Wayne Kelly: Welcome to "The Next Big Thing." I'm Wayne Kelly. Our guest today, Darrin Mish, who's a national speaker, trainer, author, entrepreneur, and tax attorney. In fact, he's represented thousands of taxpayers with tax problems with the IRS and various state taxing authorities. He's been named the practitioner of the year by the American Society of IRS Problem Solvers and the nation's premier lawyer rating service. He joins me on the phone.
Darrin, thanks for being here.
Darrin T. Mish: Great to be here. I really appreciate that you invited me.
Wayne: Now, listen, you sound like you're the guy, because you're teaching CPAs, agents, all kind of different people about IRS representation.
Darrin: Exactly. What happened is I actually teach other attorneys, CPAs, and enrolled agents the finer aspects of IRS tax problem resolution. What that means is I've immersed myself, for over the past decade, in helping taxpayers who owe more money than they can afford to pay to the IRS. I've immersed myself in that practice niche, in that practice area, to the point where I can actually travel around the country teaching these other professionals how to solve their clients' problems with the IRS.
It's a funny story how I ended up becoming so competent in that area, and it goes like this.
It was probably in the mid '90s. I was practicing law. I was actually a criminal defense lawyer at the time. I was out on my own, didn't know a thing about business. I found myself in a very common situation that lots of taxpayers face, especially small business or self employed people, and that is I ended up with a tax bill that I could not afford to pay.
It was really scary. It was really stressful. It caused a lot of anxiety. It was one of those situations where sometimes husbands or spouses don't want to tell their spouse when there's a money problem like that. That's exactly what I did. I hid it. I covered it up for a while, because I was just deathly afraid of what my wife was going to say when she found out that we owed the IRS several thousand dollars.
Long story made short, when I went looking for help to solve my IRS problem, I couldn't find anyone. So I figured, well, I'll fall back on this legal education I spent so much money on, and I'll just figure this stuff out myself. I ended up solving it.
It was no big deal. When I went and talked to my wife about the problem, she was very understanding. In fact, she was the one that prodded me to deal with it. She said, "This is not the end of the world. You need to take your head out of the sand and just deal with this situation. You need to figure this out and deal with it." So I did.
What that did is that led me on a quest to help other taxpayers in that situation. I realized that there was a tremendous need, and there just wasn't a whole lot of help out there available for those people. As the years went by and I got more and more clients, I got more and more sophisticated at the techniques that I used to help taxpayers solve their problems. That's how I found myself actually teaching other CPAs, enrolled agents, and attorneys how to solve their problems with the IRS.
Wayne: You had that feeling of you just wanted to hide, and so it makes you relatable to everybody else who's going through this, because when they get that bill and they get in trouble with the IRS, there's probably an overwhelming feeling of fear.
Darrin: Oh, absolutely. There's some really common emotions, and I can say this from personal experience. There's a high level of anxiety. There's frustration. There's marital difficulties. There's apprehension. It's one of those situations where you go to bed at night thinking about it, and when you wake up, it isn't gone. It's still there. And you wake up thinking about it.
So you can imagine, Wayne, that this is something that eventually can consume your life, just this fear. I've had many, many people come into my office, and they were afraid that there was people following them. Now, that sounds sort of paranoid to us, just thinking about it and talking about it right now, but that's not paranoid if you're in this situation and it's consumed you. I've had clients come in and sit down and give me fake names, because they were afraid that I was going to turn them in. Of course that's not going to happen, we have attorney-client privilege. I would actually be in severe trouble if I did that.
My point is, I'm trying to illustrate the level of psychological trauma that this can cause to people, and it's just not necessary.
Wayne: But there's no secrets that the IRS are keeping from us, right?
Darrin: [laughs] Well, that's great. There actually are. There's at least seven secrets that we've been able to identify. We have a special report on our Website called "The Seven Secrets that the IRS Doesn't Want You to Know about Solving Your Tax Problem." That's available at our Website at getirshelp.com.
But I'd like to talk about two secrets here today that I'm willing to disclose, because we don't have that much time. One of those secrets is, well, there's a program that Congress has devised called the Offer in Compromise program. Now, that program's existence is not really a secret. What that program does is it allows taxpayers to make a deal with the IRS to settle for less. That sounds really good. You see lots of TV commercials, late night and whatnot, of national companies advertising their services so you can settle for less with the IRS.
Now, that's not the secret. The secret is that virtually all offers in compromise are denied, out of hand, after they're initially filed. So, in other words, the IRS is treating this much like an insurance company, where you file a claim and it just comes back denied, because some certain, very large percentage of the population will just go away and forget about it.
So what we're able to do is we're able to use our over a decade of experience, and having handled thousands of cases like this, we're able to use our experience to try to get the offers through on the first time. If they don't actually go through, here's a little bonus subsecret. The little sub-secret is everything that the IRS does is appealable. So if our offers are denied on the first go-around, we file an appeal on behalf of the taxpayer in almost every case, and we go ahead and we get them done at appeal. So that's one of those secrets.
Wayne: Oh, OK. I'm quite shocked, because I did a little bit of research on you beforehand. You were talking about $27,000 paying off a $2.7 million tax problem. Legit?
Darrin: Yeah, that's a really interesting case. This leads me right into the second secret that I was going to talk about, and that is that there is actually something called a statute of limitations for the collection of income tax.
We're going to talk about this in English. In English, that means the IRS only has a certain amount of time to get the money from the taxpayer. When I found that secret out many years ago, I was blown away: "Wait a minute. This is a situation where the government's not going to follow you around for the rest of your life. They only have a certain amount of time to collect it? That's awesome!"
It's 10 years from the date of the assessment of the tax. So that leads me into this story, where we settled a case for $27,000, give or take, for about a $2.7 million liability. This gentleman came in. He was a very high wage earner, which typically means that the cases are harder to deal with. This gentleman was making somewhere between $16,000 and $20,000 a month, so he was not a destitute individual.
He came in, and he was very skeptical. He had already hired three law firms prior to us, and he was very skeptical that we would be able to help him in any way whatsoever. But I told him to go ahead and trust us, that we would look into it, and that I had a hunch, based on the tax liabilities, the years of the tax returns in question, that the statute of limitations was growing very short.
What we did is we got a power of attorney signed by him, which allows us to communicate with the IRS on behalf of the taxpayer. Then we filed something called a Freedom of Information Act request. What that is is we get the IRS's play book, but they don't get ours. Through the Freedom of Information Act request, we're able to get documentation from the government so that we can see exactly what has transpired in the particular case.
We were able to get his information, and I recognized almost immediately that there were somewhere between 18 and 24 months left on the collection statute. I can't remember off the top of my head.
What we were able to do is we worked out a deal so that he made monthly payments of a couple thousand dollars or so, but only until the collection statute expired. So he got a fantastic resolution, when he otherwise might not have, because the government will often ask taxpayers to extend the collection statute. Usually, how they phrase that is, "to give you more time to take care of this and to pay this off." If he had actually filed an extension or agreed to an extension of the collection statute, he would have paid much, much more money in the long run.
Wayne: All right, Darrin, we're going to take a quick break. You're listening to "The Next Big Thing," with our expert today, tax attorney Darrin Mish. We'll be back right after this.
Wayne: Welcome back to "The Next Big Thing," where Darrin Mish is our speaker and our guest today, helping us solve some IRS problems. If you've ever had a problem, you know how stressful it is.
Now, Darrin, in the last segment, you were talking about, if you can kind of hold off for 10 years. I don't think you're encouraging anybody to just go into hiding for 10 years.
Darrin: [laughs] No, absolutely not. Lots of very bad things can happen during that 10 year period.
Wayne: OK, good.
Darrin: So one of the things that we're able to do when we represent clients and we get involved early in the process is we're able to keep those really bad things from happening, things like federal tax liens, which can severely mess up your credit, keep you from buying or selling a house, for example. We can stop wage garnishments, where the IRS just comes in and takes sometimes 80 or 90 percent of your paycheck. And we can often stop or reverse bank seizures, where they just come in, and one day you go to the ATM to get some money out, and you notice that there's no money in there because the IRS has sucked your account try.
Wayne: Wow. Now, a lot of people probably think, "Well, I can do this myself." Tell me why they should be dealing with you, here on "The Next Big Thing."
Darrin: [laughs] Well, it's kind of like a brain surgeon operating on themselves. It's one of those situations where, if you try to handle this yourself, you can't be objective. It's very hard.
When I actually handled my own case early on, my first instinct was not to handle it myself. I wanted some help, because I wanted someone who had been there, done that before, who'd had the experience, handle it for me. But I didn't have that luxury. Now, more than 10 years later, we have more options as far as that goes.
But it's also one of those situations where I personally have handled thousands of cases. And we've seen just about everything that can go wrong go wrong, in one way, shape, or form. What I mean is taxpayers who don't give us all the documentation that we need, or IRS employees who just go sideways and do their own thing and don't follow the law. Those thousands of impressions, those thousands of cases, has given us that experience and confidence to know that no matter what happens, things are going to be OK.
We don't have catastrophes, but you do get curve balls from time to time, and so we just have that experience to take care of that if things don't go well. Virtually no case goes exactly the way it's supposed to go, even though we've handled thousands and thousands of them in the past.
Wayne: You know what I feel a little nervous about, though, at this point, is that 90 percent of bankruptcy lawyers don't really know the rules. This is what I found out from you. Is that true?
Darrin: Yeah, actually, bankruptcy is one of the solutions that we will sometimes recommend to taxpayers, but, by far, it's not the most common solution. But taxes can be discharged in bankruptcy under certain circumstances. Here we're talking about income taxes, not payroll taxes. Not the kind of taxes that get withheld from your paycheck, as far as on behalf of the employer, but the type of taxes that you didn't pay on your Form 1040.
So let me go over those rules real fast. They're kind of esoteric, and they're a little bit hard to remember, but I think I can explain it really well.
If the tax returns in question have been due more than three years, including extensions, then that's one prong that's been satisfied. If the returns were filed late, as long they've been filed for two years, then that's the second prong. The third prong is that the taxes in question that we seek to discharge must have been assessed for at least 240 days.
Now, I don't really expect anybody to understand that legalese that I just threw at you. But the point is that there's very, very strict timing rules that are involved with the discharge of income taxes and bankruptcy, and so what you do is you need to find someone who's very comfortable with those rules.
What we do is, again, we use the Freedom of Information Act requests to get transcripts from the government, and then I use very sophisticated software that's not even available anymore to put in the correct dates so that I can get out the correct dates that we can file bankruptcy. It's frightening and disheartening that over 90 percent of bankruptcy attorneys don't even know that taxes can be discharged in bankruptcy.
Wayne: Why can't they just call the IRS and hope to get somebody who has a heart, don't laugh yet, and ask them, "OK, here's where I sit. I can't pay this bill. What can we do?"
Darrin: Well, have you ever heard that old clichÃƒÂ©, "I'm from the government, and I'm here to help?"
Darrin: That's kind of what we're talking about here. There are instances where you can call the government and you might get somebody who is kindhearted and helps you out. But more often, what we see is that the IRS employees work for the government. They're bill collectors, period. That's their job to get as much money from the taxpayer as fast as they can, and they will use whatever weapon in their arsenal, legal or illegal, to get the money.
So the difference between the taxpayer, who's probably only been in this situation this one time, versus the IRS employee, who handles these situations day after day after day, the experience level is really vast and diverse. I mean, there's no chance that your average taxpayer is going to know what's going on versus the IRS employee.
Let me give you a real quick example of what happens. You might get what's called a Final Notice of Intent to Levy, which is a document that the IRS is telling the taxpayer, "Hey, if you don't respond to us within 30 days, we're going to levy your assets." That means we're going to seize assets of yours. We're going to garnish your wages. We're going to seize your bank account. We're going to do those types of bad things that I talked about that we could stop. But you have 30 days to file an appeal to take care of that.
Well, your average taxpayer will get this letter. They're very alarmed. Immediately, they will call, because that's what the letter tells them to do. They'll call, they'll speak to an IRS employee, and they'll ask the IRS employee, "Can I get some more time to deal with this?" It usually goes like this: "Of course you can. Here's your deadline," which just happens to be after the 30 days.
Now, interestingly, when you call that second time, after your appeal rights are gone, it's not a warm and friendly conversation anymore. Because they've got you over the barrel. Now they've got the big stick that they can whack you over the head with when they need to. But they're real nice on that first option, that first call, because they want to get you past their appeal rights.
Wayne: Wow. That's very interesting. Where do you see this trending? Up or down? Better or worse?
Darrin: Well, all we have to do is open the newspaper just about every day, and we see that the federal deficit is growing and growing. I don't think it's rocket science to see that the government needs their money, and they need it pretty much now, if not yesterday.
I believe that the trend is going to be increased enforcement. I've been doing this a long time, over 10 years, and I've already seen a trend in the last couple of years of the IRS chasing smaller and smaller balances. Sometimes as low as $1,000, they'll pull the big guns out, and they'll go ahead and seize that money from your bank account, or file a wage garnishment on you, so that they can get paid and they can get paid as soon as possible.
Wayne: Is there ever too little of an amount for us to call you?
Darrin: I would say that, typically speaking, it's not going to make a whole lot of economic sense for us to represent you unless you owe $20,000 or more. When I represent a client, what we're doing is I'm aiming for a 10-to-1 return on investment. So if you have a $5,000 tax liability, it's going to be pretty hard for me to provide you that 10-to-1 return on investment. But if you have a $20,000 or more liability, it's going to be a whole lot easier. It's going to make a whole lot more sense.
That being said, if listeners have a smaller tax liability, they can certainly feel free to give us a call, and we will definitely point them in the right direction, because my point and what I'm trying to do here is I'm trying to solve that psychic pain and trauma that taxpayers face when they have a tax problem and they don't know where to turn and they don't know what to do.
Wayne: You have a tremendous amount of information on your Website. People can go there. It's getirshelp.com. Darrin, a pleasure having you on the show today. Thank you very much.
Darrin: Thank you, Wayne. Appreciate it.