Do NOT ignore your tax issues — get them solved now

Steve Klitzner, the IRS Problem Resolution Attorney, joined Good Morning Keys on KeysTalk 96.9/102.5FM yesterday morning to talk about everything taxes.

If you haven’t filed your taxes in years, be prepared for a letter from the IRS.

Klitzner said, “What happens is, and they fell behind, they’re starting to catch up from COVID. They’re still kind of recovering from that and what’s happening, we’re seeing more and more people who, after many years of really hiding under their sheets and hoping for the best are getting letters from the IRS. These letters are saying, if you don’t file your return, we’re going to take what we know, what’s been given us, and we’re going to file for you and they’re not taking all your deductions. Of course, they don’t know your expenses. It could really run up a bill. We’ve seen those two, three, four times higher than they would have been had the taxpayer filed themselves.”

Are there more agents in the department, too?

Klitzner said, “We are seeing more and more revenue officers, those are the collectors coming in. In many cases, they’re really just replacing people that have retired or moved on. But at least they’re trying to keep their numbers up. Now revenue agents are the auditors and we are seeing more and more of them. It’s funny, years ago, I’d see the same revenue agents all the time. Now I’m seeing new ones every single audit, it’s a new revenue agent coming to audit people. So they really are getting back to business as usual. I really expect them to be filing the same amount of liens, issuing the same amount of levies on bank accounts and wages as they were prior to COVID.”

Having someone help you with the IRS is really your best bet.

Klitzner said, “When I’m speaking to the territory manager in South Florida and I remember when he started out as a Revenue Officer, and I’ve watched him climb to the top. The whole idea and what I do is I have to represent my clients first. But I’ve also got to deal with the IRS because if we can’t make a deal, they’re the judge and jury. So we have to get along. We have to work together. The one thing that the IRS and I always agree on, on every case is, we don’t want to set the taxpayer up for failure. Whenever I say that to them, they always back off a bit because they don’t want to an installment agreement for $2,000 a month, which they’d love, when they know the taxpayer can only pay $1,000 a month or $500 a month. So it’s my job to get to that point where my taxpayer’s going to be able to go on with their lives and still afford to pay the IRS.”

Does it seem like generally there are less returns being filed because people just aren’t filing them?

Klitzner said, “I do know that people who haven’t filed tend not to file in the future. So when they miss a year, and they want to take it on the next year, and that year, they fall a little behind, not sure what to do, now we’re in the third year, and they look at it, they’re so overwhelmed, they don’t know where to begin. Now, it snowballs into something bad. The biggest problem they may have is, if they’ve moved since the last time they filed the return, while the IRS technically could find that out, that’s not their concern, they’re going to be writing very important letters to the old address. So you’re getting certain rights on these letters, they’re going to your last known address, when they finally catch up to you because now they’re ready to take your things, you’ve lost a lot of your rights and we’re playing catch up. We’re playing, please don’t hurt me, as opposed to this is what we want to do. Here’s our proposal to you.”

Not getting a letter from the IRS because it was sent to an old address is not a defense.

Klitnzer said, “It’s just like not picking up your certified mail, or we see a lot of people just don’t open up their mail, hoping it won’t count against them. But it does. They’re only obligated to send it for the most part to the address they have on file when you last filed a return six, seven, eight years ago. When they finally catch up with you, when they finally say okay, now you owe the money. Now they go to look, where’s he banking? Where’s he working? Now they’re going to start taking action.”

When businesses fall behind with taxes, it can get a little complicated.

Klitzer said, “We see a lot of business owners, and they’re very good at the work they do. They’re even good at getting work and selling the work and high quality work. But they’re not good at running a business and they don’t keep the right records. They don’t have a bookkeeper an accountant. They don’t know how to take care of payroll taxes, they don’t have a payroll tax service and ultimately, it’s going to catch up with you. Businesses are the most prone to immediate IRS action. So if you’re not filing or paying payroll tax returns, it is pretty close to inevitable that the IRS is going to be assigning someone locally to come after you. So you have to be very careful. It’s very difficult when you have other bills to pay, and you can’t pay all your bills, and you don’t pay the IRS this week with payroll taxes, they’re not going to find out about it for a few weeks or a few months or maybe even a year. So it’s very easy to put them aside. But they are the worst creditor to have and you have to get on top of it as soon as you can.”

The rights that you have in the initial stages of the process can go away.

Klitzner said, “Those letters, some of them are just notice letters or threatening letters, but some of them say, here’s your right, you have 30 days to exercise a request for a hearing or you have 90 days to protest the tax return we’re preparing for you or to protest the audit that we’ve come after you on. You have to be very careful because especially when they’re dealing in correspondence, it’s very hard to get someone’s ear. You write them back a letter. They don’t answer it. They don’t care. They keep rolling along. It’s just not set up for an individual to handle a lot of these problems because they don’t know what they can do, and sometimes we see a revenue officer on the case, and he or she is very nice and trying to work with the taxpayer, but they don’t tell them all of their rights. They don’t tell them about requesting a hearing. They basically strong arm them, and you have to be very careful.”

Is there such a thing as getting forgiveness from the IRS and getting a drastic reduction that you can just walk away from?

Klitzner said, “Well, yes, but it’s not like people think. If you watch The Office, there was an episode where Michael wanted to go bankrupt and he walked out of his office and said, ‘I declare bankruptcy.’ That’s not how you do it. It’s the same with the Fresh Start program, you can’t just call and say I want a fresh start. The reality is the Fresh Start was a program that the IRS added to for several years. But it was last added to in 2012. It’s no longer something that we say, oh, we’ve got the Fresh Start program, because it’s over 12 years old. It’s now part of their culture, part of the Internal Revenue manual. But it was a program that helped people settle cases, for less and a lot easier. It’s still in effect. Unlike those radio ads for these nameless and faceless out of town companies, it’s not a brand new program that’s going to expire. There’s nothing new about it. Just be very careful of speaking to these sales people from out of state programs who I guarantee, no matter what you tell them you want to do, they will say you can do it when the reality is all they’re doing is taking your money. There’s a couple of those companies, they charge people every month until the case is over. They have no incentive of resolving the case. It could be around for years and years and guess what? No one’s working on it. No one’s actually working on their case. I’ve talked to revenue officers in South Florida and their managers, they have no respect for these companies. They know they’re not going to get what they need from them. As far as they’re concerned, they can bypass them and talk directly to the taxpayer. When I represent somebody, they can never call my client, because I’m always talking with the IRS. I stand in their shoes. And that’s a big difference.”

Is Social Security income exempt from a levy?

Klitzner said, “The IRS can take 15% of your Social Security income, there are some times where they could technically go more. It’s rare. It really is something if you don’t cooperate with someone locally, but the system the computer will send out a letter and start taking 15%. Unlike other levies where when the statute of limitations runs, the levy stops, the Social Security levy goes on forever. So 15% really adds up and a lot of people, they’re living, check to check. They can’t afford the 15%. We’ve got to get it released. Most of the people where they’re going after their social security can be considered a hardship and currently not collectible. So that’s what you have to watch out for that phantom levy where all of a sudden, you’re losing money every month.”

It’s usually not a good idea to try to represent yourself without an attorney.

Klitzner said, “You can do it. It is set up to try to help taxpayers. But again, you don’t know all of your rights. I practice a lot in the United States Tax Court. The great thing about tax court is if you go to federal court, you have to pay the tax, and then you got to go to court, people can’t usually afford it. In tax court, you can argue your case, you can make your case and not have to put any money in and have the court decide. Most cases in tax court settle. We get fantastic deals in tax court. Not every case can go there. You have to have a ticket to get to tax court. But we’ve been quite successful there. That’s somewhere where we practice a lot in. If you’re not a lawyer, you have to take a very difficult test where maybe 10% of the people pass it. If you’re a lawyer, they let you right in. It’s worth going to law school just to be a member of the tax court.”

Just because the tax deadline has passed, that doesn’t mean tax problems just magically go away.

Klitzner said, “It’s human nature not to do anything if they’re not coming after you. But that’s why I offer free consultations. I tell some people do nothing based on the facts. Other people, let’s get the records, let’s see what’s going on. I can get the records online and never call the IRS. The last thing you want to do is call the IRS just to ask them a question. I’ve seen that happen and all of a sudden, here they come. That’s why when I get records from them, I get it online, don’t wake anybody up. I don’t want anybody all of a sudden sending the case to the field. So that’s what we do. Sometimes we sit back, sometimes we go forward, it just depends. Every case is an individual case with individual facts. We have to guide it toward that. It’s not a cookie cutter approach to it.”

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