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 Associates of Delray Beach, tax resolution specialists. Call Levy and Associates 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 is enjoying the good weather, in Florida. Even though it is a little bit rainy now, it is part of what happens in Florida, but, what do you do if the IRS, or the State of Florida is raining down on you? If you are listening to this show and you are having a problem, or you are having sleepless nights because you owe the IRS, or, because the IRS has levied, we are going to talk about that. So, like my last name, levied your bank account or levied your wages, what do you do?
Well, let’s, firstly, start off by introducing everyone to a gentleman who used to work for the IRS for over 30 years. Greg Mahaffey, good morning and welcome once again to the Levy Show.
Greg: Good morning, Lawrence. I am glad to be here today on Memorial Day weekend. Let’s give a shout out to all of the veterans out there who served and sacrificed for this country on this weekend.
Lawrence: Absolutely. Greg, we would like to give a shout out back to you because you did serve. You were in the navy in the Gulf war. You were called up from the reserves and you had to take a break from the IRS to go to the navy during the Gulf War. So, “Thank you for your service”.
Also, Greg is right, it is Memorial Day weekend which means we would like to say, “Thank you” for all of those that did sacrifice. As we all know, in the recent couple of weeks, once again we have been faced with a very tragic school shooting in Texas, which was horrific. As a father, it is scary. Even if I did not have kids it is still scary. As a father who has a 12-year-old in 6th grade, it is extremely scary to hear of these things, and it resonates with these kids these days. So, on Memorial Day weekend we would like to say, “Thank you to those who have sacrificed. To the police officers, the first responders, the paramedics, the EMTs, the retired military, the active military, and the special forces, we love what you men and women out there do to keep us safe and we respect that. So, from the Levy office and the Levy team, a big shout out to everyone out there. Also, our prayers and thoughts go out to those who have been through some tragedies, and to anyone who is suffering out there.
Let’s start off the show. I should probably give the phone number because I don’t do it enough.
Toll free: 800-TAX-LEVY.
Yes, Levy really is my last name.
Let’s talk a little bit about some success stories of the week. We ended up getting a call earlier this week from a gentleman who owed the IRS over $100,000. He came into the office, right here in Delray. It was very early on Thursday morning. I mean ‘early’. It was 07.00 a.m. He is a really nice guy. He ended up going through some rough times in his life and ended up owing $100,000. The IRS had levied. A local revenue officer, who was actually a reasonable and very pleasant to deal with, had levied his bank account and levied his wages from his employer. He came in and the file was assigned to one of the POA’s in our office. She got in touch and literally within hours of the clients leaving the office, right here in Delray, she was able to have the IRS release the bank levy and release the wage levy. There is a little bit more of a twist to the story, but it gets a little technical because there was an earlier year that somewhat cropped up out of the blue. It was from back when he was not living in the State. He thought he had some issues that were resolved, and apparently, they were not. This guy is a tremendously nice guy and he is down to earth. He is a good husband, a good father, he loves his family, and he just wants to put this behind him. He really and truly is a nice guy.
He had another firm that was representing him, not anyone local, but, out of the State, not that that always matters, but, for a couple of years not a lot went on. It was actually longer than a couple of years. When we jumped in, he said, “You guys have done more in about 6 hours than was accomplished in literally, almost 2 years”.
Not that it always happens like that, but I really want to give our staff a really big pat on the back. We jumped into action and we were able to resolve it. The guys house was on fire, and we had to put it out, and to make sure that we were able to address it because he did not want to go into holiday weekend with stress, and not knowing what was going on. It is not that it is going to be fixed within a day. As the saying goes, they did not build Rome in a day, but it was a very nice feeling to be able to shake someone’s hand and say, “Look what the Levy team did.” Danielle jumped into action. It was tremendous. A lot of our admins. got involved. It really was a nice team effort on the Levy side to help this gentleman out, who came in with a big pit in his stomach because he was stressed out. That is what we do.
It does not always work out like that, and we want to be very clear, but, in this case, it did work out like that. There is always a way to be proactive about it.
Greg, you were a revenue officer for over 30 years. Did you see that a lot of the time, people didn’t respond? Occasionally, there was the wrong address. You, as a revenue officer, would send something to the wrong address and the tax-payer never got it, then, it turned into a big ordeal, or, you dealt with these tax resolution firms that were, shall we say, not the most responsive of the bunch. Therefore, deadlines were missed and negative activity, and my last name occurred. Did you see that quite a bit when you were working at the IRS?
Greg: Yes. Quite a bit. It is hard to say, exactly, as there is no one-set pattern, but, yes, it happens all the time. That is why, when you get someone to represent you out there, you want someone who knows what they are doing. A regular tax attorney may know about going to tax court, great. Anyone can go into tax court that is an attorney, however, that does not mean that you know what you are doing. You do not necessarily know the IRS systems. You have to get someone who knows how it works, when it works, why they levy, when they levy, and again, what could be the root cause of the problem.
So, you need someone to actually look at your situation, analyze it, figure out what the problem is and what got you into that situation, and find a solution. More importantly, how to keep you out of trouble going forward, and that is what we do here at the Levy office. We analyze your situation. We come up with an overall game plan, and not only just to fix the current problem, but to keep you out of problem going forward. That is the most important thing in the world.
We do not work like traditional firms do. When we work a case, we want to make sure we fix it right the first time. So, that is what we try to do. and that is what we do here at the Levy firm. Back to you, Lawrence.
Lawrence: To talk about that, I want to explain an example. We had a client that owes, I believe, close to one million dollars. Some of which date back for many years, and we had filed an offer and compromise for this particular client, right before Christmas. Surprisingly, the file got assigned to a very nice, very talented offer and compromise specialist, recently, in past 30 – 60 days. I believe we had offered in the high $170,000, and the offer specialist came back with an amended offer that was bumping it up, by roughly $10,000 and some change. The gentleman owes the IRS quite a decent chunk of money and I will tell you that the offer specialist technically (he was a revenue officer before), but he could not have been nicer. He could not have been more reasonable, and could not be more, I will even call it ‘friendly’, and it is just such a pleasure to have that interaction on the other side of the phone.
So, here is a client who has had the weight of the IRS on their shoulders for over a decade because some of this actually predates 2008, this nonsense. Ultimately, we are able to get to the light at the end of the tunnel. Now, we are not quite to the end of the tunnel yet, but we do see the light. Again, that is a positive thing. It has taken a long time to get there. We do not know for sure that this is going to be accepted as it has to go through several layers of managerial approval at this point, but, ultimately, this is what goes on in the Levy office.
Not every file is going to be an offer and compromise. Not every file is going to have the penalties abated. It does not always work like that, but, in some cases it does.
Greg, can you speak to penalty abatement for a second? As a former IRS revenue officer, did you have discretion to abate penalties? Did it have to meet the reasonable cause, or the reasonable criteria? Was there any discretion that you had, as a revenue officer, or, how did that work behind the scenes, so to speak?
Greg: Yes. Basically, revenue officers are guided by reasonable cause guide lines, as far as penalty abatements are concerned. No-one can just wave the magic wand and promise you that they will make all the IRS penalties go away. If you hear that from some service, or from some firm offering their services, run away from them because no-one has that authority.
IRS can abate penalties based on reasonable cause guidelines. Reasonable cause guidelines basically consist of, that you took all prudent measures in order to ensure that the taxes were satisfied, but through some disasters, or for some unforeseen circumstances, the taxes got out of had and you ended up with a balance due that you just could not pay.
Some primes examples of that are natural disasters, like what the listeners went through during the hurricane, in Florida. The IRS went ahead and gave a blanket waver of penalties for a set period of time to allow people to recover their lives. Other disasters can be things, such as a terminal illness of a spouse or of a child, the tax-payer may fall ill and not be able to keep up with their taxes due to escalating medical bills, or they have been incapacitated. Reasonable cause guidelines are not willy-nilly. It is not, “Let’s make a deal”. There are certain guidelines and the revenue officers do have some discretion, but still, they must get approval from there managers, who are very strict about this stuff. Again, you need a firm that knows what they are doing. A firm who knows what reasonable cause is and what it is not. When it falls into a grey area, we might be able to get it, if not right away, maybe through appeals. Again, you need a firm that know what they are doing with this stuff.
Lawrence: I will tell you also, there is what they call ‘first-time penalty abatement’.
This is pretty recent too. On Wednesday, May 16th, a week ago we will call it, or ten days ago. Danielle, one of the power of attorneys in our office, called the IRS. There was a client of ours that owed just over $80,000. Of the $80,000 dollars, Danielle was able to have just over $3,000 abated in penalty abatement. Now, when the client came to us. They said that they had already tried to set up their own installment agreement, and I say that because it is somebody in flux, but, they had tried to set up their own payment plan. The client did not know that they would qualify for penalty abatement, so if there is no reason other than simply that? In this particular case, look at what happened. A client called us. They were able to get penalties of over $3,000 abated, but, before they called us they did not know that was even an option. So, the client is thrilled that they saved $3,000. Now, the rest of the file still has to be worked.
What have we talked about so far, in the first half of this show?
- We talked about this one, which was an example of a penalty abatement of over $3,000.
- We talked about the gentleman who probably owes about one million dollars, if not more, and he is able to get a preliminary offer amount of almost $189,000 dollars and is settling for around 20-cents on the dollar.
- We also talked about the gentleman who had another firm representing him, who was levied both a bank levy and a wage levy, and we were able to get that released, literally, within hours. Not days, but hours from when the client became our client.
Now, I want to be very clear on this Memorial Day weekend. It does not always work like that. It does not always mean that you are going to get the penalties waved, or abated, as the term goes. It does not always mean that you are going to qualify for an offer and compromise. It does not always mean that you are going to be able to get your bank levy released, no matter if you have $5 dollars in there, or $5,000 dollars in there. It does not always work like that. Oftentimes, it is the circumstances that are going to dictate, but a lot of it too is the revenue officer.
Greg, we talk about this quite a bit on this show. When you were a revenue officer, my staff always thought that you were a very tough revenue officer, but you were also very fair. You were always practical. You took a pragmatic case approach where you would be resolution-focused and resolution-orientated. You were not always trying to make matters worse and cause more headache, and more grief for everyone including the tax-payers and the POA’s. So, when a file came across our office that you ended up having, we knew that you were a reasonable, level-headed revenue officer.
Greg, have you run across this in your career? In the private sector, and now that you have been advocating for tax-payers by working in the levy office for a while, have you run across it, where you don’t always get that same mentality, where people are trying to be helpful? It is almost like they are trying to be ‘not’ so helpful.
Lawrence: To us, it is very frustrating. After we talk about this we are going to bring something up with the Florida Department of Revenue.
Greg: Yes. Basically, everyone is different in how they approach stuff. They work within the general manual guidelines. The IRS has a manual called ‘The Internal Revenue Manual, and there are different parts to this manual. It is quite complex and is constantly being evaluated, and it is constantly being updated. They basically have one section concerning revenue officers in the collection division. It is about how to do their jobs, why do to it, when to do it, what is legal, what is not legal, and so forth, and so on. That is why the training period to become a revenue officer, just as a trainee, is one year, but to actually get into the job it takes a good 3+ years. Also, to make matters worse they have not hired any revenue officers in 15 years, thanks to political consideration.
Lawrence: There are new revenue officers that have been hired?
Greg: None. Congress keeps cancelling any appropriations to hire new revenue officers for the IRS. They can bring some people back from other details to become revenue officers, but there are no new revenue officers allowed to be hired, thanks to congress. So, the IRS is trying to do ten-times more work with half of the staff, which is constantly getting smaller and smaller. As a result, people are more stressed out, the procedures change, and individual revenue officers not necessarily have their own personal ways of doing things. Some are reasonable, and, frankly, some are hostile to general tax payers. It is a sad thing, but it is very true. Most revenue officers out there are reasonable. They have to set deadlines. They have to learn the consequences. They have to give you your rights, and your appeal rights, and they have to notify you of those things. However, within that scope all of them still do that, but some are more helpful than others, and that is the sad part.
It is just like being in a restaurant. You can get a great waiter, but your food is lousy, or better still, the food is great, but the service stank. So, it just depends upon who you get, what kind of mood they are in, what their background is, and how stressed they are, and it is a variety of different things when dealing with people.
Lawrence: It is frustrating. We talk about that a lot, and we use the restaurant waiter/waitress. You can go in and have great food but horrible service, and your dining experience is not going to be a great one. You may have bad food, but the waiter is very apologetic, and the manager comes over and buys you a dessert, or a cup of coffee, or a round of drinks, or appetizers and you leave there thinking that they were really classy about it.
It is just human nature, and we bring this up because, unfortunately, the consistency in the application of the rules is not quite there. This is not only with the IRS. It is State as well. There is tremendous discretion out there, but, unfortunately, you are stuck with dealing with human beings and it is not always a cookie cutter or push of the button. There is discretion that does exist out there.
That brings me to the Florida Department of Revenue. This is a pretty amazing story. It is about another taxing authority that is out there. We have about ten-minutes left. I am not going to eat up the whole ten-minutes, but listeners, listen up to this one. This is not the first time that this has happened, I have got to tell you.
We have a client that owes some State taxes, and in Florida owing taxes, as in any state, is pretty serious. You want to catch it, especially, in Florida, before it goes to criminal. So, the power of attorney in our office has been talking to a representative from the Florida Department of Revenue. The tax returns and the financials were submitted. I think, the amount owed is less than $30,000. Keep that in mind, as it is not a million, not $300,000, not $100,00, but about $30,000. The representative from the Florida Department of Revenue comes back and says to the POA in my office, “We believe that your client can pay $2,500 per month”. I think, it had a down-payment of another $2,500. I do not know the exact numbers, but, it was something crazy like that. I say it is crazy because the financials do not dictate that this particular tax-payer has a profit of $30,000, or an ability to pay $2,500 a month. The numbers just do not show that. Then there is a discussion. Greg, do you remember 8th grade math? I remember my 8th grade math, and the math teacher used to say, “Show me your work, how did you get to that answer? You did not cheat, did you? You did not use a calculator? You did not cheat on it? Show me how you got to that number.”
Greg: We didn’t have a calculator back then. You have to remember how old I am. Calculators were unheard of in my day. We had slide-rules, if you can imagine that one.
Lawrence: Right. So, the teacher would say, “Show me your work”. So, we go back to the Florida Department of Revenue and say, “Please, show us how you arrived at your arithmetic. How did you come up with the number of $2,500 a month? Show us”. This happens sometimes with the IRS, do not get me wrong. Well, guess what? The Florida Department of Revenue had absolutely no basis for how they arrived at this dollar amount. At first, they started talking about a profit from the company, but it is an S-CORP. Then, it was clear that the representative did not really understand what a K1 is, or how and S-CORP works, and what the difference is between distribution and wages. It was very clear that the representative did not have any idea how to analyses or interpret the tax returns or financials.
Then, you have a call with the manager, and the manager does not seem to have any better answers. There was a lot of dead air and it was very clear to us that there was a pattern of a lack of understanding, as well. Then, you go to the next level of manager, and in that phone call it was said, “Look. Everyone is frustrated. Our office is trying to get to a dollar amount that the tax-payer can afford. You do not want to set them up on a payment pay that they cannot afford, and in which they are going to default”. It is very interesting because it is very clear that there are no guidelines to do the ‘show me your work’. So, the POA in my office said, “Please send me over your financial analysis. Please show me, like an 8th grade, how you arrived at the number of $2,500 a month, or, did you really just pick it out of the clear blue air and you just said that you think they can pay $2,500 dollars a month?” The frustrations. Now, imagine we hear that. Now, what are we left here to do? We are left to now go back to our client and say that despite the fact that your financials show inability to pay, and, despite the fact that you do not show that you have a disposable income for your company of $30,000 a year, $2,500 per month, the Dtate of Florida believes that you can pay $2,500 per month. When you ask them why because the client will say, “How do they think that? Why do they think that? Where are they coming up with these numbers?” The client always says, “Where are they coming up with these numbers? What are they talking about?”, we say, “We don’t know either”. How do they come up with this? It is the most frustrating part of our job, to try to get answers out of the taxing authorities, sometimes, to determine how they arrived at this.
I want to bring up a similar issue that happened with a client, recently, that has just been resolved with the IRS. The business owed about $300,000. During that time, and we talked about this a couple of shows ago, a bankruptcy attorney was representing them with the IRS. So, the revenue officer is there at the bankruptcy. Don’t even ask me why they were with a bankruptcy attorney at the time, but they were. So, the bankruptcy attorney is there, and the revenue officer is there, and the tax- payer; the client, is there. The revenue officer said to the client, “What can you afford?” The client does not know any better and so he throws out a number, “$5,000”. This is against the $300,000 debt. Now, the revenue officer, in their mind, is believing that this particular tax-payer can afford to pay $5,000 per month. Well, when they finally come to us and we look at their financials, it went back to a similar story that we just told you about the Florida Department of Revenue, the power of attorney in my office spoke to the revenue officer, and said, “Look. I do not know were our client got $5,000 from. Maybe they felt pressure, maybe they felt backed into a corner, or, they did not know what to say. The bankruptcy attorney, of course, is not specialized in tax resolution matters. Therefore, based upon all of the above, the client opened their mouth and said something that they probably shouldn’t have said. Sorry, but, as opposed to just guessing at a number, let us give you the financials”. Well, after much back and forth the group manager ended up getting involved. The manager was a tremendously nice guy. He is reasonable and very practical with his case approach on many, many files. He said to the POA in our office, “Let’s come up with something that is reasonable, based upon these financials”. The end result of that was $750 per month. Now, how does IRS go from $5,000 per month, to $750 per month? That is a huge swing.
So, imagine, whether it is the Florida Department of Revenue or the IRS, the tax-payer gets into a pickle and agrees to something that the finances just do not show on paper. There is another reason why you want to hire a firm to represent you in these things, besides penalties, which we have talked about in this show.
To everyone listening out there, you would not go and file bankruptcy without a lawyer. You would not go and get a divorce without a divorce lawyer. You would not try to fill your own cavity without going to a dentist. You just would not do those things, and you should not. I have never heard of anyone trying to fill their own cavity, for crying out loud, silly example, but extreme, all be it. It is pretty straightforward. Me, I am not a handy guy and I would not know how to fix a leak in a pipe. I would have to hire the plumber. People should do what they are good at. It is that simple, and that is why you need to hire someone.
I want to end the show here, as we come to the top of the hour with this. We had a client that owes the IRS about three million dollars. It is a lot of money. It is payroll taxes, by the way. The business is generating a decent amount of revenue, in the millions. We said, “Well, who is your CPA? Who do you have doing the tax returns? Who is doing the books, monthly?” They had no-one. They had a self-prepared tax return on a multi-million-dollar business. They were self-preparing their own taxi returns with the help of a friend, of a friend, family friend. Literally, it was like that.
Greg, when you were a revenue officer, you saw a lot of people who did not have the right accounting. They did not have the book-keeping. They did not have the back up. They did not have the foundation of a CPA, of an enrolled agent, or, of a bookkeeping staff. When you saw that a lot, it led you to believe that the financials were either non-existent or did not make any sense because the client did not know what they are doing. We have clients that are trades. A roofer that we talked to earlier this week, on Thursday, doesn’t have his books being done. He is doing quite a bit of money, doing hundreds of thousands of dollars, and, after the hurricane here in Florida that business has been booming. Unfortunately, it is a business that is doing well following mother-natures catastrophic events, but he needs to get his books in order. That is really a big component and we talk about how important it is to have a good set of books with many clients, and how important it is to be able to make sure that your accounting is in order.
So, as we round down this show and we come to the top of the hour, I am going to recap, again.
- We talked about a client that owes $80,000, and we were able to get $3,000 of penalties waived.
- We talked about another client that owes a lot of money. I believe, over a million, and they were able to get a preliminary offer that is perhaps going to be accepted for about $189,000.
- We also talked about the gentleman, the really nice guy who came into the office, right here in Delray, this week that was faced with a bank levy and a wage levy.
By the way, Levy really is my last name. People always ask about it. Also, we want to say a big “Thank you” to my father up in the heavens. It was his birthday and, even though he has passed away, I still say, “Happy birthday, dad”. It was his birthday earlier this week.
If you have an IRS problem, don’t bury your head in the sand. Don’t just think that it is just going to go away, don’t just kick the can down the road because it will not. If you owe to the State of Florida, you also want to deal with that sooner, rather than later. In the Levy Office, we try to be very proactive.
We are available to you for seven days per week. Even though the IRS is closed on Memorial Day, the Levy Office is not. We enjoy the weekend calls. We enjoy the after hours calls.
In fact, this week I want to finish off the show by explaining that we had a call at 06:30 in the morning. We had an early start. A lot of our staff start at 06:30 a.m. We had a call from about 06:30 – 07:00 a.m. earlier this week, on Wednesday, and the client loved that. It gets us out of the way and now you can focus on your day. After you are done with us, get the kids off to school, go have a relaxing breakfast, get off to work, do your thing and you don’t have to worry about taxes.
If you have tax problems, give us a call. The Levy Office has a very deep bench. The former IRS revenue officers, the attorneys, the CPAs, the EAs all function as power of attorneys, along with the tremendous support staff of bookkeepers, of admin., and case managers.
So, enjoy the rest of the weekend. Enjoy the long weekend. Again, we want to say, “Thank you” to all those who have served, and to all the lives that have been sacrificed to make our country what it is.
Enjoy the rest of the weekend, South Florida. You take care. We will speak to you next time. Signing-off for now from the Levy Tax Help Show, you have Lawrence Levy, and the famous former IRS revenue officer, Greg Mahaffey, in the house. Enjoy the rest of the weekend, South Florida. You take care.