Introductory audio: Liens, levies, wage garnishments, back tax debts of all kinds. If you’re facing any of these tax debt problems, stay tuned for the next 30 minutes. This is the Levy Tax Help Show presented by Levy and Associated of Delray Beach, tax resolution specialists. Call Levy and Associated 24-hours a day, seven days a week with all of your civil tax questions, 1-800-TAX-LEVY, that’s 1-800-829-5389. Now, the Levy Tax Help Show.
Lawrence: Good morning, South Florida, and welcome once again to the Levy Tax Help Show. We hope that everyone has had a great week. We certainly see a lot of people in the Levy Office who were able to move their lives in a positive direction by getting things under control. We are going to talk about a few pretty big success stories on today’s show.
Before we start off, let me introduce everyone to a very famous, former IRS employee, a guy named Greg Mahaffey is joining us again. He has been in the Levy Office for a while now. He was at the IRS, Greg, for how long?
Greg: Over thirty-two years.
Lawrence: Thirty-two years at the IRS as a revenue officer. You worked a little bit of time in the offer and compromise unit as well. So, you come with a very nice skillset. This week, we had a really nice piece of mail come in. I have it in my hand. It is dated, Friday, April 13th. As everyone recalls the 15th happened to fall on the Sunday and the following Monday would have been the filing day, but because it was Emancipation Day, that kicked until the Tuesday. On that Tuesday, the IRS computers crashed, which has never happened in the history of e-filing. The commissioner came on and said, “Great, you will end up getting until that following Wednesday”.
This letter was dated, April 13th. It was a client that is in, what we will call, the construction industry and owed somewhere around a half of a million dollars. I don’t know the exact amount, but it was up there. The gentleman had offered $179,000. So, not quite the pennies on the dollar, but less than 50 cents on the dollar against his debt which, again, was probably about five or six hundred thousand dollars.
The point being, it was a very fair offer that was calculated out, based upon the IRS analysis that we have to do to determine if somebody is going to qualify for an offer and compromise. This file started at the fall of last year. The revenue officer that was assigned to the file basically thought this was an intentional delay of collection. Greg got involved here because the POA who submitted it ended up having a baby. So, Greg ended up having to take over the file while she was out taking care of her new born baby.
So, if anyone is listening, this gets a little complicated, but a revenue officer generally speaking will write what is called a 657. It means, they give their opinion. It is ‘thumbs up, or thumbs down’ on what they believe to be the validity of the offer. In this case, the revenue officer didn’t really have a good reason. He just happened to be, what we will call ‘unfriendly’, which is the best way to put it. Greg, you then had to step in as the power of attorney, talk to his manager, talk to the territory manager, talk to a number of people because what happened was that the IRS returned the offer as an intentional delay of collection.
So, now, you go back to the revenue officer and say, “Why? Why do you believe that the offer is not one that has got legs on it?” Since, when did revenue officers become the gatekeepers of offer and compromise? That is not the intention of the system. The intention is to have the offer and compromise unit analyze process. I am sure there are practitioners out there, and tax-payers who file borderline ‘waste of time’ offer and compromises that have no chance of succeeding whatsoever, but if it is a valid offer, let the tax-payer have their right to an offer and compromise analysis. It is a two-round challenge. If the offer specialist disagrees, you get the rejection of the offer and then you go to appeals.
Greg, you spent so much time. This wasn’t a day or two, or three days, it was into two weeks of trying to explain to the territory manager, because the manager at the time, I think, was out of the revenue office, and that this was a valid offer. So, now the back channels of the IRS, for lack of a better terms, had to go back and reinstate the offer and let it go on its natural course. Do you remember that, Greg?
Greg: Yes. I definitely remember. Number one, it doesn’t make any sense at all because when people make frivolous offers it is usually for a dollar, or one hundred dollars, or a thousand dollars on their five-million-dollar liability. They are still (? 00:05:02) taxes, and they just do this to stall and waste time, but this was a legitimate offer. It was over one hundred thousand dollars with 20% of it paid down. I don’t know about anyone else, but I don’t have $25,000 lying around that I can just throw away. Essentially, the IRS just stalled him for six months and it didn’t make any sense whatsoever. How did the IRS determine that this was a frivolous, waste of time offer? That is not his job. His job was to simply process the offer, forward it to the offer group, put his two cents in, and in this case, he went far beyond his allotted duties. He decided to become judge, jury, and executioner all at the same time, trying to kill the offer, which he almost did.
It is only because we had to intervene and basically a race came with the management chain of command explaining to them why this was not a frivolous offer.
Lawrence: Greg, I just want to chime in too. Management, in this case, was absolutely incredible. They were incredibly polite. They were incredibly smart. They were incredibly professional. So, the management, which was at several levels, had to get involved with you and they were absolutely great to deal with.
We bring this up because it happened recently, again. For one of our recent clients, we weren’t the POA, but a POA that happened to be assisting a tax-payer that owed over a million dollars, and this was about four or five years ago, and the exact same thing happened. The offer, again, was not a five-dollar offer. I don’t remember the exact amount, but it was enough, and the revenue officer did the same thing. Now, that case has become overly complicated, when back then, it was more than a valid offer, at least from the way that my staff is looking at it.
So, my point to telling the story is, in my hand I have an acceptance letter. It is dated, Friday, lucky April 13th, for this gentleman who was plagued with an IRS liability that was on for, literally, back to 2004. He had over a decade of IRS problems and now is able to see light at the end of the tunnel.
Like Greg said, “Why in the world would someone pay $35,000, which was the 20% down payment, just to buy a week of time, or six months of time?” It absolutely makes no sense to me whatsoever. That is the frustrating part.
Here we are, where Greg and one of the other POAs were trying to explain what was going on. Greg wasn’t intimately involved in this file and so he is trying to pick up the pieces after we had, what we believed to be a solid offer that was submitted on behalf of the tax-payer. Now, Greg is having to wrestle with a revenue officer that is really not willing to give an explanation. So, Greg, when you asked the revenue officer, “What is your analysis, and why do you believe that this is not a valid offer?” The reply was silence. It was dead air. For everyone who is listening, do you remember eighth-grade math, it could be sixth-grade. I have a son in sixth-grade, but the teacher says, “Show me your work?” Greg, they said that to me and they said that to you, do you remember those days?
Greg: Yes. Definitely.
Lawrence: We say the same thing. This just happened with Florida Dept. of Revenue too. We had a client that owed one hundred thousand dollars. The Florida Dept. of Revenue comes back and says, “Here is what they need to pay as a down payment, and here is what they need to pay each month.” We said, “Wait a second, how do you know if they can afford to pay that as a down payment, and how do you know what they can afford to pay on a monthly basis?” You need to look at their financials. As opposed to taking the eight-grade math teacher approach and saying, “Show me your work”. They just come up with an arbitrary number without financial analysis to determine anything, and this is Florida Dept. of Revenue, not IRS. It is absolutely insane, as far as I am concerned, that this is what goes on. The average person out there wouldn’t know what to do and wouldn’t know what options exist or wouldn’t know what you can do and what you can’t, to talk to a manager, or a territory manager (with the IRS scenario), and the average person wouldn’t know what to do.
I am going to give you another example, but, before I do, let me give out that phone number.
Local 561 865 7800 Toll free 800-TAX-LEVY
Yes, Levy really is my last name. Also, before I forget, I promised I would give big shout out to the electricians of the world that are out there. In Michigan, there was an ice storm on Sunday, April 15th. At my office, we had to have electricians mobilize and come on-site in the early hours on the Monday morning of the 16th so that we could be up and running. A lot of times, we say thank you to the first responders. A lot of times we say thank you to the military, and the retired military. Greg, you were in the Navy, right?
Greg: Yes. That is right, in active duty during desert storm.
Lawrence: We thank you for your service. I want to give a special shout out to the electricians. If you are listening, I don’t care if you (? 00:10:14) electricians, but the electricians out there saved the day in the Levy Office in Michigan when we had an ice storm that took out the power. It was out on Sunday, Monday, Tuesday, and half of Wednesday. So, I really want to say to those electricians listening, “Thank you, guys. You really came to the rescue and I will forever be grateful because we were able to have our computers up and running”. We didn’t quite have lights. We had 1.5 furnaces running, but it was better than nothing. We literally had flash lights. It was crazy. We couldn’t plug in the (? 00:10:43). We couldn’t plug in the coffee maker, but it was great. So, “Thanks guys.” I want to say that, and “Thank you, Greg, for your service”, and for anyone listening out there, the first responders, the police officers.
I want to share a quick story while talking about that. I want to digress for a second. I saw this video where this lady, who happened to be a commissioner, so a civilian that was a commissioner of the police, or the port authority, or something, and she ended up getting a call from her eighteen, or nineteen-year-old daughter who was a passenger in a car and the boy who was driving got pulled over by the local police. She comes up there and she starts saying to the police, rudely, “Why did you pull that car over? I am the commissioner and I need to know what is going on”. The police officer said, politely, “Mam, you daughter is a passenger. She is not in trouble. The boy who was driving isn’t really in trouble either but talk to them. They are over eighteen years old. You are just here to pick the kids up because we are impounding the car.” She went on, and on, and on, and was so rude to this police officer. There were actually two police officers, both men. She was so obnoxious and so rude, I just want to say to all of the police officers out there, “We thank you for protecting us. We thank you for what you do”. Much like, we thanked the first responders. We are away off of taxes, but I just wanted to bring that up. Sometimes, I talk about unrelated things to break-up the show, if you will.
Getting back to taxes and getting back to the phone number.
Toll free 800-TAX-LEVY
And, remember, ‘You want a Levy on your side, not one against you. You don’t fear a levy, you hire a Levy’.
What a great feeling it is, Greg, when you were the offer and compromise in for this gentleman that was accepted. It makes our job so worthwhile. The happiness, the tears of joy, these clients say, “What a Godsend we are.” We try to help. We don’t have a magic wand. So, let’s be very clear. That magic wand doesn’t always exist and, sometimes, the client makes too much, or spends too much, or they have too much. So, not every client is going to qualify for an offer and compromise. It is just the way it works. Sometimes, you go into a payment plan.
Let me give you another example of a client, locally, right here in Florida that owed the IRS, on paper at least, just under a quarter of a million dollars. It as $230,000 or $240,000. It was substantial dollars. As it turns out, with this gentleman there was an issue with the IRS disallowing a mortgage interest deduction. This went on for years. The guy was going through a bit of a rough time emotionally in his life. He never responded to letters. The CPA, the accountant wasn’t too helpful and now he comes to us and he has got this debt. Well, after we analyzed the debt it appears that this can simply be fixed by going back for audit reconsideration, although we won’t know for a little while. In essence, there is a few options, but, basically, we are saying to the IRS, “Can you please go back and take a look at this because the tax-payer didn’t respond, or didn’t respond properly”, which is literally going to be to the tune of a net change, we hope, of almost $200,000 plus. There is a way to fix your IRS problems. Whether it is accounting adjustments, an offer and compromise, or a payment plan. Whether the IRS has, what they call currently non-collectable.
Greg let’s talk about that. As a revenue officer who used to work at the IRS for thirty years, can you explain what currently non-collectable is? Then, I am going to talk a little bit about a letter that we received in the mail that was dated, April 18th. So, pretty recent. It came out of the Memphis Tennessee Service Center, to one of our clients and the end result was the appeals officer saying under the summary of determination, “Our decision is to grant you relief under IRC Section 6330, from the proposed collection action. His appeal has determined, based on verified financial information that your tax account is currently not collectable, period.” Let me just also say that this does not mean that the liability is no longer owed. It means that we have to determine that it is currently non-collectable. “No collection actions will be taken, except the offset of future refunds until we determine that collection should resume.”
What does that mean, Greg? We refer to it as CNC, the acronym for ‘currently non-collectable’. As a former IRS employee and as a former revenue officer who would put tax-payer in ‘currently non-collectable’, and now, as a power of attorney advocating and helping out tax-payers, translate to the listeners out there what CNC means.
Greg: Basically, the IRS makes a determination that a hardship exists at this time for whatever reason. It could be a wide variety of reasons. Some people lose their jobs. The breadwinner of the household may have passed on, died. It could be that you are going through severe medical issues and you have medical bills of the ying/yang which have to take a higher priority than paying your back taxes. It could be one of them.
There are a million different reasons why, but, basically the IRS does have a human side to it. If they determine that you currently cannot pay, that is what ‘currently non-collectable’ means. It does not wash away the debt. It does not forgive the debt. It just says that, at this time, we have made the determination that it is in our best interests just to let the account close, until your situation improves down the road. The way they make that determination is when you file future tax returns and they look at your adjusted gross income. When they set it as a ‘hardship’, they set it with a certain closing code depending upon your circumstances and of what they project you should be able to start paying when your income goes back up to that level. Until it does, your account will stay closed, providing you don’t owe any more taxes.
There is an important factor, and that is what we stress here at the Levy Team, we want to make sure that when we fix your problem, we fix it permanently.
So, if you get your case closed, it stays closed. That means that you don’t owe anymore taxes going forward. We stop the bleeding, like basic first aid. That is what we try to do, which a lot of firms do not do. They just slap a band-aid on it. They just let it go. “Well, we got your case closed. If it comes back open, you will have to pay us again.” That is not the way we work. When we close a case, we want to make sure it stays closed. We want someone’s account fixed permanently. Do it right the first time. Back to Lawrence.
Lawrence: I love that, “Back to you”. It feels like we are on TV. “Back to you, Greg.” “Back to you, Lawrence.”
Let’s talk about another client that was pretty recent. Yesterday morning, Friday, a very nice gentleman comes in. He and his wife owe the IRS over $300,000. Actually, he came in by himself. He has been a client for a couple of weeks now. His wife happens to be a physician. He happens to be an educator. They are nice couple. They are smart, but they just got behind. So, now, there is about five years of taxes that have to get caught up. This happens a lot.
Earlier this week, a client in the Delray Office came in. I think, it was on Wednesday morning. He has got a few years to get caught up on and get cleaned up. His case is assigned to a local revenue officer. Again, a nice guy, but, he just hasn’t got his corporate tax returns filed in a few years. Sometimes, it is because cash flow means they can’t afford to pay the accountant to do 12 months’ worth of book-keeping, and sometimes because they get scared and bury their head in the sand. The reasons why people don’t file are all over the board.
Greg, you have heard this, as a revenue officer, on countless times. Someone didn’t file taxes because they didn’t have the money to pay their accountant. They had a falling out with their accountant. Sometimes, the client got sick with cancer, or a heart-attack, or family medical issues. We just had a client last week that hasn’t filed in a few years and his brother is in a nursing home. His brother is sick and there are a lot of issues, and he had to go on an emergency, out of town, to take care of his family.
Greg, when you were working at the IRS, and a tax-payer maybe didn’t have a great compliance history comes to you. They still have to lead their life. Our clients are husbands, they are wives, they are mums and they are dads, they are brothers, they are sisters, and they are sometimes grand-parents. They are human beings, is my point. They have their kid’s birthday parties to go to. Their kid is sick. Their loved one is sick. They have to go to a wedding. It is just your normal things that go on in life, and, oftentimes, IRS just doesn’t care.
When you were a revenue officer, did you care, Greg? Did you understand? How many times have you had to go and take care of your kids, or your grand-daughter?
Greg: Yes. I have six grand-kids.
Lawrence: Yes, but those things happen. It is just life. Oftentimes, IRS just doesn’t seem to want to care. I say, “Seems to…”, but, maybe some people care. Maybe, Florida Dept. of Revenue cares, but it is so bizarre that you can’t have this human touch to it. I will tell you, however, that the Florida Dept. of Revenue this week… We had a client who was dealing with his brother, and the Florida Dept. of Revenue representative was very, very nice. She said, “No problem. We understand that your client is travelling to take care of his sick brother. We will give you a few weeks. No problem.” If you do it the right way, if you are communicative and just say, “Hey, this is a mess.”
Greg, you worked on a file with a revenue officer and a group manager, and the books are just a mess. After explaining that to the revenue officer, and to the group manager, they understood. To me, it is mind-blowing, and mind-boggling how some people just don’t take a reasonable, pragmatic case approach. It is unbelievable to me how much time we spend trying to discuss with the taxing authorities about why the client needs more time.
So, what purpose does it serve to further hurt a tax-payer by levying them? How are they going to pay to get their books done, to get their tax returns done? How are they going to function in business? It is just a never-ending cycle. The response, by the way, is, “There has got to be deadlines. There has got to be consequences. The clients, the tax-payers, oftentimes are the quintessential procrastinators. They bury their head in the sand.” There is, oftentimes, a lot of these issues that go on, that, unfortunately, you just need to take a real-life, hand-on, practical approach. We do the same thing with the client.
The gentleman that was in on Friday said, “Look, think of it like you haven’t paid your property taxes in five years and now your house is about to go on the auction block because of these taxes. You have got to come up with five years or you are going to lose your house. So, instead you have got to pay to have your accounting done for the last five years. It is the same thing. What is the difference? Whether it is accounting, or book-keeping, or taxes, paying property taxes is a bill that is passed through and you have got to get it done. We see that all too often.
Greg, when you were at the IRS, you did try and take a case resolution-oriented approach. You were always trying to move in that direction of trying to resolve a case, as opposed to being an obstacle, and as opposed to being the antithesis, the anti-Christ of a resolution, which we see. It just doesn’t make any sense to me. At certain levels of the tax authorities, why can’t there be a mutual philosophy of trying to move in a direction of a resolution. It is a win-win for everyone. The tax-payers get their mess cleaned-up. The IRS gets cleaned-up. The State gets cleaned-up, and, as Greg said, “In perpetuity, you keep them on that track of compliance”. We always talk about ‘Cs’ in this office. There a lot of them. We always say, “Current compliance is a critical component of any case resolution”. There are a lot of ‘Cs’ there.
I think, Greg, when you were at the IRS you always used to try and stress that so many tax-payers fell off the wagon and it was like a revolving door. What was the joke you would say?
Greg: Tax-payers never die, they just form new corporations.
Lawrence: Exactly, and again, that is an issue that you have got to be conscious of because you don’t want what is called an ‘altered ego nominee’. That is a big issue that you have got to be aware of, but, if there is a need to form a corporation, so be it.
I want to bring one last example. This was not an IRS related issue, but a State related issue. I got a call earlier this week, on Tuesday afternoon, from a high school buddy of mine. He said, “Hey, I know you are in the tax resolution business. My neighbor owes the State a decent chunk of money.” It turns out to be about $60,000. When the client ended up sending us over the documentation, it was literally from, I think, 2005 and 2006, or 2004 and 2005, but it was a long time ago. We said, “What happened?” It was a company at that time which was grossing about 3 – 3.5 million dollars. So, it was a decent size. They had a CFO, a controller, or whatever the guy was titled, who wasn’t telling them that things weren’t getting paid, and was not helpful. Then, it led to this. The company eventually went out of business. They were tied to the auto industry in Metro Detroit. Low and behold, now, ten years later, this gentleman is personally on the hook. Similar, to what is called ‘trust fund’ in the IRS world, but for $60,000. He said, “Oh my God, I only found out about it.” Now, he is trying to face that a decade later. It is the crazy things that we see in the IRS and State work, and in the tax resolution world.
If you have a problem, we have talked today about a gentleman that owed the IRS half of a million dollars, maybe more, and he was able to get an offer and compromise with the acceptance letter for $179.000, and literally was able to get a new lease on life. It was not even a couple of weeks ago. He is just as happy, as happy can be.
We had the State agreement to abate penalties for one of our clients. There is just so much that goes on and it is not just concentrated to tax season. It is throughout the whole year. We are as busy in October and November, and July, as we are on April 15th. That is just the way the tax resolution industry is geared.
Clients need to understand that they need to stay current. You can’t fall off of the wagon. You have to be paying on time. Those are all critical elements of any tax resolution case. Without staying current, you don’t really have any options. If you are current, the doors to various resolution options exist and can be opened, and you go in that room with the door, and you try and get to the end where you can sleep at night and have peace.
We always say, “You want a Levy on your side, not one against you. Don’t fear a levy, you hire a Levy”.
In the Levy Office, we have the former IRS revenue officers, Greg Mahaffey and Claire Coffee. We have the attorneys, we have the EAs and the CPAs, all of whom function as power of attorneys in civil tax controversy, helping resolve the issues so that you can enjoy your life, and so that you can sleep at night. So, you can just go on and function normally and not have to worry about my last name, and not have to worry is your bank account going to be levied, or that your accounts receivables is going to be levied. If the State put on a ‘freeze’, they call it, on your bank account. You don’t want that.
So, if you have an IRS issue, or are getting audited, or haven’t filed in a few years, or if you owe back taxes, or have had letters in the mail from the IRS, pick up that phone right now, if you are listening on this Saturday morning at about the top of the hour here.
Toll Free 800-TAX-LEVY
Yes, Levy really is my last name. Signing-off for now from the Levy Tax Help Show, the famous, the incredible Greg Mahaffey in the house, who used to work at the IRS for over thirty years, and Lawrence Levy. Enjoy the rest of the weekend, South Florida. You take care.