Steve Klitzner, the IRS Problem Resolution Attorney, joined Good Morning Keys on KeysTalk 96.9/102.5FM this morning to talk about tax problems.
With tax time being behind us, if you haven’t filed for years, you really should catch up.
Klitzner said, “This is a good time now to catch up. Because you can find a good CPA or Enrolled Agent who has the time to work on your returns and spend whatever time it is necessary. Now, we’ve talked about this before, if you haven’t filed for 8, 10, 12 years, you only have to go back for the last six years. You don’t have to worry that you haven’t filed yet this century but the time to do it is now. Get the returns prepared. Take a look at them, start to file them and pay them as best you can. Don’t wait until next year because the IRS is gearing back up. Statistics show that last year was the first year in several years that they’ve actually filed more liens against property and they’ve issued more levies taking bank accounts, and wages. So you need now to take control of this. It’s a perfect time to do it.”
It really is best to at least get your current taxes filed, get them paid and then start to approach the previous tax returns.
Klitzner said, “If you don’t pay in taxes, you have to start making those estimated quarterly payments. One was due in April, then again in June, September and January, so that you’re considered compliant. I had a case I was talking to an appeals officer yesterday, and my client’s a serial non filer, non payer. Everything’s now filed, but he’s been late since 2010 and she said to me, I can’t give him a deal. He’s just not a good person in our eyes. So my plan is, if I can do something now, let him file and pay for a year or two. He’s back in their good graces, then I can work a deal for the old stuff.”
One myth is that the IRS is on your side. That’s not exactly the case. What are other myths?
Klitzner said, “One of the biggest ones is that people think that if you don’t file and pay your taxes, you’re going to jail. That’s the biggest question people asked me when they first talk to me, am I going to jail? The answer generally, is this, based on what I know about your case, if you go to jail, I’m going to have all my clients go to jail. I’ll just be able to go down to the prison once a week and visit everybody. I’ll have my own wing down there. So that’s not the case. They don’t have the resources, they can’t go after everybody. They also want a conviction. So the last thing they want to do is go to court and have somebody come in and tell a sob story and be found not guilty. So they’re looking for high profile people, people with large lifestyles, people who aren’t filing, who aren’t paying, people who if they prosecute, they can send a message to everybody else, not your average person. I have an attorney that I’ve represented for a few years and we finally worked out a deal. When he came to me, he hadn’t filed or paid personal taxes, corporate taxes, or payroll taxes for 10 years. He was living large, properties, cars and he didn’t go to jail. It never even came up. We just quickly worked it out before anything happened. We got the returns filed, he started paying it off. He was relatively high profile. They’re looking for bad tax preparers that are causing the IRS to lose millions of dollars. They’re looking for people who file zero returns, or go out of their way to lie. One good way to go to jail is to send a zero return and write down what are you going to do to me? Those are bad things to do. But your typical person who’s fallen behind is not going to jail.”
Fear can be taken away with a consultation with Klitzner.
He said, “I’ve got a lot on my shoulders. I do take on their burden. However, they can’t feel 100% great, because we still need them to do things. We need to catch up on the returns. We need their financial information, so we can work something out. But by filing the returns and being proactive, that’s what you want to do. Because they’re not putting people in jail who are filing their returns even when they owe money.”
Were there really 87,000 additional IRS agents added to the organization?
Klitzner said, “No. It hasn’t happened, but they are hiring them. But it’s over a 10 year period. And over that 10 year period of time, there’s going to be just as many if not more people retiring. The other thing about the 87,000 new agents so to speak, is that they’re not agents. They don’t carry guns and badges. These are people that answer the phone, it could be IT people, maintenance people, they’re not all dealing with taxpayers. So at best, maybe the IRS will rise a little, but they’re going to basically stay flat when it comes to employees. Their biggest problem is hiring people. They went to a job fair a while back and they were wondering why aren’t people coming to us? Well, a study was done of 10 government agencies, and the IRS was the last in the government agency that someone would want to work for.”
Is it true that now that taxes have been filed or are supposed to be filed, we’ll start to see a flood of audits and maybe even more so than ever?
Klitzner said, “I have seen an uptick in audits, not tremendous, though. The more you make, the higher your percentage, still not tremendous. What happens is there’s very rarely an audit that comes out of anywhere, a random audit, it’s usually based on the return. So when you file your return, the IRS has a score they put on it. It’s called a diff score. It takes a look at your return in relation to other people in your industry, other people that do what you do. If the numbers are off, if your percentage of advertising is higher than the norm, then you’re more likely to get audited, the odds are still in your favor, but the more off the numbers are, the more likely you are to get audited. The other thing is, if you go to a bad tax preparer, someone under investigation, there’s a good chance as part of their investigation of them, they’re going to audit you. So be very careful who you have do your returns because there’s no secret sauce in doing the returns. Most CPAs, Enrolled Agents, if you take 10 of them to do the same return, they’re going to get pretty much the same number. There’s no secrets to it.”
Another myth is the IRS can’t take your house because it’s homesteaded.
Klitzner said, “That’s not true. The reality is the IRS doesn’t take your house, they send the case to the Department of Justice and in order to take your homestead, they have to sue you in federal district court to foreclose on your homestead. They don’t do it often. But they do do it. They’re looking for people, they have 10 years to collect. Otherwise, the statute of limitations runs. So when nine years goes by, the IRS looks at it. Sometimes they’ll say, you know what? Let’s sue this person, we’re going to get a judgment for another 20 years, because we think they can pay. They don’t have the resources, they can’t do that with everybody. They also have a house and the house has a lot of equity. Let’s try to foreclose on that house. So while it doesn’t happen often, it does happen when there’s property with a lot of equity, and the IRS is running out of time. So it’s not over ‘til it’s over and statute of limitations runs for my clients, and we save millions of dollars a year. But there is a small select few where they actually go after their house.”
If a married couple is filing jointly and if they split up, is it true that one of the spouses can still be responsible for the other who maybe hasn’t paid their fair share?
“Yes,” Klitzner confirmed. “If you file a joint return, even if you go to court for your divorce, and the judge says okay, the husband is responsible now for those joint returns. That may be true in court, but the IRS looks at it and says you filed a joint return. They’ll come after either one and try to get all of the money from that person. That’s between the two taxpayers, not the IRS. Now, sometimes innocent Spouse Relief is available. It’s a little bit complicated. It’s not as easy as saying I’m an innocent spouse. We have forms to fill out, it goes through a process. It can take many months to just hear from them. Often they end up in appeal or in tax court. But with the right set of facts, we can free one spouse from the taxes of the other even when they file joint.”
What if people say if I can’t afford to pay my taxes, how can I afford to hire someone to help me?
Klitzner said, “A large percentage of our clients actually do have the money to pay the IRS, they just haven’t, they fallen behind, but we do represent people that have no ability to pay the IRS and they still need my help. They do, they find a way. I always charge a flat fee, covers everything I do start to finish until the end of the case. The case could go on a year, it could go on 10 years, we could do different things over the period of time to resolve the case. Some of my clients pay everything, some of them who can’t afford it, don’t pay it, they pay a small percentage of what they owe, but we work out a way for them to pay me on a monthly basis. The surprising thing is, is that the IRS allows them to pay me. We actually put that on the financial form and that’s that much less that they’re paying the IRS every month.”
Some companies are claiming they will erase a tax burden completely.
Klitzner said, “You have to be careful of those faceless companies, not owned by an attorney or a CPA or an enrolled agent, it’s owned by a business person. You have sales people answer the phone in another part of the country and they’re telling you whatever you want to hear. If you want to hear you can settle for X amount of dollars, they’ll tell you sure, why not, you can do it. You have to be wary. The local revenue officers don’t really respect them. They know what they’re dealing with with them and they just, they just drive through them like a train. Because they don’t know how to exercise the people’s rights and they’re not cooperating because it’s all about cooperation. And the IRS just does what they can steamroll over them.”
If you get a letter from the IRS, please don’t ignore it.
Klitzner said, “They are sending out letters. They’ve been doing it for several months. People call me and they say, I just got a letter from the IRS. I hadn’t heard from them in a while. I said is this is a CP 504? They said yes. I said okay. They’re starting to send these out now. They want you to know that even though they haven’t bothered you because of COVID, they still love you, they still care about you, they still want your money and here they come. Don’t ignore it. That’s always the best time to take care of it, is to get ahead of them. I had a client call me a couple of weeks ago, they just levied his bank account. They didn’t really levy it out of nowhere, he’s ignored or missed the letters, they got over $100,000. Luckily he came to me in time, I was able to get it released. But if you don’t cooperate, if you just ignore them, their next phone call isn’t a phone call. It’s taking your stuff and waiting for you to call them.”
The consultation with Klitzner is always free.
He said, “If I can help, I’ll say here’s what I can do. If it’s something very small or something they don’t really need me with, I’ll give them some advice. If they don’t know where their refund is, I’ll tell them how to find out about that. If they owe two or three or $4,000, I’ll tell them how to take care of that. But when they need me I’ll tell them that too and I’ll be able to represent them. A lot of people pay me also really to just quarterback situation and just get things under control. And that’s what I do. Peace of mind.”
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