The IRS Weapon’s 3 Silver Bullets For Killing an IRS Problem (Forever)
When you have an IRS problem, it’s easy to get scared, depressed, and down on yourself. Who wouldn’t?
There was once a man who managed, through years of hard work, to provide for his family and even acquired some lease properties later in life. When the tax man came knocking at his door in the early 1970’s, asking for detailed financial records on the properties, his mind began to race. ‘Had I done something wrong?’ he must have thought. ‘Will they discover some accounting error and separate me from my hard-earned money and property?’ he undoubtedly said to himself.
Before he could answer those questions, before the audit began, it became clear to him that he was worth more to his family dead, than alive. He withdrew all the money in his bank account and returned home and took his life. That’s an extreme case, at a time in America when sensibilities may have been more fragile, but for the most part, the IRS hasn’t changed that much. That is also the true story of my grandfather, Ed.
See, the IRS doesn’t know what human frailties and dispositions people have when collecting taxes, and mostly it’s irrelevant to them. That is the primary reason that I have chosen to devote my professional career to helping taxpayers with IRS problems, and I have helped many over my 15 years of practice. I firmly believe that Americans are generally earnest and good people who want to make a living, pay taxes even, with the least amount of government interference possible.
Boiled down in 3 simple concepts or bullets, here is what my experience in dealing with the most brutal collection agency on the planet (the IRS) for the last 15 years has shown to be the most effective strategies for beating tax problems.
1. Avoid being too hard on yourself and procrastinating. There are an estimated 500,000 people in the U.S. and abroad with some type of an IRS problem. Now, are you ready for this? The IRS doesn’t care why you got into tax trouble. So, you shouldn’t either.
Let that sink in for a moment. The problems that are so personal to you and may have even led to your tax problem are of no consequence to the IRS’ overall purpose to close the ever-growing tax gap (which is government-speak for the difference between the amount of taxes owed and taxes actually collected).
With a plethora of taxes in America, there has to be a plethora of rules, regulations, exceptions, and special interests supporting them. Translation, it has to be complex, and it is. It is so complex that not even the IRS knows exactly how to apply it. The IRS’ own watchdog, the Treasury Inspector General, issued a 2013 report that gave the IRS a 70% grade when it came to IRS seizures (the highest form of governmental taking--homes and other property). That amounts to a D+ in applying its own rules and regulations!
So, is there really any reason to keep blaming yourself and being lulled into inaction? No. All that matters now is that you man-up, dust yourself off and fix the problem.
Now, the IRS is not speedy on anything other than bank and wage levies (or garnishments). Maybe your problem has somehow slipped through the cracks? Maybe it has, maybe it hasn’t. But, don’t be so sure.
IRS agents coincidentally share the same motto as the Royal Canadian Mounted Police. When it comes to justice, “we always get our man!” IRS agents don’t think of themselves as unreasonable, unfair, unconscionable or un-American. Quite the contrary, they see their job as their patriotic duty.
Whether you run or not, most people can’t escape that heavy feeling that someday this is all going to catch up with them. The #1 demographic that people with a tax problem share is insomnia, almost without exception. And that, my friend, is no way to live.
I know what you may be thinking at this point. I’m not trying to game the system or be unrealistic. I simply don’t have the money to pay now, and the IRS won’t cut me any breaks if I have no money, right? WRONG! The best time to settle with the IRS is not when things are at their financial best. It’s the opposite. The less disposable income you have (that’s gross income less allowable expenses), the less it looks like the IRS will collect the debt within its limitations period, which is 10 years.
So, here’s how to start attacking your problem today:
a. Start filing and paying THIS year. It’s the law anyway, and the IRS won’t cut you any deals if you are not in filing compliance when you make a request for relief.
b. Get your withholdings straight with your employer if you are a wage earner, so you don’t owe taxes at the end of the year.
c. Start making some payments to your old IRS debt (newest periods first).
d. Obtain your master tax file from the IRS and diagnose the nature and extent of your problem. It may not be as bad as you think. On the other hand, it may have to get worse before it gets better. However, I promise you that the first step back to a more peaceful night’s sleep is to determine what years are unfiled, if any; what years are filed but unpaid; and the first day that the IRS will stop coming after you for a given tax year, i.e. the statute of limitations or CSED (literally, the Collection Statute Expiration Date).
2. Get realistic about tax relief. It is possible for a taxpayer to have huge savings. Mostly, those big savings come from the IRS’ Offer-in-Compromise Program. IRS reports show the average accepted offer is 14 cents on every tax dollar owed. Since the IRS’ “Fresh Start” initiative in 2012, getting an offer approved is much easier and cost effective than it used to be. However, acceptance is still not the norm. In fact, about 2 of every 3 offers gets rejected the first time. Here’s how it works:
First, the IRS considers the equity you have in assets (like your home for instance) that could be seized. Pay close attention to this one.
Next, the IRS considers the amount of your disposable income. Disposable income is your paycheck, minus allowable expenses, like housing, food, transportation, health insurance, state and federal taxes, etc. In its most simplistic form, the IRS then takes your disposable income times 12 and that’s your offer amount.
For example, let’s say you have no assets and your income is $4,000 per month and your expenses are $3,000 per month. The offer calculation would look like this: 0 assets. Then take 4,000, less $3,000 for a total of $1,000 in disposable income. Take that $1,000 times 12.
-$3,000 allowable expenses
$1,000 disposable income X 12 = $12,000
Your offer would be $12,000.
It doesn’t matter if you owe $100,000 or $1 million in this scenario. You only pay $12,000!
You must put down 20% of your offered amount ($2,400) to make the offer request and you have a full 5 months from its acceptance to pay the remaining 80% of your offer (or $9,600). Processing of the offer takes 6-9 months. Meanwhile, collection stops while the IRS considers your request, so long as a wage levy is not in place when you make your request. In that case, a stay of collection is in the IRS’ discretion.
Looks pretty good so far, what’s the catch? First, remember that the IRS considers the amount of equity in the assets it could theoretically seize. In other words, if you have equity in your home (i.e. the value of the home on the open market, less the amount you owe on the home) or a retirement account (401k, for instance), the floor of your offer is the equity in those assets. This is true, even if you could not liquidate these assets by sale. This knocks out quite a few offer candidates right off the bat. Taxpayers who receive huge tax savings usually have little to no assets.
Second, IRS offer examiners like to play a little game with the law. They make a lot of hay about one provision in the IRS regulations. It says that an offer is not available “IF IT IS BELIEVED” the taxpayer can pay off the debt in the time the government has to collect it. And guess what? The government always BELIEVES it can collect the debt in time. Incidentally, the ‘if it is believed’ standard prevents many taxpayers from even getting a simple payment plan with the IRS.
4. To tip the scales in your favor, hire a local, licensed lawyer to explain your options and get you the best relief available. There are a lot of debt relief outfits out there claiming they can fix your tax problem for cheap. Unfortunately, many of the national tax help chains are mostly salesmen (or worse, thieves), not problem solvers. Here is why you need a local, licensed lawyer instead.
a. Revenue officers (IRS tax collectors) are, themselves, local. When IRS computers don’t have enough information on you to spit out a lien or a bank or wage garnishment, you are likely going to deal with one of these IRS bulldogs in your area. If you have an IRS Form 2848 Power of Attorney on file with the IRS, these officers can’t talk to you. You can legally call the police on them if they refuse to leave your premises. I don’t recommend that, initially, but the point is, a lawyer is best suited to create a buffer when the stakes are this high. Simply put, let a local lawyer talk to the IRS exclusively, face-to-face with the Revenue Officer, on your behalf, so you don’t have to.
b. A tax problem is a legal problem. If you aren’t prepared to keep up with the daily changes to the already voluminous and confusing laws that govern the agency (they literally change daily), don’t expect the IRS agent assigned to your case to tell you what your options are. If you can’t pay, there are different types of payment plans, currently not collectible status, penalty abatements (forgiveness) and the offer-in-compromise program, mentioned above. If your spouse caused the problem, there is innocent/injured spouse relief. In some instances, bankruptcy will kill old taxes. In others, simply filing an amendment or an original tax return (if you haven’t filed and the IRS has created a substitute return for you) may do the trick. Because a tax problem is a legal problem, your communications with a qualified local tax lawyer are privileged. You don’t have to share those communications with the IRS upon demand. This is a power a CPA, bookkeeper or non-lawyer representatives from out of state DON’T HAVE!
c. Lawyers have appeal and the power of the lawsuit. Alas, the most important reason of all. Remember how I told you that few offers in compromise are initially granted? Luckily, virtually any IRS decision can be appealed ad nauseum with IRS appeals. But, you have to know when to timely wield those appeals or to drop them and try a different route. Also, the rubber really meets the road for IRS relief when you can effectively keep the IRS honest with a U.S. Tax Court action or other Federal lawsuit. Some IRS actions carry these rights and some don’t. Exercising these rights in court is another one of those things other non-lawyer professionals CAN’T do for you.
So, find yourself a qualified, local, tax lawyer who charges on a flat fee basis. Here are 5 ways how.
1. Look for flat-fee lawyers who practice before the IRS every day. IRS relief can be a time consuming process, and if your lawyer charges by the hour, you can quickly run up a new problem for yourself--a lawyer’s fee problem. An experienced tax lawyer can effectively estimate how much time it will take to get you across the finish line with your problem. If your lawyer can’t do this and wants to send you a monthly bill for services, run!
2. Watch the solver-to-salesmen ratio. Many tax relief firms are stacked primarily with salesmen, not tax problem solvers (ratios often as high as 8:1). Tax problems are highly emotional problems, which means they are very lucrative cases for relief outfits and lawyers. To cut corners, many firms use seemingly knowledgeable sales personnel to get you in the front door. Then, your tax problem takes a back seat in line for a solver to work on your case. Unfortunately, some cases in that firm model never get worked at all. So, how do you find out what a firm’s solver-to-salesman ratio is? Just ask! Personally, I love to field questions like this. Why? My solvers (associate lawyers) and I are the only sales representatives. In other words, our salesmen are our solvers.
3. Research your tax lawyer on consumer-rating sites. Now-defunct tax giant, JK Harris, had an “F-” rating with the Better Business Bureau (BBB) (BBB.org). Bad, right? Now, consider this. Harris never applied to be BBB accredited, but BBB has integrity. For that reason, BBB is still the gold standard for consumer/commercial help outfits. Don’t settle for less than anything less than an “A+” or an “A” rating with BBB. By the way, Harris and another tax juggernaut, TaxMasters, both folded as insolvent, in a storm of class action judgments and state attorney-general actions. These outfits were greedy, no doubt. However, there was a bigger problem here. They advertised in every U.S. state and territory. They boasted about having offices in each one. They didn’t. They had central bases of operations in one office, and rented regional conference rooms by the hour.
4. Research your tax lawyer on peer-review sites. Martindale-Hubbell (Martindale.com) has been the premier rating site for lawyers for decades. Judges, former clients and other practicing lawyers rate the lawyer at issue. AV-rated is preeminent/superb. It is the highest designation, and the voting is rather strenuous. Other lawyers and judges don’t hand out this designation willy-nilly. BV-rated is distinguished, while the “Rated”-rating simply means that the lawyer has not achieved the two distinctions mentioned above. You need an AV-rated tax lawyer to navigate the laws with experience dealing with the IRS daily, so you don’t have to.
5. Settle for nothing less than an American Society of Tax Problem Solvers (ASTPS) CERTIFIED lawyer. ASTPS is a national, non-profit organization of professionals who specialize in representing taxpayers before the IRS. ASTPS trains ‘rescue squads’ for troubled taxpayers. ASTPS is the only authoritative organization that certifies lawyers as experts/specialists as IRS problem solvers. In other words, your brother-in-law lawyer who is a general practitioner (or even a tax planning lawyer, for that matter) is just not suited for this highly specialized niche. The ASTPS certification process is rigorous. It requires continuing education with the organization and passage of a test similar in difficulty to the bar.
ABOUT THE AUTHOR
Travis Watkins is Your IRS Weapon™. He is the principal and senior attorney at The Law Offices of Travis W. Watkins, P.C., with offices throughout Oklahoma, Arkansas and Texas. His firm is unique, as it devotes 100% of its practice to fixing IRS problems for select clients and keeping those problems fixed forever.
Travis has represented hundreds of companies and individuals before the Internal Revenue Service, since 1999. He received his law degree from Oklahoma City University in 1999. He attended Oxford University and received his B.A. in Arts and Letters from William Jewell College in 1995. He is admitted to practice before the Internal Revenue Service, all Federal and State courts in Oklahoma, the U.S. Court of Appeals for the Tenth Circuit and the U.S. Supreme Court.
Travis is a Christ follower and his faith walks on ‘all fours’ through a life of helping others. He is the son of a foreign missionary. He grew up spending summers in Haiti, Kenya, Rwanda and Europe assisting his earthly and heavenly fathers in the fight against hunger for impoverished children. He brings those experiences and his grandfather’s untimely death, preceding a tax audit in the 1970’s, to every fight against the IRS.
Travis is a peer-review “AV-Rated” Preeminent lawyer by Martindale-Hubbell. He is a certified tax specialist by the American Society of IRS Problem Solvers, a national, non-profit organization of tax professionals who trains ‘rescue squads’ for troubled taxpayers.
Travis is also the creator of the Tax Help Legal Network™ (THLN), a consortium of local, licensed, lawyers in a growing number of locales throughout the U.S. THLN embodies Travis’ strongest belief about tax resolution: the hope and future of America’s troubled taxpayers lies locally in the experience, courage and accessibility of lawyers trained to do battle with the IRS for fair treatment under the law.
Travis lives in Oklahoma City with his wife and two children. He is an active member of LifeChurch.tv. He is an avid football and basketball fan. He is also the host of a public service, regionally syndicated, radio show, ‘Your IRS Weapon™’ on Sunday afternoons. The show is a tax news, tips, strategies and answer format, set to the tunes of Travis’ favorite rock and country classics.
Travis can be reached 24 hours a day at 1.800.721.7054 or log on to www.traviswatkins.com for more information on the firm and what it can do for you.