Steve Klitzner, the IRS Problem Resolution Attorney, joined Good Morning Keys on KeysTalk 96.9/102.5FM yesterday morning to talk about tax problems.
Klitzner said, “I do one thing, and that’s I deal with the IRS all day, every day. I take care of people and businesses who owe the IRS, are getting audited or haven’t filed their tax returns.”
If you find yourself owing money, taking care of it sooner rather than later really is the best bet.
Klitzner said, “There’s no question. People fall behind and they say, okay, next year, I’m going to take care of it. Then it’s like, well, I’m not sure what to do this year, what do I do and then April 15, comes and goes. The following year, they promise to take care of it. Before they know it, it’s snowballed into something where they just don’t know how to catch up. Sometimes it’s the IRS that comes to them and makes them catch up. But the ideal situation is to stop the bleeding and the best way to deal with the IRS on your past taxes is to get current on your current taxes going forward, and then we can deal with them down the road.”
Tax day is coming up.
Klitzner said, “April 15 is the deadline to file and pay. You can get an extension, but only to file. So a big mistake some people make that have fallen behind is they say, well, I don’t want to file because I can’t afford to pay it. Well, if you don’t file on time, you get hit with a four and a half percent penalty that maxes out when it hits 22 and a half percent. So after five months, now you owe an extra 22 and a half percent plus failure to pay, plus interest, which is right now at 8%. So that’s a big problem. The other thing you have to be careful of is when you have your returns prepared, go to a qualified tax preparer, CPA, an enrolled agent. You might pay a little more, but you can end up paying less because if it sounds like it’s too good to be true, if you hear about a tax preparer that knows all the secrets and can get you all the all the refunds and all the deductions, chances are, they’re making things up. When they make things up, and the IRS catches it, you’re going to pay it back plus penalty, plus interest. So it’s better to go to somebody qualified, pay a couple of bucks more, and make sure it’s done right, That way you’ll stay on audit problems.
How can a person catch up if they’re behind with the IRS in filing or paying?
Klitnzer said, “They have to start filing their returns. People who are employees don’t normally have tax problems because they have taxes taken out. Independent contractors, realtors, people where no money is taken out of their check, they’re the ones that often fall behind, because they figure okay, I’ll take care of this in April. But what the law says is, you have to be making estimated payments during the year. April 15 is the deadline to file but you’re supposed to have paid it in during the prior year. This is very difficult. There’s no question about it, because now these folks who are not used to paying current taxes, have to start doing that and deal with the prior taxes. Everyone has a different solution. We make deals for some people with an offering compromise, because they qualify where they pay very little money on their debt. Other people who have assets, who have money, they have property, they make a lot of money every year, they’re going to end up paying most or all of the tax due. The IRS doesn’t wave the interest. People call me all the time and say, can you just call them and see if the way the interest or the penalty? Well, if they would do that, no one would ever pay their taxes on time, everybody would just wait a few years and make a deal. So certain people qualify, people that can’t afford to pay the taxes in the past, we make a deal and maybe they don’t pay all the taxes. But in order to get to that point, you have to be good going forward. It’s tough, but you have to do it.”
Business owners and small businesses who get behind in taxes can find themselves in quite a hole.
Klitzner said, “The payroll taxes for a lot of small businesses who can’t pay all their bills, they tend to hold off on the payroll taxes, because if they don’t pay their electric bill, they get shut off. If they don’t pay their rent, they’ll get thrown out. If they don’t pay their employees, they’ll quit. So when there’s not enough money, they say, well, you know what? The IRS can wait and I’ll take care of it next month. Of course the IRS wants to be first and you really have to prioritize them because they come back with a vengeance. It may not be right away, but when they do, they can make your life and your business very difficult.”
Audits have been on the rise recently.
Klitzner said, “They’re doing more correspondence audits because they don’t have enough agents take care of the in person artists. But we’re seeing a lot of those and very often, the audits wrong, sometimes they’ll send you a proposed change, based on information they have without ever talking to you. You have to fight this, you may not owe the money. Just because they audit you and say you owe the money, you have rights. You can appeal it, you can even go to tax court to get to the right number. That’s really important for individuals and businesses to exercise their rights there because just because the IRS says something does not mean they’re correct.”
Is there a way to prevent an audit?
Klitzner said, “The best way is to go to a qualified preparer. It won’t guarantee that you don’t get audited. But what happens is, the IRS puts a score on your return based on what people in similar businesses pay for certain expenses. This is called the diff score, when the score is high, you’re more likely to be audited, when it looks like your numbers are out of whack. That doesn’t mean your numbers are wrong, because there will be some numbers that are higher for people and some expenses that are lower for others. But they will then open up a file. They don’t usually just do a random audit. When I see a tax return of someone getting audited, I can usually tell pretty quickly exactly why they’re getting audited. Again, that doesn’t mean that the IRS is correct. We have plenty of audits where at the end, there’s no change at all. If the audit is completely wrong, it’s completely wrong. But it’s up to really the citizen to be very careful when doing the return because and I know that the return is very complicated, but if the numbers on the return are made up, are way out of whack, if someone makes $30,000 in the business, and has $35,000 in expenses, maybe that’s correct. But when the IRS sees that they say well wait a minute, how will you live it? How is that possible? And you’re more likely to get audited. Fortunately for taxpayers, the odds are still on your side. The IRS is auditing more, but it’s still a small percentage of returns.”
Local help with tax problems can be the best, as opposed to some of the national companies.
Klitzner said, “They make some pretty good claims because you don’t know who the business really is. Many of them don’t have a website. You don’t know who’s really running the business. You get different caseworkers, depending on who gets fired or who quits and you’re dealing with somebody very often thousands of miles away. I can tell you from experience, the local revenue officers at the IRS really don’t have a lot of respect or patience for those national companies that don’t do the work and a lot of times, they’re going to steamroll them. See, when I represent someone, when I have a power of attorney, they never talk to the IRS. It’s not necessary. The IRS is fine with that. But when you have a national company, and they’re still sleeping and someone at the IRS is at your door, you’re stuck. So I think that’s a big difference. As a Florida attorney, and as a licensed attorney here, I’m bound by the Florida Bar. I have to work hard, I have to do a good job. I have someone looking over me. A company across the country, if they don’t do the work, what are you going to do? Sue them in California or Colorado? So that’s a big difference. I don’t consider them really competition. They may be from a standpoint of advertising. But they’re not competition for someone that’s actually helping the taxpayer.”
Does the IRS frown on people who retain counsel for their tax problems?
Klitzner said, “A lot of people say that, and the opposite is true. When I have a case, and I send it over, I send my power of attorney to a Revenue Officer, often they’re very happy that I’m on the case, because now they know that I’m going to exercise my client’s rights and I’m going to give the IRS what they’re entitled to. They don’t really want to levy you. They don’t want to really take your bank account. They don’t want to take your wages, they do that as a last resort. But if they’re not getting cooperation and not getting what they need, they have no choice. Sometimes when I send in my power of attorney, it’s like, thank goodness, you’re on the case. Now you can deal with the taxpayer, we can’t get anything out of them. So it actually is kind of the opposite, thank goodness. They generally welcome us on the case. That doesn’t mean of course that were on their side, by any means. We know what the law is, we know what we have to comply with. But our main concern always is our client. How can I get the best deal for my client, and not set him or her up for failure, but do something they can afford? As I said, sometimes they pay a lot of money when they make a lot of money. But if they’re not making a lot of money, they’re not going to be paying the IRS what they don’t have, and no one’s going to take their account. The IRS can also certify your passport to the State Department if you owe over the number now is $62,000. If you owe over that, they can actually not renew your passport not issue you a new one. In some cases when it gets way beyond everything, they’ll actually have it revoked. That’s very rare.”
If you’re in trouble, Klitzner can help.
He said, “The earlier the better. The one thing people have to realize is those letters that you get from the IRS means something. The certified letters often have certain rights that go along with them, that will expire depending on the letter. It can be 30 days, it could be 90 days. If you pass that time, you’ve now made your case, you’ve taken the leverage you have and made your case more difficult to resolve. So don’t ignore the letters. They are starting to send out more and more letters from the folks at the 800 number and many people may ignore them and say, well, we’ve heard this before. But now the IRS this time they mean it and you can’t ignore it. People feel so much better once they take the bull by the horns and say okay, I’m going forward and taking care of this. Now, sometimes people talk to me, they hire me, we have a free confidential consultation. They say I want you to represent me. Then they say I feel great and I feel so much better. Okay, that’s good. But now we have some work to do. I need some things to represent you and get you a good deal that you can afford to get them in the rearview mirror and behind you forever.”
The consultation is free.
Klitzner said, “I’ll talk to you, if I can help you, I’ll tell you what I can do. Most of it, most of the IRS problems, they really do need help. There are some that are very small, that are very simple. I’ll tell you what to do, and go on your way. But very often, taxpayers need me not just to solve the whole case, but sometimes the initial retainer is for me to get the records from the IRS, find out what’s going on, find out if the statute of limitations of 10 years has expired, and get a real handle on the case, before we decide what the best what the best way is to resolve it.”
There won’t be a bunch of billable hours.
Klitzner said, “It’s always one fee, a flat fee, either initially to get the transcripts and get my power of attorney in or if we know what the situation is, here’s my fee, it covers you until the case gets resolved. That’s another big difference with those tax companies, they don’t really want to get the case resolved because every time they lose something, they could charge you more. My fee covers everything start to finish. You’re not going to keep getting bills, because you called me or because I had to do an appeal or take other action. That gives me the incentive to get your case done quickly and correctly so that it puts it behind you. Most of my clients, just about all of them, really appreciate that fact that they don’t have to worry every time they call me and they’ll get a bill from me because they spoke to me for 15 minutes. That doesn’t happen.”
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