Steven Klitzner, tax attorney with the Law Offices of Steven Klitzner, joined Good Morning Keys on KeysTalk 96.9/102.5FM this morning to talk about tax issues.
Claiming ignorance will not work with the IRS.
Klitzner said, “The ‘I was confused, I didn’t realize’ doesn’t work. Some people come to me and they say my accountant was supposed to file the return. My accountant said he was going to file the return. He never did it. And the IRS is like, that’s not our problem. It’s your job to do it. You need to know it. You need to do it. Oh, and by the way, you also never paid the taxes. So it’s very hard to delegate or blame somebody else and and just say, that would be a heck of a defense if everyone just said, taxes I didn’t know.”
Are accountants absolved from liability?
Klitzner said, “ln theory, the taxpayer can sue the accountant, but they still owe the taxes. Really, all you can sue them for is the penalty you incurred for not filing it on time. Of course, it would be very difficult to find a lawyer that’s going to take on that case for you, which is not going to be a fortune in money. It’s usually cost prohibitive. A lot of times, people go to their accountant, and if the accountant does take some accountability, they work something out. The accountant might pay the penalty, or the accountant may say, I’ll do your returns for free for a few years, or whatever it is. But more often than not the accountant says you didn’t tell me to file an extension. You didn’t give me the information to file the return. So it’s very difficult to blame that on somebody else.”
There have been cutbacks to personnel in the IRS.
Klitzner confirmed, “They cut back. The IRS was at around 102,000 employees, total employees, that includes the maintenance people, the computer people, not necessarily everyone that deals with taxpayers. And now from 102,000 they’ve lost about 25%, they’re down to about 77,000 and in the new bill, the Congress has proposed an additional 40% cut in the budget for the IRS, not necessarily people, but another 40% down. So morale over there, very low. I always picture the people at the IRS office every hour or so saying incoming and hiding under their desks. It’s just unbelievable, but they’re trying to make up for it with AI, with computers doing the work. And incredibly, we haven’t seen much of a drop off yet in audits and collection cases. That may come, but they still seem to be cranking it as if everybody is there. It’s just amazing what they’re doing.”
Is there a time of year audits are more prevalent?
Klitzner said, “We don’t see a whole lot of difference. It just depends on whose name is in the queue, and when that auditor finishes a case and picks up the next case in the queue. So, we never know. We see influxes here and there. What we see with the IRS is we see kind of programs where suddenly they’re targeting more things than others, like they’re targeting corporations where the owners aren’t taking a salary, which they’re required to do, or they’re targeting corporations that are treating employees like independent contractors and not paying their payroll taxes. So it’s always changing over there, but the computer has been spitting out a lot of collection letters, a lot of levies are now coming out. And what they’re doing more than ever, is they’re doing federal payment levies, meaning that if you get benefits or if you get money from the government in the way of Social Security, for instance. Or if a business, a doctor’s office, takes Medicare payments, they’re going after those government payments, which can be crippling, especially to a medical office, where every single day, the IRS is grabbing all of their Medicare and government payments.”
Regulations on taxes change pretty regularly.
Klitzner said, “The no tax on tips, and the no tax on overtime, it’s not for everything, and not for everyone. I can’t charge my clients $10 and take the rest of my fee and tips, and there are some limitations. But the CPA’s, the accountants, they’ll be on board, their computer software will be working and people know what they’re going to get. I think the one thing about the bill, like it or not, for specific items on it, from a tax standpoint, for the individual, they’ll continue to get the tax breaks they got from the last time the tax laws were changed. There’ll be some more tax breaks. I think people generally will be paying somewhat less. If an individual, for instance, owns a company, and he’s taking money, he’s taking distributions. Then he is required, or she is required, to take a salary, to take a paycheck, to pay in taxes. Someone who’s a silent partner, who’s not really working there, not making any money, isn’t required to do it. The requirement is that you are supposed to take in salary, what you would pay someone to do the job you’re doing.”
So you can’t avoid payroll taxes by just taking a distribution.
Klitzner said, “The IRS doesn’t like it. They don’t like when no taxes are paid in and every every business is a little different. Sometimes 50,000 is enough, 25,000, it just depends on how much the business is making. There’s no minimum. Some people suggest half of what the income is. But for the most part, when we see someone making a lot of money that can afford it, taking $1,000 a week, that’s usually okay with the IRS. It’s the ones taking zero that create a huge problem. And I know 50 is not bad, because the ones taking zero, they come in, they audit, they say you should be taking 100, 125 of this. And I can usually settle it for about a $50,000 salary, depending of course, on the business.”
The IRS isn’t going anywhere.
Klitzner said, “Even if tariffs come through, tariffs can in no way take the place of the IRS. It may help a bit, to some degree, but there’s just not enough money there that’s going to replace the IRS.”
What is the most common problem that Klitzner sees?
He said, “It’s the unfiled returns. At least, probably 80% of the people that come to me have at least one unfiled return. But generally it’s I haven’t filed my return in X number of years. And I always tell them, you only have to go back six years, not the eight or 10 years that you that you haven’t filed. Some people come to me, I owe money from 2018, 2017, 2016. I haven’t filed since then, so they’re going to owe more money, plus we’ve gotta deal with the past money. But the single most important thing that all of these folks have to do is starting now going forward, you’ve got to get on track. You’ve got file and pay this year. The very least 2025 pay in, file it on time, pay it on time. Stop the bleeding, and we can deal with the past. I can’t deal with the past unless folks are dealing with the present and the future.”
The IRS can come after people for a lot.
Klitzner said, “They do have a lot of tools they can use. I think the most important one, the liens, that’s important, even the passport certification, is because you may not be able to renew your passport, but probably their biggest tool is that levy, when all of a sudden you wake up one morning and your bank account is frozen, or your boss calls you in and says, yeah, we’ll be paying the IRS most of your salary this week. Those are the things you’ve got to watch out for, and you have to be careful too, because sometimes people trying to help themselves trigger these things. I have people all the time, I called them, I wrote to them and what they’re doing it’s all well and good, but it’s not the way to handle the problem. It’s not the way to take control of the problem. It’s basically giving the IRS a lot of times carte blanche to just do whatever they want to you.”
AVVO can help people find attorneys.
Klitzner said, “It’s an attorney listing website. I use it to find lawyers sometimes around the country, if I don’t know anyone, but it’s a pretty good website that, it has qualifications of lawyers, it has ratings of lawyers. It has testimonials for lawyers. It’s really a good way to get started with finding someone that can help you in a certain area of law, in a certain area of the country.”
Klitzner has a 10.0 rating on AVVO.
He said, “Being proactive is good, because when I get involved in the case, I make the decision how proactive we’re going to be, but it’s better I’m making the decision than the taxpayer.”
For more information, click here: https://www.keywestsurgicalgroup.com