Steven Klitzner, tax attorney, joined Good Morning Keys on KeysTalk 96.9/102.5FM this morning to talk about taxes.
What should people be doing as the New Year begins?
Klitzner said, “It’s funny, this is the only time of the year where you look back and say, I hope I didn’t make that much money. I don’t want to pay that much in the way of taxes. But it’s a good thing. Of course, the more taxes you pay, means the more money you made and in retrospect, it’s a good thing, but right now it’s time to start putting things together. By the end of the month, you’ll get your W2, your 1099. If you own a business, you’ve got to do the business return and start working on that. Maybe you sold property, a gambling, winning stock sales, you’ll get all the documents on that, but it’s time to start putting things together, because even if you have a problem with old taxes, the way to start taking care of that is doing this year going forward so we can deal with the past.”
It’s important not to ignore the letters from the IRS.
Klitzner said, “The letters the IRS is now sending because they keep sending new letters, now they’re really backed up. It took them so long to get over COVID that they’re really starting to gear up and the letters now are serious. Those certified letters. They mean business, so you’ve got to take care of those. Don’t ignore those. Or the next call they’re going to give you is when they take your bank account or wages.”
The IRS won’t give up, either.
Klitzner said, “They have 10 years to collect. And some people get lucky, and the 10 years go usually, because they just don’t have the ability to pay and the IRS puts them not collectible, it gives them an offer in compromise, but if you ignore them, your number will come up at some point in time, and here they come, and the sooner you take hold of it, the more rights you have, and the more you can hold them back, because you don’t want them filing a lien. You don’t want them taking your stuff, you don’t want them certifying your passport, so you can’t get a new one.”
What about the 80,000 new IRS agents? Will things change with President Elect Donald Trump in charge?
Klitzner said, “Those 80,000 come over 10 years and they’re not all collectors or auditors or criminal investigators. They’re people that answer the phone. They’re maintenance people at the office. They’re computer people. They’re not dealing directly with the public, and those 80,000 are just, I don’t even know if they’re going to cover the people who are retiring. When I speak to a Revenue Officer and I’ll call and I’ll say, how you doing, they’ll go one year, three months, two days, Mr. Klitzner. That’s how long he’s got before he retires. He’s counting down the days when he can get out. So these revenue officers, revenue agents who are experienced, who know what they’re doing, who understand taxpayer rights, they’re retiring, and some of these 80,000 people are going to replace them, but a lot of them don’t stick. They come and they try to work there, and after a few months, or maybe even a year, they say, this isn’t for me. So I don’t think we’re concerned that there’s going to be more IRS employees than we can handle. They’re just going to probably keep status quo over the next few years and replace those that are leaving.”
Klitzner has a lot of experience with the IRS.
He said, “I teach around the country CPAs and enrolled agents and attorneys how to represent taxpayers who have IRS problems. Some of the courses are very basic boot camp type courses, and some of them go all the way up to very advanced courses. But I really enjoy that. The teaching part is great. I like helping out new tax practitioners or even existing ones. The one thing about my profession, and I don’t know if everyone has this certainly, as a lawyer in the legal profession, we don’t, is that everyone in the profession really tries to help each other, and they really work together, and they’re all very nice people. Well, the one common goal, is to represent taxpayers and represent their rights when they have a problem with the IRS, because you do have rights. They can’t just come in and do things without you having an opportunity to resolve it first. But if you missed the time period, now you no longer have that opportunity. We’re playing defense, and it’s much better to play offense than it is defense.”
What kind of advice would Klitzner give to agents, either new or established?
He said, “I think one of them is that when there is a practitioner like me on the case, we’re not on it to fight. Fighting doesn’t get us anywhere, because ultimately, the IRS is the judge and jury. We’re there to try to make a deal and not set the taxpayer up for failure. It’s very easy to say that somebody the IRS, all right, my client will pay $1,000 a month, but if my client can only pay $500 a month and a month from now, two months from now, he’s going to default, so we’ve got to convince them what the right number is. I just finished a case where my client had been levied. They were taking his paycheck for 10 months, and then he came to me right before Christmas. He said, can you stop this by Christmas? Well, because it was Christmas time and the IRS was on vacation, we couldn’t do it beforehand, but we were able to hold back his paychecks. I was able to get the levy released, and now we have to work a payment plan. What they were taking from him about $3,000 or $4,000 a month, we were able to get the levy released and work a payment plan for $500 a month. Now he owes several $100,000. I think it’s over a half million dollars from old tax, from old taxes. So we’re able to work this $500 a month deal. This isn’t a permanent deal. The IRS is going to come back a year from now and see if they can get more. But we’re able to kick the can down the road because they only have 10 years to collect. Unless they sue to get a judgment, which they don’t usually do. The majority of the time, 10 years runs, and we have taxpayers that save tens of thousands of dollars up, to seven figures. I have a taxpayer now in April, we just worked out a deal. She’s paying a couple $1,000 a month, but in April, seven figures of tax liability goes away.”
While the IRS is aggressive, they’re not necessarily looking to ruin the taxpayer.
Klitzner said, “What they don’t want to do is, and what they can’t do, whether they want to or not, is create a financial hardship. Those are the two words we use all the time. You’re going to create a financial hardship. You need to do this. You need to do that. That’s the key here. They don’t want to ruin anybody, because if they ruin somebody, they can’t pay taxes going forward. By the same token, the taxpayer has to pay their taxes going forward. I could always deal with the past, but you’ve got to stay current. You’ve got to be in the IRS’s mind a good person who’s taking care of their problem now, then they’ll work with the past. Sometimes the IRS themselves don’t read the Internal Revenue manual, which is their guidebook. That’s our job is to say, take a look at this section right here, it says you can’t do this, or it says we can do this and very often they look at it and go, oh, let me ask my manager, and they come back oh, yeah, my manager said, you’re right. That happens all the time. They don’t read their own guidelines. Can you imagine working somewhere and not knowing the rules of your own office?”
What might happen if the taxpayer tries to go it by themselves against the IRS?
Klitzner said, “The problem is this, you don’t know what things mean. Some people look at me go, well, you’re only filling out these forms. Well, you have to know how to fill out the forms. You have to know what numbers are proper in the forms, what the IRS standards is, because if you put, for instance, food and clothing for a family of three, and the IRS allows $1,592 and you put $3,000, they’re not going to allow it unless you have some extend extenuating circumstances. So you have to know what things mean. And of course, the IRS forms, the IRS letters, they’re not always very clear. So we do more than just, I always laugh when someone thinks all we’re doing is filling out a form. It’s advocating for my client and creating the best opportunity for them where we can make a deal that we can get the IRS to agree with, where my client says, yeah, I can do that. I can still live my life the way I want to, and pay them off. It’s tough sometimes. We have people that their kids are going to private school, or they’re supporting a kid in New York who’s going to college, and they’re paying their room and board and their college tuition. The IRS is that’s all money you can give us. So it’s up to me to convince the IRS that they should allow certain things. So my goal always is, and sometimes, people live a little too large. They’ve got to cut back. But my general goal, and usually we can accomplish it, is keep living your life, keep enjoying your life and let’s carve out a section that we’re going to give the IRS every month, that they’re going to accept, and this will ultimately go away. It might be full paid, or maybe the 10 year statute of limitations runs, or maybe we can do an offering compromise, settle it all right now.”
Is it ever a defense whereby someone uses a CPA and then says, well, I didn’t know, my CPA had told me what to do.
Klitzner said, “It’s really more for penalty abatement. If your CPA says, no, you don’t have to file or this is how we’re going to take this complicated matter and you get audited, you’re still going owe the money, but we can save you the 20% penalty. However, beware of this. If your CPA or tax preparer says, I’m going to file the return and they don’t, the IRS will not forgive the penalty on failure to file. That’s your responsibility. You can’t delegate that to somebody else, so you’re going to be on the hook for it. So you’ve got to make sure they file. But if they give you advice and you follow it and it’s wrong, we could save you the penalty and the penalty of 20% can be very, very large in some audit cases.”
It’s helpful that Klitzner talks to the IRS on your behalf.
He said, “You’ll still get letters, but I’m the one making all contact. You’re not going to get phone calls. You never have to talk to the IRS and that to a lot of people, they just don’t want to do it. It’s a lot of pressure, and some people are embarrassed. Some people just are afraid. They’re afraid the IRS is going to brow beat them. So I protect them from that. They brow beat me. I’m fine with that. I can be brow beaten with the best of them.”
The 800-numbers out there that claim to help with taxes may not be very helpful.
Klitzner said, “A lot of those companies are owned by businessmen. They’re not practitioners, and the owners certainly don’t do the work on the cases. They hire people. The problem is most of the people they hire are answering all the phone calls from all the ads they do. There’s not many people in the back room actually working on the cases and those people in the back room don’t last very long. You call one week, here’s your case worker. I don’t even know what a case worker is, but here’s your case worker, and then the next week you have a new case worker. So you have to be very careful of those companies, because you’re not getting that personalized service. It’s like going to the doctor’s office, and every time you go, you get a different doctor, only in this case, these people aren’t licensed doctors. They’re just workers on the case. They may have one person in the back room who knows anything about the cases, and they’re not going to be able to get their attention. So be very leery of that. Even the IRS local people, when they see these national companies on the case, they just roll their eyes. They know they’re getting no cooperation. Nothing’s going to be done and cases like that when I get involved, very often, the IRS person goes, thank goodness you’re on this, now we can get this thing resolved. All I’m doing is levying these people because I’m not getting any cooperation from them or their representative. Make this the year if you owe back taxes or haven’t filed your returns, that you’re going to get this under control. It may hurt a little financially. I get it. It may be a little aggravating, but at the end, you’re going to feel so much better that you’re not constantly looking over your shoulder for that shoe to drop.”
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