Lien’s, levy’s, 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. 800 TAX-LEVY, that’s 1-800-829-5389. Now the Levy Tax Help Show.
Lawrence Levy: Good Morning South Florida. Welcome once again to the Levy Tax Help Show. We hope that everyone had a happy Thanksgiving since that was now a couple of weeks ago and we are officially really in the holiday season. However, what if your holiday isn’t so bright because you have tax problems? What if you haven’t filed your taxes in a few years? What if you owe the IRS because, and I say because, because the reasons are endless. Listen up to the next half hour on the Levy Tax Help Show because we’re going to talk about some recent cases and what you can do if you have an IRS tax problem. Because I don’t give it out enough. Let me start out by giving the phone number. That’s 800 TAX-LEVY. That’s 1 800 TAX-LEVY and yes, Levy really is my last name. Let’s start off by also introducing and saying hello to a gentleman who used to work at the IRS for over 32 years. He was a revenue officer. He was also in the offer in compromise unit for several years. Greg Mahaffey and been on the show many a time and Greg is now on the Levy team and we’ve known Greg for a long time even obviously when he was at the Internal Revenue Service and he was always tough but fair. He was always pragmatic with his case approach, but he was always reasonable and we hope that everyone is able to have that same approach with revenue officers, but it doesn’t always work like that. I mean, Greg, you’ve seen that firsthand, but Greg, a good morning and happy holidays.
Greg Mahaffey: Good morning Lawrence, how’s everything going in this bright and beautiful Sun Shiny Day. Well, let’s look at a heat wave going up here in Michigan right now. It’s supposed to warm up to 36 degrees. We’re celebrating.
Lawrence Levy: There you go. Well, Florida had a bit of a cold snap for Florida, but thank God we dodged some bullets. This hurricane season. So you guys handle the snow there and so be life. But, Greg, let’s talk a little bit about a file that is a file from southeast Florida where a gentlemen owes the IRS over $600,000. And Danielle was working on that file and filed an offer in compromise. And earlier in the week on Tuesday, there was a conference call where the IRS tried to take income. This gets pretty technical, so I’ll water it down, but basically tried to take income and say, because the gentleman, oh, 600,000, and because he didn’t pay his, what they call surplus income for 2015, 16, and 17, they added that back is what’s called a dissipated asset. Well, that number one concept, if that were true, would fundamentally literally go against the grains of the offer in compromise program in general. Not to mention the fact that right in the IRM you’re not supposed to do the arithmetic like that, but needless to say, that’s the way the offer specialist actually performed the arithmetic on it. Well, Danielle has been with our office a long time. She pushed back and she had to then escalate it up to a manager and then she was called a front line manager as how they term it in the offer in compromise side and then it had to even further escalate it to a department manager. Long story short, which was a long story, Long Story Short, the IRS admitted that they made a mistake. Yep, you heard that right, that the IRS made a mistake and the way they interpreted the internal revenue manual and they changed their position. Not only did they change their position, they changed it actually several times, but to the favor of our client, thank God, but it was actually rather refreshing to actually hear that the IRS admitted that they made a mistake. And look, everyone’s human. I’ll tell you when my wife sends me to Costco or to the grocery store and she says, can you please buy milk and cereal? Make sure you get laundry detergent, make sure you get paper towel. And Oh, by the way, I want some almond butter. You know, there’s no doubt in my mind that I’m probably coming home with something wrong or not the entire grocery list that she sent me with. So people make mistakes. Everyone’s human. However, the reason I wanted to bring this story up is what if, and Greg, I want to talk about this. What if the innocent taxpayer was trying to represent themselves and didn’t know that the way the IRS came back with their calculations was incorrect, was improper? What if another firm who may not specialize in tax resolution work wouldn’t know the technicality behind the error in which the IRS tried to calculate the offer amount. So there’s so many what ifs that goes to how important it is to hire a firm that knows what they’re doing.
Lawrence Levy: Let me shift a little bit here and let me go to Greg for a second. Greg, you were at the IRS for how long?
Greg Mahaffey: 32 years.
Lawrence Levy: So as a fair but tough revenue officer, you would oftentimes, and we’ve talked about this, you would oftentimes see a nice taxpayer, a nice person that would get themselves into an IRS pickle or perhaps a attorney or a CPA or someone that just didn’t really know what in the world they were doing, right? Uh, you would end up seeing something like that happen a lot, and you would in essence, try and help them right? As opposed to try and take advantage of their lack of knowledge. And unfortunately, not everyone was of your honest and honorable and willingness to assist mindset. But how critical is it if you owe taxes to have representation, in your opinion, as a former IRS guy,
Greg Mahaffey: It’s very critical because if you don’t know what you’re doing, who knows who you’re going to get out there and the other end at the IRS, some people are brand new, some people are very hard nose, and as far as they’re concerned, they think their job is to punish taxpayers who they’re owed money to, the government that’s not their jobs, their jobs to go out there and collect the correct amount of tax fairly, and that’s what I have to remind some of these reps sometimes. Occasionally, most of the reps I run into, we’ll try to do the right thing, but occasionally you’ll run into someone who is going to do whatever they need to do to punish the taxpayer, and those are the people I have to put in their place and if necessary contact there manager, their territory manager, or under extreme circumstances. I’ve only done this once in my lifetime, the inspector general’s office. So again, that’s a very extreme measure. That person has to do something just plain illegal. I’ve only had to do it once. Thank goodness. Very few people want to do the wrong thing. Most people want to do the right thing, but they get hardened. They get bitter. They have pressures above them, from their management above them, the management chain above them demanding they do cases a certain way of going through that person’s dictates and their beliefs. So again, it’s a juggling act at times and these people are sometimes working impossible case loads. You have to remember the IRS has not had any significant hiring authority in many, many years. I believe the last time they hired any revenue officer’s, which is what I used to do, was almost eight years ago. We were supposed to be hiring about 700 coming up in the next fiscal year. But again, given the political winds as they may choose to blow, that could get canceled or may not be anyone. When I started at the IRS, there’s over 32,000 revenue officers. When I retired there was 3,200 and now this is probably down to around 2,600 today nationwide. This shows you, you’ve got to have someone who knows what they’re doing, preferably someone who used to be at the IRS, someone who knows the rules, someone knows how to fix your problem right the first time. Not only just the fixed the back taxes put to make sure going forward, it never fall off the wagon again. You stay in compliance, you make sure you make those estimated tax payments or you’re changing withholding exemptions on your W4 work in any event, and if you get stuck in an audit, making sure that you get the taxes done correctly next time and you’ll have the proper documentation to back up everything that’s on that return. Remember, you need to keep that stuff they say for seven years, but the statute of limitations on an audit is three years from the due date of the return. That’s an important deadline to keep in mind along with the statute date for collecting taxes. Again, all this is overwhelming to most people out there. If they’re hearing this for the first time or if they’ve heard this many times, which is why you need to contact an experienced firm like us. We’ve got the people. We have former revenue officers, two of us have offer in compromise experience. I have a tech experience which has to do with overseas money laundering and transactions, muscle and employment tech specialists. Claire was an offer specialist for almost 16 years. She knows offer up one side and down the other. Wendy was a group manager for many, many years as well. So she knows the rules, regulations, what’s allowable, what’s not allowable, how much flexibility there is. You need a firm that’s going to do it right and going to keep you out of trouble going forward. Back to you, Lawrence.
Lawrence Levy: Back to me Greg. Well, thank you very much, but that’s really important. And I want to bring that up because it, it happens quite a bit and just some, some examples of what went on this week. This week alone, we were talking to a very nice client who is in the landscape business. We were talking to someone who is in the real estate business. We were talking to another gentleman who is a client that’s a, as a former police officer and now is in private security. We were talking to another company that’s in the cleaning business. So with our client base, it’s spans, no matter what, whether you’re a contractor, whether you’re a doctor, whether you’re a lawyer, Greg, you’re currently working with a lawyer that was almost $600,000, right? And then you go 600 and change, if I’m not mistaken,
Greg Mahaffey: I’m working with several lawyers right now. Many, many doctors. I work with people from all walks of life, both at the IRS and now here on this side of the table.
Lawrence Levy: Right. And, and keep in mind that, you know, the IRS issues, they don’t, they’re not just limited to a certain demographic, to a certain income level. We have clients that literally are making over a half million dollars a year, sometimes more and clients that are making 15 to $20,000. And it’s all in between. In fact, a lady that we were talking too, she owes the IRS, uh, it was early morning on Wednesday morning, the 28th at 7:30 in the morning. She owes the IRS north of $600,000. Very nice lady, talented lady, and just got herself into a pickle. And these things happen and no matter what you do, to get yourself in that pickle, generally speaking, there’s always a way out in order to get yourself out of it. But Greg, in your experience over the years, can you just explain the three different options so people have a general understanding of what goes on. An offer in compromise is one option, a payment plan and installment agreement is another, and then being deemed currently non-collectible as a third option. Can you just run through what the three options are?
Greg Mahaffey: Well, basically an installment agreement is basically the IRS’s main tool they have of resolving most taxes that are out there. They give people time to pay their taxes. Generally under IRS rules and regulations. They’ll give you between six and seven years providing, here’s the key word, providing you never again owe tax in the future because if you fall off the wagon in the future, everything defaults and he had to start all over from scratch and it’d be harder to get that agreement the next time. So again, before they give you an agreement, they want to make sure that you’re caught up right now or your current year and that you’ve fixed whatever caused you to owe taxes. Then you have six to seven years to pay it back. That’s the easiest option. Second option, which is very prevalent within the IRS, is the hardship situation. People fall on hard times, they get sick, they lose their jobs, the jobs get eliminated. If you happen to be one of the GM plants has just been announced to be shutdown, those people are going to be in a world of crap. They’ll get unemployment for a while and hopefully they’ll remember to have taxes taken out that unemployment now that the unemployment is taxable but they fall on hard times, they don’t make enough money. They owe taxes and their expenses exceeds their incomes. The IRS will agree to suspend act of collection on those accounts for a while until they get back on the feet and the way they determine if you’re back on your feet is your case will reactivate when your income hits a certain level that they deem is appropriate in which you should be able to start making payments again. The last option, which is the one everyone and their mother wants, when they get into tax trouble is an offer in compromise, what?
Lawrence Levy: Why would you not want it? Of course you want. All right.
Greg Mahaffey: Yes, everyone wants it. Let’s make a deal, but it’s not let’s make a deal with the IRS. All right. The IRS has very strict rules and regulations concerning when they can compromise taxes and reduce the amount owed and settle your case. Again, their first priority is making sure you never fall off the wagon again. That is one of the conditions of getting an offer accepted. You agree that the following five years after they accepted an offer that you will never again owe taxes. You have a balance due in a future return. You pay with the return. Otherwise, if you don’t get the faulty offer they reassess all the old back taxes, penalties and interests and your chances of getting a new offer are minimized from there on out.
Lawrence Levy: And you’re back to square one.
Greg Mahaffey: Exactly. And you’re back in the same world of crap, but it’s going to be a lot worse because now you have a lot of back penalties and interest added on top of your new debts.
Lawrence Levy: Right. And we, we were talking with the client, I just, talking and there was a file that we looked at earlier in this week to give you the scope or the range for everyone listening. This gentleman, uh, had tax problems that literally go back over a decade back to 2008 and he owes just under $100,000, $96,933. So there’s one example as to what’s owed. We have another client that I’m looking at what’s called the refresher letter, which is a 31.74 is the name of the letter and that 31 74 says that this particular client of ours owes $814,000 but that’s not including anything for 2013, 14, 15, 16, 17 or this current year. But I think that number’s going to be just shy of $1 million. So just to give you the scope of what goes on. Now in that particular file, we are going to try and file an offer in compromise based upon the financial condition. Sometimes the more you owe, the less likely it is you’re ever going to be able to full pay the debt. That’s why IRS has this offer in compromise program. One of the big pieces of the puzzle that needs to be talked about no matter what in any file is current compliance. We talked about a lot of C’s. Current compliance is a critical component of any case resolution. It’s extremely important. And Greg, do you want to just shed some light how being current is important, the gentleman that owes $1 million in payroll taxes, he still isn’t making his payroll tax payments timely. In fact, I’m looking at a notice from early November where he had an electronic bounce basically. How critical is that to be current?
Greg Mahaffey: If you’re not current and you’re in business and these are your employees, payroll taxes, the IRS may be forced to get an injunction against you to prevent you from ever going in business ever again.
Lawrence Levy: But I’ll tell you,
Greg Mahaffey: That’s the most extreme version of that.
Lawrence Levy: But to be clear, in 20 years I’ve never seen that. You may have seen that in your career, but we’ve never seen that. So we don’t want to alarm people, but it could happen. Let’s be clear it could happen
Greg Mahaffey: It could happen. In fact, I did it on two cases in my career, but that’s only two over 32 years. So it is a very extreme circumstance. But usually what they do is they’ll just levy the jeepers out of you until you stop accruing taxes. And if necessary, they will put you out of business. Those are extreme circumstances, but that’s why it’s so critical when you’re dealing with other people’s money, which is what you’re doing when you have payroll taxes, that’s your employees money. Government still gives people credit for that amount withheld, even if the government never got the money to begin with, which is why they get so upset when those special taxes, and they’re called trust fund taxes because the businesses were entrusted to make those payments to the government when they don’t get paid. Government takes special priority over getting the trust fund taxes satisfied
Lawrence Levy: Let me just interrupt. The way that I explain that is the trust fund is the amount of money that the government trust that you as the employer are going to pay into the government. So Greg, I pay you. You have a W2, there’s withholding taxes that are held out of your paycheck. And then I pay withholding into the government. When you file your tax return with your wife, you claim the withholding as taxes paid, obviously, based upon me paying it as your employer and then that offsets any tax that you may owe and potentially you have a refund. So trust fund payroll taxes are very, very, very important and they are frowned upon when a business doesn’t pay its payroll tax. It’s a pretty big issue. Sales tax, by the way, especially in Florida, is equally a big issue that has to be addressed. Florida doesn’t have an income tax, so they take their sales tax pretty serious and that has to be addressed oftentimes sooner than later. Greg, let’s jump to a different topic. We see a lot of clients that don’t have a solid footing for accounting. The books are either not done, the books are an utter mess and the client hasn’t focused on their foundation of accounting. We see it all the time, no matter what the business. It literally it could be, again, a doctor’s office, a law firm, a contractor, wherever it could be. We just see this all the time, day in and day out. How critical is it to get your books done? Before you answer that question, I want to share with you a story about a Florida file. Very nice client of ours. A contractor, again, hasn’t filed, I think it’s four years, 14, 15, 16, and 17 so we sent this over his bank statements and we have to go through and prepare the bank statement, of the books by the bank statements and basically create a QuickBooks file. In this particular case, Danielle spoke to the revenue officer and said, look, we need to be transparent about this. There is a tremendous amount of work that’s going to be involved and it’s time and it’s money. So therefore, if you can’t afford to pay for the accounting work, right, she says to the IRS, what would you like them to do? Right? It’s next to impossible. How are they going to be able to sustain getting their life back in order? She actually was pretty reasonable, uh, happened to be, maybe it’s the holiday time, a little bit of holiday cheer going on. But she said, look, show me that there’s some progress being made and I’ll give you some time. Her choices are, she enforces what’s called the summons, which is sorta like a subpoena requesting information. But in the IRS collection space, it’s called a summons or she can refer it to exam for what’s called an SFR, which is when IRS computes a fictitious assessment, I call it that because they make up the numbers without giving you any expenses, but it actually isn’t a fictitious, it becomes a valid assessment. And the term is in substitute for return called an SFR. So if you don’t file, eventually IRS will file for you and it becomes a valid assessment. You can then of course submit an original return, what’s called a recon return. And the numbers would, would obviously adjust. But this guy’s a nice guy and he just went through some struggles in his life and he hasn’t filed his taxes in four years or so. It happens. And, uh, we just want to make sure that everyone out there, especially now that we’re coming to the end of the year, why not start the new year off right? Why not make this your call to action? Why not do this the right way? That’s what’s so critical and that’s what’s so needed in your life. We have so many clients who just say they let it go and there’s really no good reason. Now, sometimes there is a reason it’s sad. Uh, Claire is actually working on a file now where the, I believe that the husband is 70 years old, still working, but who knows for how long and his wife has cancer and the IRS is not wanting to see it as a hardship. And Claire who used to work at the IRS for over 30 years, who her 16 years, she ended out her career as an offer specialist working in the offer in comprise unit. She was talking to me on Tuesday night. We were talking to about 7:30 at night. She just can’t believe that the IRS is not seeing the same things she is seeing. And she worked there. And Greg is a guy who worked there for 30 years. It’s sometimes I’m sure tough for you in your mind, you’re saying, Geez, if this was my file when I was a revenue officer, I would have handled it this way. Totally different than what you’re getting and I’m sure from your end it’s frustrating occasionally, because you see what is a non-practical and impractical approach to a case resolution and sometimes it creates so many roadblocks that it’s mind boggling. Greg, do you have any, I mean is it just, again, we talked about it before. Is it just personality or what is it?
Greg Mahaffey: It could be a million different things, could just be in the mood someone’s in, but more than likely is because they are given a specific direction by their management team. Management as the way they have of working cases. Although most revenue officers are free to work within manual guidelines as long as they’re reasonable and when they don’t become reasonable, that’s when you go to appeals. That’s when, if necessary, use the nuclear option. If you have too under extreme circumstances which are brought up before, but generally that’s why there is an appeals. That’s why there’s a new law that was passed in 1998 called RRA 98. You now have taxpayer rights out there but you need a firm who knows what those rights are, who knows what the IRS can and cannot do, what the IRS must do and say before any enforcement actions can be taken. And it comes back to hiring the right firm to begin with, making sure you have your ducks in a row, in your paperwork together, getting everything together and making sure at the end of the day you got the best laid plans. Again, staying current and then resolving the back stuff.
Lawrence Levy: And I’ll tell Ya, let’s try and end it on a, on a positive note here as we come to the top of the hour. The phone number, which I haven’t given out enough, is 800 TAX-LEVY and that’s 800 TAX LEVY. And yes, Levy really is my last name. We want you to come into the office. We like the weekend appointments. In fact, last Saturday after Thanksgiving, a client sent me a text and said, hey, are you available? And I said, no problem. Let’s meet on Saturday. And we met Saturday morning at 8:30 in the morning. I’m sorry, I take that back. It was Sunday morning. They send me a text on Saturday and said Sunday morning, uh, and drive my son to the airport early. And uh, in any event it’s we like to have the client interaction. We’re on Federal Highway about a half a mile south of Linton on the east side of the street. We’re right across from the Toyota, building and we’re right next to Enterprise Rent-a-Car. Come on in. The local phone number is (561) 865-7800, (561) 865-7800. And I want to bring up, because I love this guy, about a month ago, October 22nd to be specific, we got an acceptance letter from a client that originally was living in Florida, then moved out of state and he owed the IRS about $400,000 and I don’t know, four hundred and ten thousand, four hundred fifty thousand it was, it was up there. The guy had cancer. He had a litany of medical issues. He used to work for the government. I think the Department of Defense, you know, it may have been in the military and part and his offer in compromise on four hundred thousand dollars was, if I can find this real quick, um, I want to say a $5,000 maybe it is what it was. I think that’s what it was. Other, I thought it was slightly more, but regardless, he was able to get his offer in compromise accepted and it looks like it was $5,000 total offer amount, 5,000 initial payment, a thousand remaining balance, 4,000 and he was able to get it accepted. No, I’m sorry. There’s an addendum to it and it went up to $19,000 I knew that’s right. So on $400,000 he ended up with $19,000 offer. He was so ecstatic. I’ve talked about it on a few shows, but it really just makes us so happy to be able to help people like that. I can’t tell you, it’s so nice that he can go in to have a happy holiday season with his family, Christmas, Hanukkah, New Year’s, thanksgiving. It just gives us such a great feeling to be able to help someone like that. But again, I want to be very clear. As Greg said earlier, not every file is going to be an offer in compromise. It doesn’t always work out like that. There are many issues that come up that would prevent you from qualifying for an offer in compromise. Unfortunately, not everyone is going to be a candidate, but you have to look at it and see what your options are. But ultimately you want to be able to sleep well at night and you want to be able to live your life and go on with your life and not have to focus on the IRS. I want to talk about it as we have about a minute or so left, another Florida client, really nice. Close to the office and we’ll leave it at that. And this gentleman came into the office, his head was hung low. He was a really in a down mood and he owed the IRS over $200,000 and by the time we were done, which we’re not quite done yet, it’s down to about 30 some thousand dollars and we’re still trying to plug away at it a little bit. It’s a little involved. But now when he comes into the office he smiles, he’s perky. It’s totally changed his whole life. And this is literally just in this year alone. If you have an IRS issue and you don’t know what to do and you’re scared or you just are worried, I can’t tell you how you really have to step up and face it head on. You gotta be proactive in life. It’s such a critical part of what we do for living is trying to be proactive and oftentimes we’re trying to tell the clients that the foundation of having solid accounting, solid bookkeeping, that’s totally what’s needed and it’s such a critical part of what goes on in our life with making sure that the accounting is done. Making sure that you have a proper financial statements so that you see what you look like on paper because oftentimes we’ll ask the client, hey, what do you make? And they’ll say, I don’t know. Well, we need to know. You need to know as a client what’s going on. If you have an IRS issue and you don’t know what to do, you give us a call and the Levy office, we have former IRS revenue officers. We have the attorneys that function as power of attorneys. The enrolled agent, CPA’s, you give us a call, we’re happy to help. We enjoy the weekends. The local phone number is (561) 865-7800 or toll free 800 TAX-LEVY, and they also want to end the show with saying a big thank you since it was just to my staff. We have a tremendous staff from the administrative assistants to the case managers, to the receptionist, to the power of attorneys, to the accounting staff. I got to tell you, without the staff that we have, we wouldn’t work as well as we do. So I want to give a public shout out to my staff. Signing off for now from the Levy Tax Help Show, you have Lawrence Levy and the former IRS revenue officer Greg Mahaffey in the house. Enjoy the rest of the weekend south Florida, you take care.