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DARRIN T. MISH: Good morning, and welcome to the IRS Solution Attorney show. I am your host, THE IRS Solution Attorney Darrin T. Mish.
KATRINA MADEWELL: And I’m your co-host good morning and welcome to the show. We are glad to have you here with us today.
DARRIN T. MISH: You have a name, co-host?
KATRINA MADEWELL: Yes, what is our name, oh yes I’m Katrina Madewell. Welcome to the show. Pat George back there. I didn’t even say our name did I? It’s going to be one of those days.
PAT GEORGE: That’s a first. I’m back here all busy now for the last hour and a half I’ve been playing with the Gear VR. I’m just telling you right now it’s the best it could be if I had waited, been the greatest Christmas gift ever but I couldn’t wait.
KATRINA MADEWELL: But you are so impatient like that.
DARRIN T. MISH: For the benefit of our listeners, the Gear VR is the virtual reality device that you strap to your head. I just tried out Pat’s VR headset and it’s pretty cool. I was in the Sahara Desert on a little dune buggy with the family and we went and checked out an Oasis it was very cool.
PAT GEORGE: Last hour and a half I have been all over the world but now our equilibrium is all messed up.
KATRINA MADEWELL: I was going to say at some point you are going to run to the bathroom and throw up Pat.
PAT GEORGE: I let some of the folks here in the studio, I mean the station, look at it and they had to yank it off they couldn’t do it.
KATRINA MADEWELL: Yeah, I would get sick I think after awhile I would be like….
DARRIN T. MISH: Especially like roller coasters and things like that.
PAT GEORGE: But who needs a Hatchable? That’s the big gift nobody needs. Hatchable. When you can get this, virtual reality.
KATRINA MADEWELL: I mean, I love rides but a lot of those virtual simulation rides they make me sick like that one at Epcot that space ship one it makes we want to barf.
PAT GEORGE: That does mess me up, but I’ll tell you this is just like…listeners out there have never tried it on they have got to go try it on it’s just like Soarin’ the ride Soarin’ have you ever been on that in Epcot?
DARRIN T. MISH: If you sit in a really high chair and let your feet dangle it’s exactly like Soarin’.
KATRINA MADEWELL: You guys are killing me. Alright so…
DARRIN T. MISH: And the Hatchables, are like the new hot toy?
PAT GEORGE: Hatchimals.
DARRIN T. MISH: Yeah, Hatchimals.
KATRINA MADEWELL: Ok, Hatchimals, what is it?
DARRIN T. MISH: Well, I had some Hatchimals. They were baby chicks and ducklings.
KATRINA MADEWELL: I have the youngest kids here and I don’t know what a Hatchimal is and I feel like I should, what is it?
PAT GEORGE: It’s something that apparently hatches or something and it comes out and you take care of it like all those other things that came around Christmas time. I was listening this morning Wal-Marts got them and they are going to have a whole bunch coming up but they are about a hundred bucks. There are people online selling these for a thousand dollars.
KATRINA MADEWELL: Well, let me just listen if we got to take care of it, it ain’t coming to our house, that’s all I’m saying.
DARRIN T. MISH: How do I miss the hot new toy every year? I should be buying those things in like August and stock piling them sell them on Ebay for $3500 a piece or something.
PAT GEORGE: Well, I have to stay up on this because and I hope there are no little people listening but I, I play Santa Claus until the real Santa Claus gets here, so I have to know all of these things so they would say I would like this and I would go, ok, would you like one that comes with batteries or you plug it in? You can’t say that when it’s not that way so you have got to be prepared for all of these new toys.
KATRINA MADEWELL: You are a little late to the party there with the beard, Pat.
PAT GEORGE: That’s the bad part about being Santa. When you don’t have a beard the beard that comes with the suit just itches and tears your face up so in January I always have a rash.
KATRINA MADEWELL: The thing probably smells horrible to.
PAT GEORGE: No, it doesn’t. As a matter of fact, thank you for reminding me I got to go to McNats and pick up the suit it’s ready.
KATRINA MADEWELL: Oh, thank goodness, you dry cleaned it.
PAT GEORGE: Are we going to talk about anything else?
KATRINA MADEWELL: Yes, well, before I forget since we are just having fun and playing, let me just plug (inaudible) Griffin’s event real quick. She is doing something for Metropolitan Ministries so if you like the race track or (inaudible), we are going to be out there tonight from 6-9 you will support Metropolitan Ministries and help feed some families this holiday season if you are interested. I don’t know how to play poker so you can come teach me how to play poker.
DARRIN T. MISH: I have a good friend Stan Reynolds who does a lot of work with Metropolitan Ministries. It’s a great charity. I would be there if I was going to be in town tonight. I’m actually getting on an air plane and flying out of town tonight but…
KATRINA MADEWELL: That’s ok, you can donate some toys, Darrin, I will take them with me.
DARRIN T. MISH: You should go check it out for sure if, like I said I would be there if we were going to be here in town.
KATRINA MADEWELL: And there are going to be prizes and 50/50 raffles and all that stuff. I don’t know.
DARRIN T. MISH: It sounds like fun.
KATRINA MADEWELL: I will share it on the IRS Solution Attorney page if that’s ok with you?
DARRIN T. MISH: That’s great. And the Metropolitan Ministries throws great events I know that for sure.
KATRINA MADEWELL: So our topic for today? Our real IRS topic.
DARRIN T. MISH: So, today, our topic for today that has to do with the IRS and taxes and tax problems is All About Audit Reconsideration. It’s kind of interesting if you go through an IRS audit…and there’s a lot more audits happening now, I’m getting more, I’m getting new audits come in the door every single week now.
KATRINA MADEWELL: So, is that after November 8th I’m just saying.
DARRIN T. MISH: I don’t think it’s a time, I don’t think it’s….
KATRINA MADEWELL: No, it’s just a late to the party IRS thing?
DARRIN T. MISH: No, I don’t think it’s actually, there is no correlation to the election at all it’s just, I’ve seen enough taking activity in our office at least which is very non-scientific right but we are getting a lot more audits in the door…
KATRINA MADEWELL: What kind of audits are they?
DARRIN T. MISH: Mostly self-employed people I would say.
KATRINA MADEWELL: Like” we don’t like some of the stuff we wrote off” kind of audits?
DARRIN T. MISH: Yeah, I would say the biggest, the biggest thing that I see that causes audits are claiming too much car and truck expense. Mileage that was just a little bit high and there’s other things that can trigger audits as well, big losses just crazy looking numbers. We’ve talked about this on other shows round numbers. …
KATRINA MADEWELL: Even.
DARRIN T. MISH: Yeah $6200 exactly for travel or things like that.
KATRINA MADEWELL: My mileage, I drove exactly 62,000 miles.
DARRIN T. MISH: Yeah exactly, I got an exactly 75,000 write off for our car and truck expense, yeah that is not looking very real and if I will tell you this, nobody is listening right?
KATRINA MADEWELL: Nope, nobody is listening.
DARRIN T. MISH: Nobody is really listening. If I had a deduction of $75,000 on our tax return and it just happened that way coincidentally came out to a nice fat round number like that I would claim $74,997.00
KATRINA MADEWELL: Well think about it, if you go buy something at Lowes and you are writing that off the chances are slim to none that it is going to be an exact number.
DARRIN T. MISH: Exactly.
KATRINA MADEWELL: It’s going to be like $74.28.
DARRIN T. MISH: Yeah, exactly, because of sales tax and everything else. But today what we are going to talk about is if you’ve gone through an audit and you don’t agree with the results because you didn’t have the proper documentation or you just blew it off or whatever, there is actually a process called Audit Reconsideration where you can get another bite at the apple. So, it’s not over until it’s over now there are sometimes when you’ve gone through an audit and it is actually over and you are just actually in a tough spot.
KATRINA MADEWELL: So, how do if it’s over.
DARRIN T. MISH: Well we will go over here today in the show but basically….
KATRINA MADEWELL: And what happens if you reopen Pandora’s box, can that be bad for you?
DARRIN T. MISH: It could be it could get worse if one of the requirements is that…
KATRINA MADEWELL: It’s like poking a bear with a stick.
DARRIN T. MISH: Well, so that’s why I think it’s kind of a good idea to know what you are doing if you are going to go back through the process. I mean, even for those of us who professionally help clients with audits, audits are not a fun thing, they are just not. It’s not a pleasant experience because you are kind of under the gun. You are kind of under the microscope and the IRS wants to see your documentation to claim certain expenses, right? Certain deductions that you have taken on your tax return, they want to see the documentation for that and it’s not a pleasant experience and most people’s documentation is not perfect because, news flash, people aren’t perfect, I’m not perfect you are not perfect.
KATRINA MADEWELL: Wait who told you that?
DARRIN T. MISH: Well….
KATRINA MADEWELL: Just kidding.
DARRIN T. MISH: As evidenced by the fact that you forgot to say your name in the opening…
KATRINA MADEWELL: Yes exactly.
DARRIN T. MISH: Exactly so…
KATRINA MADEWELL: That’s our husband’s job he is perfect.
DARRIN T. MISH: Wow, Chris did you hear that?
KATRINA MADEWELL: Little plug.
DARRIN T. MISH: I think he should hold that over her head for evermore.
KATRINA MADEWELL: Well he is OCD that’s what happens with OCD people they are perfect.
DARRIN T. MISH: And they are all nines.
KATRINA MADEWELL: That’s right.
DARRIN T. MISH: So, if you’ve, here’s the deal, if you’ve been audited and you really never had an opportunity to meaningfully produce the documents for the auditor or the audit or assessment was done without your involvement at all you can pursue audit reconsideration. So, the first would be if you’ve gone through an audit and maybe they sent it to your last known address but you’ve moved and you’ve never gotten notification of the audit and they just went ahead and assessed a whole bunch of money then you can have another bite at that apple, you can go ahead and reopen it, you can request what’s called Audit Reconsideration…
KATRINA MADEWELL: So, is that formal paperwork or how does that work?
DARRIN T. MISH: Well, there’s a great publication it’s IRS publication 3598 and it goes through this in detail but basically what you have to do is you have to write a letter just formally requesting Audit Reconsideration and the best thing to do would be to go ahead and, if you have a copy of the audit examination report which is a report form 4549 if you have a copy of the exam report then you want to go ahead and send that with your letter requesting formal Audit Reconsideration and all of your documentation to the address listed in the IRS publication 3598. So, what will happen is the IRS will acknowledge that they got it within about a month and then nothing will happen for a very long time.
KATRINA MADEWELL: That’s about right for the IRS right nothing works?
DARRIN T. MISH: Nothing will happen for a very long time. Somewhere between 6 months and 24 months you will get an answer back and it will either be, usually it will be up or down. We accepted your position and here’s the answer or sometimes they will call you back. This has happened with a case of mine that I am going through right now, they will call you back into the audit, the office for another 4 hour little sit down.
KATRINA MADEWELL: So, what do they do during the audit process? I don’t think we’ve actually talked about that like they, like how grilling is that I guess it depends on who you get right?
DARRIN T. MISH: Well, I mean, in any job there’s people who are more friendly or more pleasant to be around then others.
KATRINA MADEWELL: They are just looking through all of your stuff going give me this, give me that?
DARRIN T. MISH: Yeah, so in the law and in, well, when we come back we can talk about the details of what happens during an audit and how you might be able to use Audit Reconsideration to fix it if it didn’t go well.
KATRINA MADEWELL: It’s so funny, I’m listening to this and it’s just, if you think about this and you look at it from an outsider looking in, like all the IRS stuff right they are called publications so it’s kind of like, yeah, you want an Audit Reconsideration, well read this book this publication to do that well then.
DARRIN T. MISH: And in fairness IRS publication 3598 is like 2 pages but it is really small type.
KATRINA MADEWELL: But isn’t it just funny to call it a publication?
DARRIN T. MISH: Yeah, it is.
KATRINA MADEWELL: I don’t get where they got that from but anyway.
DARRIN T. MISH: It’s the government.
KATRINA MADEWELL: It’s the IRS. Well, you are listening to the IRS Solution Attorney show, when we come back we are going to tell you all about Audit Reconsideration as well as the process like what the heck can you expect if you actually get audited. We will be back in just a minute.
DARRIN T. MISH: Welcome back to the IRS Solution Attorney show. I am your IRS Solution Attorney, Darrin T. Mish.
KATRINA MADEWELL: And I am your co-host Katrina Madewell. I was think about on the break how we were talking about how you and Heather actually sleeping with chicks and you are no longer doing that anymore.
DARRIN T. MISH: Oh our goodness, you just had to bring that up. So, for people who are just wondering what that’s all about, I live out on a small farm and we decided to raise, hatch some chickens and ducklings and our bedroom is really big. Our bedroom is bigger than some of the houses that we’ve owned and we had the incubator and the breeder set up in the bedroom but it was pretty far from the sleeping area. So, it was interesting because in the middle of the night, especially the ducklings, would wake up and start fighting and raising a racket cause ducks are little hellions and chickens are actually pretty mellow. At least the ones that I have but the ducklings are not mellow at all. They are just like Daffy Duck and Donald Duck, just kind of crazy.
KATRINA MADEWELL: Anyway so, yeah, I had, you like that little pun, right?
DARRIN T. MISH: So, we are going to go ahead and try, yeah we are going to try and segue now into…
KATRINA MADEWELL: The chicks are in the barn, right?
DARRIN T. MISH: The chicks are in fact in the barn.
KATRINA MADEWELL: It was good, come on.
DARRIN T. MISH: We are going to try and segue now into the more serious topic of audit reconsideration…
KATRINA MADEWELL: We are, but we’ve got to keep it fun, cause not everybody is under an audit. I mean we want you guys to listen.
DARRIN T. MISH: Everyone who is not under an audit should right now take a deep breath, take a deep breath.
KATRINA MADEWELL: I’m glad I don’t have to hire Darrin.
DARRIN T. MISH: Thank God I’m not under audit.
KATRINA MADEWELL: That’s right.
DARRIN T. MISH: Cause it’s not a happy time for most people.
KATRINA MADEWELL: So audits are up.
DARRIN T. MISH: Audits are definitely up, I’ve had a few recently. We will only take audits where, I will take two different kinds of audits, I will take the audit where the person comes in and says look, I’ve got great documentation here and here it is for our positions that I took on this tax return and I just need somebody to go in and go to bat for me and try and limit the damage here. Because in most audits, there’s going to be some damage, there’s going to be some additions there’s going to be some penalties there’s going to be some interest..
KATRINA MADEWELL: Is that easy breezy from your perspective or easier?
DARRIN T. MISH: Yeah, if they have good documentation, it’s way easier. And the second type of case that I get sometimes are the people who come in and say these numbers…
KATRINA MADEWELL: I don’t know where I got them from?
DARRIN T. MISH: On the tax return they are just kind of like aspirationally correct.
KATRINA MADEWELL: So, where do they get them? Are they random wild guesses or are they trying to add stuff on their bank statement or like where do most of these people get the numbers?
DARRIN T. MISH: Two or three different ways it happens or sometimes it’s the tax preparer, right, so there’s a guy in the neighborhood usually in an ethnic community because there’s people…
KATRINA MADEWELL: There’s stats to prove this.
DARRIN T. MISH: Yes, certain people in certain ethnic communities, they culturally have an infinity for each other naturally, right? So, they go to that guy because they have heard through word of mouth that he gets the biggest refunds. So, not all of these people are bad, there are great tax preparers in every ethnic community across the community but some of these guy’s because they’re, I guess they feel the pressure to get the highest refund rates, they will fudge things and then they keep fudging things and then naturally they fudge some more and they get worse and worse and what happens? I mean, I’ve seen people who have paychecks, just regular wage earner job, they get a W-2, I’ve seen people do it just paychecks have a schedule C put on their 1040 like they had a business that was losing $8000 a year or $10,000 a year or $15,000 a year and…
KATRINA MADEWELL: And that’s a side business they really didn’t have?
DARRIN T. MISH: Yeah, it was a non-existent side business that the tax payer knows nothing about.
KATRINA MADEWELL: No, EIN it’s just a random we are going to add this form?
DARRIN T. MISH: Yeah, financial literacy in our country is so poor at this point and the tax system is so hard that people just sign those returns all they look at, and I’m guilty of this sometimes too.
KATRINA MADEWELL: I will be lucky if I sign it.
DARRIN T. MISH: Yeah, all they look at is bottom line how much am I getting back and so you can see how these guys are motivated by getting more and more people bigger refunds.
KATRINA MADEWELL: Are you kidding? If the tax preparer said, how much I’m getting back, I wouldn’t ask him any questions.
DARRIN T. MISH: Yeah, so then what happens is once the IRS gets wind of that, what that tax preparer is doing and participating in this kind of behavior, then they go ahead and audit every return that the guy did, now that obviously puts him out of business.
KATRINA MADEWELL: Well, that’s also going to open up anybody that didn’t fudge anything to get audited to.
DARRIN T. MISH: Exactly, exactly and so that’s one way. The other way would be the tax preparer is just, I don’t really have records and those numbers just looked right to me or we’ve talked about this many times….
KATRINA MADEWELL: Somebody estimated.
DARRIN T. MISH: And I think actually that Turbo Tax somebody is going to be a guest on a future show by the way…
KATRINA MADEWELL: Oh fun. We won’t throw him under the bus, we will be nice to him.
DARRIN T. MISH: But, the other one is the guy that’s doing his return on Turbo Tax and he’s looking at that running number, I think it’s in the upper right hand corner, how much do I owe or how much am I going to get back and they just, they are not really qualified to be doing their returns at the level that they need to be.
KATRINA MADEWELL: If you have a complex return you shouldn’t be doing your return anyway.
DARRIN T. MISH: Yeah, no one should. I mean I don’t think the CPA who can do his own return should be probably handling his own return, just our own personal opinion. I just don’t think it’s a great idea.
KATRINA MADEWELL: Well, that’s debatable that’s kind of like saying…
DARRIN T. MISH: I agree that is debatable.
KATRINA MADEWELL: I mean depending on the CPA should know I was going to say for real estate it’s not like I would hire another agent to sell our house but I would have someone through because they are not going to be jaded like me living in the same house and they may see some stuff that maybe I didn’t notice.
DARRIN T. MISH: Well, some of that’s our bias too because that old saying, only a fool represents himself as his own client or something like that and I’ve had to hire lawyers in the past to handle legal issues that I have had…
KATRINA MADEWELL: Right.
DARRIN T. MISH: And…
KATRINA MADEWELL: And I did just buy commercial buildings so I had an agent to help me with that.
DARRIN T. MISH: See.
KATRINA MADEWELL: So I did.
DARRIN T. MISH: So there you go.
KATRINA MADEWELL: But it was different like if I was buying a house I wouldn’t.
DARRIN T. MISH: If it’s a house transaction like, yeah, whatever not a big deal right.
KATRINA MADEWELL: Right.
DARRIN T. MISH: And maybe that’s the case with the CPA but maybe it’s not.
KATRINA MADEWELL: Right.
DARRIN T. MISH: And maybe, so let me make this suggestion. CPA prepares his own return and a non-involved CPA just reviews it.
KATRINA MADEWELL: Makes sense.
DARRIN T. MISH: I think that a good idea. Like I review our, I’m perfectly capable of preparing our own tax return, I usually don’t, and then it’s usually an employee of mine will prepare and I definitely review it and just about every year I find problems with it.
KATRINA MADEWELL: But, it’s also not your highest and best use of time.
DARRIN T. MISH: No, absolutely not.
KATRINA MADEWELL: It’s just not.
DARRIN T. MISH: That’s why I don’t do the bookkeeping and I don’t prepare the tax return because I have better things to do.
KATRINA MADEWELL: So, what can somebody expect if they actually go under an audit? Because somebody like me, I have not experienced that, so I don’t have anything to compare that to?
DARRIN T. MISH: Well, there’s a couple of different kinds of audits. One is called a correspondence audit and typically there’s a letter called a CP2000 that comes out and we are going to talk about that in one of the news stories today if we can get to it. A CP 2000 is just a letter that says hey there’s a problem with your return, it’s limited to this one thing and we are proposing that it’s going to cost you this much tax penalties and interest, if you agree sign here, if you disagree send us back your proof within a certain amount of time.
KATRINA MADEWELL: So, you either write a check and pay the bill or you send them back proof and that sort of fixes it.
DARRIN T. MISH: And that’s, yeah, that’s called a correspondence audit because it is all done by correspondence. And the next kind of audit would be an in person audit where typically if it’s just your normal tax payer you are probably going to have a 4 hour slot and you are going to have to go down to the IRS and you are just going to have to bring all of your documentation and there’s going to be a limited number of issues it’s not an unlimited number of issues it’s usually limited to somewhere between 3 and 8 or 10 specific issues, specific deductions on your return…
KATRINA MADEWELL: So you go to them they don’t come to your office? For this particular case, you go to their office.
DARRIN T. MISH: And then there’s and then there’s the, oh you actually are in trouble audit where I am going to come to your location and then they are going to camp out for weeks at a time.
KATRINA MADEWELL: Oh. So, depending on how they are trying to audit you can determine the severity of the audit?
DARRIN T. MISH: Yeah, kind of yeah, for sure if they are like….
KATRINA MADEWELL: We want to hang out in your office that’s not good?
DARRIN T. MISH: Yeah, we want to do a field audit. Yeah you got some problems you need to call somebody for sure.
KATRINA MADEWELL: Why would they want to do a field audit compared to bring your stuff to the office?
DARRIN T. MISH: Because the breath of the issues are so vast that they contemplate that it’s going to take weeks or months.
KATRINA MADEWELL: Oh, ok, and they want to bill you for that time right while they are auditing is that how it works?
DARRIN T. MISH: They don’t really bill you but you are going to get billed one way or another.
KATRINA MADEWELL: You are going to pay for it.
DARRIN T. MISH: Its coming back around. I have actually had to ask an auditor to leave she wanted to do a field audit at our clients location I’m like no, negative, not going to happen. She’s like ok, I’m going to come to your office I’m like ok fine she comes to the office for day one she camps out in the conference room for like a day and then she comes day two and I’m like no this isn’t going to work you got to, you, I don’t, I don’t pay rent so the Federal Government can come and hang out in our office space and she said something like well I don’t have an office to go to, not our problem.
KATRINA MADEWELL: Not our problem. I knew that was coming.
DARRIN T. MISH: Starbucks, Panera I mean I don’t know go someplace but you are not going to work here.
KATRINA MADEWELL: So how do if you actually qualify for one of these Audit Reconsiderations we’ve been talking about?
DARRIN T. MISH: Well, basically if you have new information about the audit then you are going to qualify for Audit Reconsideration so it’s like new information that hasn’t been previously considered by an auditor or the IRS in general. If you disagree with the tax the IRS says you owe, I mean that would be a, if you have additional information but you agree with the tax, that didn’t make a lot of sense right? So…
KATRINA MADEWELL: Just get it over with, I will write the check.
DARRIN T. MISH: There’s a lot of people like that. Even I would suggest that most people should be like that.
KATRINA MADEWELL: Depending on the amount maybe.
DARRIN T. MISH: Yeah, depending on the amount, depending on the issues involved, depending on the potential exposure to other issues that they aren’t questioning, right?
KATRINA MADEWELL: Yeah. I mean let’s face it, it’s not just IRS audits. How many times have you wrote a check just to make stuff go away? I have.
DARRIN T. MISH: Oh yeah, yeah for sure.
KATRINA MADEWELL: Everybody has.
DARRIN T. MISH: Yeah, most lawsuits are settled because somebody just wants it literally like ok this is over.
KATRINA MADEWELL: Somebody wants it to go away. I don’t have to be right I just want it done.
DARRIN T. MISH: Yeah, the cost for it to be over is less than the cost to keep, continue fighting.
KATRINA MADEWELL: And that’s said from an attorney. Very nice, very nice.
DARRIN T. MISH: The other issue is audits are not only, typically you will be audit for 2 years say 2014-2015 well they can open it up to 3 years so if it was only 14 and 15 and you are not to upset with the number you might want to just quit fighting because they might open 2013 now or it could be worse.
KATRINA MADEWELL: So, they could just randomly open more years if they don’t like what they see?
DARRIN T. MISH: If they feel like there are issues that are pervasive in those, if there is a pattern for sure they are going to open up…
KATRINA MADEWELL: I feel like there are some tax rights that might be violated there but I’m probably wrong about that.
DARRIN T. MISH: Sometime in the future we are going to do a whole show on tax payers rights and what rights you do have as a tax payer. A lot of times we feel like we don’t have any rights, but that’s not, that’s not really the case we have lots of rights and there’s lots of things that I know how to do that can slow the system down or just throw a monkey wrench into the whole thing.
PAT GEORGE: The only right I have to worry about is the right number to call him when…
KATRINA MADEWELL: That’s right, if you have a question you can call him at 888-404-1010 we are here live in the studio this morning 888-404-1010 when we come back we are going to talk about what happens if you can’t request a reconsideration. Back in a minute.
KATRINA MADEWELL: Welcome back, you are listening to the IRS Solution Attorney show.
DARRIN T. MISH: I’m the IRS Solution Attorney, Darrin T. Mish.
KATRINA MADEWELL: I’m your co-host Katrina Madewell and I think I’m going to clean up something I said before the break, did I say it all wrong?
DARRIN T. MISH: It wasn’t that bad.
KATRINA MADEWELL: Sometimes I’m trying to jam stuff in there in like 5 seconds and I say it wrong.
DARRIN T. MISH: You have Pat, and he is holding up 5 fingers meaning you have 5 seconds left before the hard break.
KATRINA MADEWELL: While he’s making a retarded face and I’m totally ignoring.
DARRIN T. MISH: Yeah wearing a hat half the time. Antlers whatever.
KATRINA MADEWELL: So, but what we were trying to say is what happens like what we were talking about what to do if you qualify for that Audit Reconsideration and what I meant to say is what happens if you can’t actually get the Reconsideration? Is that right?
DARRIN T. MISH: Yeah, well let me clean it up for you. So, to recap, Audit Reconsideration is when you have gone through an audit or an audit has happened to you and you want to reopen the audit because you think you can make it better. So, there’s a couple of different situations where you can have it for sure you can definitely qualify for Audit Reconsideration and one would be you have new information about the audit. Number two would be you disagree with the tax that the IRS says that you owe. Number three is you never appeared for the audit conference or the IRS or sent the IRS anything and number four is you moved and you never even got the audit notice. Those are all real common issues. Now, you cannot request Audit Reconsideration if you’ve already paid the full amount that you owe, in that case you have to file what’s called a claim for refund which is really just an amended tax return.
KATRINA MADEWELL: I was going to say, how’s the liklihood of that happening?
DARRIN T. MISH: It happens.
KATRINA MADEWELL: Ok.
DARRIN T. MISH: It happens. Next, if you previously agreed to pay the amount by signing the closing agreement on an audit or you signed an Offer in Compromise agreeing to pay the tax or something like that, then you are not going to be able to reopen the audit because it can’t be reconsidered because you agreed to it if that makes sense. The third time you cannot request an audit reconsideration is if you have already gone through, if you have filed a tax corp petition and the court has already ruled on an amount that you owe well that was your chance.you signed an Offer in Compromise agreeing to pay the tax or something like that, then you are not going to be able to reopen the audit because it can’t be reconsidered because you agreed to it if that makes sense. The third time you cannot request an audit reconsideration is if you have already gone through, if you have filed a tax corp petition and the court has already ruled on an amount that you owe well that was your chance.
KATRINA MADEWELL: You can’t just keep appealing, appealing reconsidering.
DARRIN T. MISH: No, you can’t keep appealing that was a, that’s considered a final ruling and you are just stuck with the amount at that point.
KATRINA MADEWELL: And I would imagine if you are doing that, you would definitely have an attorney to help you with that. I can’t imagine someone would try to represent their self doing that.
DARRIN T. MISH: One would think. Although in tax court it’s the rules of evidence, the rules of procedure are very relaxed and so it’s kind of like…
KATRINA MADEWELL: So, we were just talking about how complex the tax laws are.
DARRIN T. MISH: Yeah, remember People’s court with Judge Wapner?
KATRINA MADEWELL: Yes.
DARRIN T. MISH: I guess a more contemporary reference would be Judge Judy.
KATRINA MADEWELL: Judge Judy.
DARRIN T. MISH: That’s kind of what I imagine tax court if like, I filled in on a defendant quite a few tax court cases over the years but I have never set foot in the tax court courtroom because we have always worked them out one way or another so and that’s one of….
KATRINA MADEWELL: Which is what you should do.
DARRIN T. MISH: Yeah, and that’s one of the conditions of me taking a tax court case. If you want a trial I am probably not the guy. Not because I don’t think I can win but because lawyers, honestly, our kind of lawyer, does not make money doing litigation.
KATRINA MADEWELL: But aren’t you paid for, you pay for results and for negotiating.
DARRIN T. MISH: Yeah, we do a lot of flat fees and so we, if we go to trial we are probably going to be losing money and it’s probably almost never in the best interest of the tax payer, it can be, there are some cases where I think are good trial cases and they need to go to trial with with a litigator who’s going to go and try the case. So, those are the ways…
KATRINA MADEWELL: You missed one for partnerships.
DARRIN T. MISH: Oh, for partnerships, you can’t request reconsideration on an issue that’s been finally determined through an IRS administrative adjustment or under an agreement with the IRS. So here is what I want you to think about, you can’t request reconsideration if the thing is already been decided with finality that means beyond an audit exam report. If you sign something saying I agree, you can’t reopen it. It’s over, but if you never agreed to it then or if you agreed, I guess if you agreed and there’s new information that, like let’s say you agreed because you just had moved and you can’t find your box of records, ok, and then a year and a half later when you finally unpack your house. I don’t know if I’m ever going to be unpacked but when you finally unpack your house and you find the box well then you can probably request audit reconsideration at that point in time ok.
KATRINA MADEWELL: Is there ever any grace? I forget if we’ve talked about this or not, but is there ever any grace like let’s say you had a fire and your stuff was not on a cloud like most peoples are in this day and age let’s say you literally had a shoe box full of receipts or whatever…
DARRIN T. MISH: I can say, I’m going to dispell that myth right now. I can say with certainty that most people’s stuff is not in the cloud most organized people’s stuff is in the cloud but most people’s stuff is in a shoe box.
KATRINA MADEWELL: Did you hear that Chris Darrin just called me organized I don’t know if you caught that.
DARRIN T. MISH: Most people’s business records are in a shoe box if they exist at all, a lot of our clients records are on the dash board of their pickup truck right now as they are driving down the interstate and it’s all good.
KATRINA MADEWELL: So, is there grace I mean like for example you have in Tennessee like Gatlinburg’s wiped out with the wild fires is there grace on that?
DARRIN T. MISH: If you have a wide scale disaster like the Gatlinburg fires or in even….
KATRINA MADEWELL: Hurricanes.
DARRIN T. MISH: This little hurricane we had that was a nothing hurricane. Just most recently but the areas been declared a disaster area, the IRS is going to give you a little bit of grace. To be honest I’ve never had a case where it was an audit and the excuse was well, the hurricane came through and wiped out our house and I think you can demonstrate that..
KATRINA MADEWELL: Well, what if they have receipts in the attic and maybe they had a roof leak, what do you do? If it’s gone it’s gone.
DARRIN T. MISH: I’m smiling because in our office when somebody says fire, flood, earthquake, hurricane, we just kind of roll our eyes because everybody has a fire, flood, earthquake, hurricane story. Which is why they don’t have any business records.
KATRINA MADEWELL: I don’t know but now there’s Facebook so maybe they post pictures so you never know.
DARRIN T. MISH: Maybe I think if you…
KATRINA MADEWELL: You think it would matter.
DARRIN T. MISH: If you are going to maintain that position, I think if you have documentary evidence of the fire, flood, hurricane, earthquake would be a good idea. So if you were living in California and there was an earthquake and your house was absolutely destroyed and it was rubble and you could show a picture. I think you are probably going to get some grace, if there was an earthquake…
KATRINA MADEWELL: Especially if you’ve never had a tax problem, right?
DARRIN T. MISH: I think if there was an earthquake with an epicenter 57 miles from your house and your town had no damage and you are going to try and hang your hat on I don’t have any documents cause there was an earthquake that happened 57 miles away…
KATRINA MADEWELL: But legitimately they would probably cut you some grace?
DARRIN T. MISH: I think that it was legitimate and you can prove the legitimacy then you can probably, you are going to get a little grace, you are going to get a little leeway because after all, I’m going to say something controversial…
KATRINA MADEWELL: Not you.
DARRIN T. MISH: IRS auditors are people to.
KATRINA MADEWELL: Yes, they are, yes they are it’s not a…
DARRIN T. MISH: So if you can, they are not robots and they are actually by and large not bad folks so if you can demonstrate that you are not full of baloney you are probably going to be ok as far as a disaster kind of area thing goes.
KATRINA MADEWELL: So should we go over real quick what to do…
DARRIN T. MISH: Yeah if you, what you are going to have to do in an audit reconsideration is get your stuff, get your documentation that should almost go without saying. Get your evidence to prove your position ok.
KATRINA MADEWELL: Hire an attorney for some guidance.
DARRIN T. MISH: Make sure it’s very clear ok. Lots of people I would say most people try to make their arguments to the IRS as complicated as possible, this is faulty thinking, this is bad logic, you need to make your arguments as clear, as crystal clear and simple to understand as possible if you can do that then you have your chance of winning.
KATRINA MADEWELL: Kiss. Keep it super simple.
DARRIN T. MISH: Keep it simple, yeah ok. there you go.
KATRINA MADEWELL: Super simple.
DARRIN T. MISH: I wasn’t going to call our audience any name.
KATRINA MADEWELL: No, that’s what Kiss stands for,right, super simple.
DARRIN T. MISH: Keep it super simple. So, I usually say if an 8-10 year old can understand our argument I got a great chance of winning if it’s above that level of complexity we are going to have some challenges because we are dealing with folks who have to deal with lots of information incoming and they don’t want to read anything.
KATRINA MADEWELL: Oh, that makes sense I mean even the Wall Street Journal is written in 9th grade education.
DARRIN T. MISH: Is that why it’s so hard to read? Just kidding. You don’t need a special form you just need a letter explaining your request for audit reconsideration I would suggest sending it to the address listed in IRS Publication 3598 there’s too many to list here on the air but you basically send it to a special address depending on where you would send your normal tax return…
KATRINA MADEWELL: Certified mail with return receipt…
DARRIN T. MISH: Send it certified mail so that you can prove that they got it. You want to send them a copy of your exam report that was the form 4549 if you have it and copies of the new documentation that you think proves your position. Once the IRS gets your information and they review it they are either going to accept it, ask you for, accept it in total, reduce the tax, they are going to accept your information in part and partially reduce it or they are just going to reject it and pitch it back.
KATRINA MADEWELL: I notice that once you send it you have to wait and sometimes you are waiting a really long time like what is that really long time and is there ever a time that they just don’t respond at all?
DARRIN T. MISH: Yeah, there’s always a time that the IRS doesn’t respond at all…
KATRINA MADEWELL: Is there?
DARRIN T. MISH: It happens a lot so I would say…
KATRINA MADEWELL: Is this good for the tax payer right?
DARRIN T. MISH: Well not necessarily if, if there’s active collection going on and you are asking for audit reconsideration, that collection is not necessarily going to stop so you are kind of in a catch 22. They are trying to get their money, one, the left hand is trying to get their money and the right hand is trying to determine if you even owe the money.
KATRINA MADEWELL: Sounds like the banking world.
DARRIN T. MISH: Yeah, well, the IRS and the banks have a lot in common since they are both kind of quasi-governmental agencies.
KATRINA MADEWELL: So how long are you going to wait? 6 months, a year or more?
DARRIN T. MISH: I think you are going to get a letter back within I would say 30-60 days saying we got it and we are working on it. If you get that letter you are pretty crystal, ok you are good.
KATRINA MADEWELL: And then what? How long does it take them to work on it?
DARRIN T. MISH: Because they are working on it at least but then a long times going to go by, probably at least 6 months is going to go by it could be as long, I’ve had them take more than 2 year. If long periods of time go by, say 6 months or more and you haven’t heard anything back it might be a good idea to file a form 911 with the tax payer advocate…
KATRINA MADEWELL: Form 911 really?
DARRIN T. MISH: Yea0,h like an emergency, right?
KATRINA MADEWELL: What is the form?
DARRIN T. MISH: It’s called, it’s basically I have an emergency, I have a bureaucratic snarl that I need help with. You file that with the tax payer advocate, you say, hey, what’s going on with our audit reconsideration check into this, somebody at the IRS or the tax payer advocate will check into it and let and try to expedite it.
KATRINA MADEWELL: So, Darrin, I don’t think the average person would do this because again it’s kind of like poking the bear, if the bear goes away and it’s not bothering you, you are probably not going to tap it on its shoulder again and that’s what you are saying to do effectively to file that 911 form. Most people would not repoke the IRS.
DARRIN T. MISH: Well, this is really a topic for a whole another show the IRS tax payer advocate is an independent branch of the IRS whose job is to be a liaison between the tax payer and the government and the IRS. So, I’ve never made the problem worse by dealing with the tax payer advocate and in this case you just say hey I filed an audit reconsideration on January 1st and its now September 30th. I haven’t heard anything back I would like some help expediting this and finding out what’s going on.
KATRINA MADEWELL: Ok, our Twitter questions are not super complicated but they are kind of cool so I’m going to ask them anyway, you might shoot me that I’m actually putting these on there but so Jeff wants to know what’s tax evasion?
DARRIN T. MISH: Well, it’s kind of a complicated answer but the, the concept is tax avoidance it would be paying, legally paying less tax. Figuring ways to legally pay less tax. Tax evasion would be illegally paying zero tax or less tax.
KATRINA MADEWELL: Ok.
DARRIN T. MISH: That’s the simplest answer that I can think of.
KATRINA MADEWELL: It doesn’t have to be zero it can be less.
DARRIN T. MISH: Yeah, it would be through lying, false positions or fraud not paying your appropriate tax.
KATRINA MADEWELL: And Rob wants to know how many Americans cheat on their taxes? That’s kind of a loaded question.
DARRIN T. MISH: I’m going to be politically incorrect here for just a second, a lot, a lot of people cheat on their taxes.
KATRINA MADEWELL: Kind of a loaded question really.
DARRIN T. MISH: Yeah, I don’t know what the number is, but I can tell you that something like 10% of the filing, or the population should be filing tax returns don’t file tax returns so that’s a big number. That’s in the tens of millions a year and I have people come into our office every single week who have not filed a tax return in between 6 and 10 years every single week.
KATRINA MADEWELL: And his question is how many Americans cheat on their taxes and the reason why I say it’s loaded…what do you consider cheating? You could ask 10 people and get 10 different answers so is that fudging versus, this is totally a loaded question. I probably should not have asked this one.
DARRIN T. MISH: So that is Katrina Madewell, who is from Land O’ Lakes Florida who said what is cheating on your taxes like, is it cheating a little.
KATRINA MADEWELL: No, I’m just saying that if you asked 10 people you would get 10 different answers.
DARRIN T. MISH: You probably would especially, the W-2 wage earner type people who only have mortgage interest and have taxes withheld there is not a whole lot of opportunity to cheat there.
KATRINA MADEWELL: Right.
DARRIN T. MISH: But the people who are self-employed that have a schedule C or have an S corporation or even a C corporation and there’s lots of business deductions, there’s all kinds of opportunities to cheat.
KATRINA MADEWELL: And you are probably going to have debatable deductions, right? I mean that’s true.
DARRIN T. MISH: That is true.
KATRINA MADEWELL: Alright, so when we come back we are going to talk about a new IRS email scam coming to your inbox. You are listening to the IRS Solution Attorney show with myself, Katrina Madewel,l and Mr. Darrin T. Mish. We will be back in a minute.
DARRIN T. MISH: Welcome back to the IRS Solution Attorney show I am the IRS Solution Attorney Darrin T. Mish.
KATRINA MADEWELL: And I am your co-host Katrina Madewell.
DARRIN T. MISH: So, we are getting some comments about our Judge Wapner comment and how long ago or how old he is or whether he is alive and we went ahead and looked up Judge Wapner. He is actually alive still which was a surprise to me because he is 97 years old and still evidently doing some work, so kudos to him.
KATRINA MADEWELL: Pat and I both said the same thing what does he look like?
DARRIN T. MISH: And our answer was he looked like an old guy. I mean he is 97 like if he wasn’t…
KATRINA MADEWELL: That’s impressive, though, like he must still be sharp.
PAT GEORGE: The thing is, he never got paid anything like Judge Judy is getting paid though.
DARRIN T. MISH: Judge Judy is really making a bank, right?
PAT GEORGE: She’s probably the richest one on television mid-day or any show like that she probably…
KATRINA MADEWELL: That’s because Judge Wapner was on before there was YouTube that is why.
DARRIN T. MISH: The funny thing is, that those shows bear very little semblance to what actually happens in a court room and I actually have trouble watching the criminal drama sort of shows on TV because the, the stuff that those lawyers pull in those court rooms would get you thrown in jail for sure.
KATRINA MADEWELL: Which is exactly why people like me don’t like house hunters and all those other non-reality real estate TV shows.
DARRIN T. MISH: And when I was doing a lot of criminal work back 20 years ago and I was in a court room everyday for 7 years, you could tell the lawyers who were watching too much TV because they were trying to push the envelope and doing just crazy stuff and they would just get smacked they would just get smacked really hard. The better way to do it was still be a zealous advocate but do it within the traditional how…
PAT GEORGE: Gracefully.
DARRIN T. MISH: Yeah, traditional on how that judge wanted it done.
KATRINA MADEWELL: You’ve got to have some attorney swag to do that.
DARRIN T. MISH: Yeah, you got to kind of figure it out . And every lawyer or every judge in every court room in this country has different little preferences and things that he hates and things that he likes. That’s the sign of a good lawyer in our mind is figuring out what is that judge like.
KATRINA MADEWELL: Is there a data base for that?
DARRIN T. MISH: No I don’t, well I don’t think there is.
KATRINA MADEWELL: See, it’s a money maker. There you go Darrin.
DARRIN T. MISH: I used to go when I would go to a different county for example and handle a DUI or something and I didn’t know the judge and I usually was a different county that I didn’t practice in too much I would go and ask the bailiffs, I would go and talk to the bailiffs and I would say, so you are in here every day? Tell me what this guy hates? And they would say well he really hates guys with ties like yours. Oh, ok, well thanks.
KATRINA MADEWELL: He does not like facial hair. Darrin’s in the bathroom shaving.
DARRIN T. MISH: Yeah, I’m out in the truck with the scissors.
KATRINA MADEWELL: So let’s talk about this new IRS scam coming to your inbox. This is a pretty swifty one like this is these guys are getting super creative.
DARRIN T. MISH: Yeah, this one is a little scary. Basically what the IRS or these guys are doing is they are sending pretty real looking IRS notices to your house or to your email address that look like they are CP2000’s, remember in one of the earlier segments I talked about how a CP2000 is a legitimate IRS letter that says that you owe money, well these things are saying that you owe 250 bucks or 450 bucks for the affordable care act or the unaffordable care act…
KATRINA MADEWELL: Just small enough for somebody to write a check and make it go away.
DARRIN T. MISH: Yeah, and there’s, there’s a real post office address, which I’m not sure how they are getting away with and people are sending checks to this P.O box in Austin, Texas and and they are getting away with it at least for now. The other thing that they are doing is they are starting to send these things out by mail and they look pretty real, now one of the telltale signs that this is not a legit notice is it will say make the check payable to the IRS if it is not legitimate, the IRS bizarrely enough strangely enough doesn’t want checks made out to the IRS they want checks made out the US or United States Treasury.
KATRINA MADEWELL: Why is that?
DARRIN T. MISH: I think one of the reasons is IRS is really easy to make into misses and over the years they would turn, they would steal checks going to the IRS and they would make it out to Mrs. and then their name and they would go to the bank and they would cash it.
KATRINA MADEWELL: Snap I never thought about that.
DARRIN T. MISH: Yeah, crazy huh? So anyway, you have to be on the lookout for this scam. The IRS will never initiate contact via email and to date they are not communicating with tax payers or reps via email at all so no IRS email is a legit email.
KATRINA MADEWELL: It feels like the IRS tip of the day for real.
DARRIN T. MISH: Yeah for sure. So, this is the time for the IRS train wreck of the week. This is the segment of the show where I talk about a person who came into the office and they had a pretty big tax problem and usually they leave smelling like a rose. In this particular case, older gentleman, he is an African American, I would say he is in his late 50’s, not tremendously well educated, very sweet guy, super nice guy one of our favorite clients of all time. He came in and somehow, he was a low income gentleman, he was I believe working as a janitor, hardworking guy works more than 40 hours a week and he’s been doing this kind of work for a long time. I’m not really sure how but he managed to wrack up a tax debt of $61,967.00 so when you are making basically minimum wage $62,000 is a lot of money.
KATRINA MADEWELL: What did he do?
DARRIN T. MISH: He, I’m not sure I don’t remember…
KATRINA MADEWELL: Janitor or something.
DARRIN T. MISH: Yeah he was a, for a living he was a janitor and so when he first came into the office I quoted him a relatively low fee like a thousand dollars or something just to investigate to see what was going on because he really wasn’t that well equipped to tell me what the problem was or how it came about or really what he wanted. So I charged him a thousand dollars and he asked if he could make payments. Now this is somewhat common and I let him pay a very, very small amount down and then he paid these small amounts over time and the only reason I bring this up is when he paid the last payment he made a comment in passing it was in the summer time, he made a comment in passing that well gee that is really great now I can get our electricity turned back on. And our wife actually heard that comment and she is like pardon me? He says, yeah, I haven’t had our electricity on so that I can pay you guys these last couple of payments cause I said I would do it.
KATRINA MADEWELL: Oh our gosh.
DARRIN T. MISH: And so Heather says just hold on don’t leave, she came back to our office and she told me the story she says this guy didn’t have electricity to, in order to pay you and I was blown away so at first I didn’t know exactly what to do like do I just give him do I refund his money and help him or what but I knew I was going to keep helping him.
KATRINA MADEWELL: What I would have done, I would have taken the money and paid the bill.
DARRIN T. MISH: I knew, well it wasn’t enough to pay the whole bill because he owed $62,000 and he only paid a thousand.
KATRINA MADEWELL: No, no, no I meant the power bill.
DARRIN T. MISH: Ok, so what I decided to do was, I decided it would be an insult to refund the money he had already paid because that was a sacrifice that he made as a man, a decision he made as a man, that he wanted to do. So what I said is from now on all of your representation is going to be pro bono and I’m going to take care of this and get this worked out for you because you are a man of your word and I respect that sacrifice that like you can’t believe.
KATRINA MADEWELL: Mm hmm.
DARRIN T. MISH: And he was very, very appreciative as you can imagine well long story short we filed an offer in compromise for him and we settled it for $4,010.00 so 62 grand down to $4,010.00 and this is it just makes me feel so good that I can help him because he was in big trouble…
KATRINA MADEWELL: Yes.
PAT GEORGE: You didn’t think about just telling him look on the bright side all the money you saved on not paying electricity.
KATRINA MADEWELL: Pat, that is just mean.
DARRIN T. MISH: It is just one of those things where I didn’t know exactly what to do cause I didn’t want to offend…
KATRINA MADEWELL: I would look up who his service provider was and I would pay it anonymously and I would not tell him that I did it that’s what I would have done.
DARRIN T. MISH: I didn’t know what to do but I knew that I was going to help him.
KATRINA MADEWELL: What do you say to that?
DARRIN T. MISH: And I knew I was going to provide him just over whelming value in exchange for the sacrifice that he made to do what he said he would do.
PAT GEORGE: Have I told either one of you that I have an expensive electric bill and right getting ready to turn it off and…
KATRINA MADEWELL: I would have thought that you were going to say have I told you that I love you? That was what I was waiting for you to say.
DARRIN T. MISH: There’s a source for that Pat go to gofundme.com and put your sad story there…
PAT GEORGE: Alright.
KATRINA MADEWELL: But if you want to help out Metropolitan Ministries you can roll on over to (inaudible) tonight after 6pm and bring a toy.
DARRIN T. MISH: The one, the only Katrina Madewell will be there live and in person.
KATRINA MADEWELL: Hanging out with one of our real estate friends she is doing some good in the community. Thank you for joining us today.
DARRIN T. MISH: Good show.
KATRINA MADEWELL: We are glad to have you here. If you have a tip or suggestion for another show we will always take it call Darrin at 888-get-mish, 888..
DARRIN T. MISH: (813) 295-7648 visit the website at getirshelp.com. You can download our podcast or our App at iTunes and Android we’re out.