sometimes it sounds like on some of these.
D: So, Katrina, that’s about it for today. I want you to know I appreciate you calling in from the road, it’s been a lot fun. This has been a little bit of a different show. Maybe we’ll continue this trend, I really enjoy talking about the emotional and mental barriers behind tax problems. So tune in next week, 1pm, Thursday afternoon.