What should you do if you get a letter or notice from the IRS? Don’t ignore it.
In this episode of The Agent of Wealth Podcast, Marc Bautis meets with Allan Rolnick to discuss the ins and outs of an IRS notice. Allan explains the various causes that lead to a letter showing up at your door and the steps you should take to resolve the problem. Allan also shares his best tips on how to be compliant with the IRS to limit any issues.
In this episode, you will learn:
- The first step to approaching a letter from the IRS
- The most common reasons for receiving a notice from the IRS
- What assets the IRS is allowed to take from you
- How the IRS devises a payment plan
- And more!
Tune in now to learn strategies to protect yourself from the IRS!
On today’s show. I brought on a special guest Alan Rollnick. Alan is a CPA based in Sunnyside, Queens. Can you give us a little background on your practice that you have in Queens? I started out having a small accounting practice, a traditional accounting practice, and I was doing that for 25-30 years and then I decided that I didn’t want to do this anymore. I discovered that I like solving people’s problems that they have with the Internal Revenue Service. I decided to move in that direction and that’s what I’m doing now.
It’s a client having a problem with it with the government and they don’t know what to do. That’s where I get involved and help solve their problem. In some cases I’ve helped solve their financial life. It all starts with that letter in the mail from the IRS stating that we’ve adjusted your tax return and you will owe $150,000. People tend to see a letter from the internal revenue service and they put it on the side because they don’t want to deal with it.
Then the second letter comes and they don’t open that one either. And then the third letter comes and they still haven’t opened it. Finally, the certified letter comes and that’s the one the government says, we’re going to levy your wages and take away your bank account. That usually kicks them into gear and that’s the one that scares the hell out of people and when they call me.
The First Step to Approaching a Letter From the IRS
What’s the process of starting to deal with something like that. Where do you start?
I need power of attorney to pull the transcripts. From there we’ll look at their tax returns to see what’s going on. Then we start to figure out what we’re going to do. In some cases they qualify for having their tax liability reduced. In many cases they can go on a payment plan and pay it out over a period of time. And in some cases they can partially pay the liability, partially until the statute of limitations runs out. They have 10 years from the date of assessment to collect the tax. In a few cases, where they are close to the statute of limitations running out, we may offer a partial payment to the government until that process runs out.
Is the advice to open up that first letter?
Yes. We can deal with it before it gets to the point where they’re going to take wages out of your paycheck or social security check.
Does the IRS ever make a mistake, where you look at a nice and say they shouldn’t have levied that $150,000 assessment.
They make mistakes all the time. And it’s my job, my job to protect the rights of the client.
Are you usually the one that’s filed the tax return with the people you work with?
I would prefer not that it’s not one of my clients. I hope it’s not one of my clients. In most cases, I haven’t done the tax return. The IRS looks at it differently. If the accountant who prepared the tax return goes in to defend the tax return, then somebody who hasn’t seen it before comes in.
What Do You See as the Most Common Reason Why the IRS Will Send a Tax Notice?
It could be any number of things
My Common Reasons for Receiving an IRS Tax Notice
- They could have left something off the tax return of something income that they didn’t report generally. I mean, that’s an easy thing to fix.
- They could have taken a deduction that they shouldn’t have
- They could have overstated their deductions
- A mathematical error somewhere, where you put down the wrong amount. This shouldn’t really happen too often these days
- The Audit Lottery where they will look at everything on that tax return.
Is there a way to negotiate with the IRS in terms of the amount that they assess?
Yes, but don’t ever lie to an IRS agent, no matter what you do. That’s the worst thing that you can possibly do. It’s also a federal crime to do so. If you show, you show that that,
And can like a tax liability like this, or, or a tax issue, drive someone to have to declare bankruptcy.
Yes, probably the thing about bankruptcy is that the tax liability won’t be discharged.
Okay. So it may not even help.
You have to wait. You have to declare bankruptcy three years after the tax return has been filed and the tax assessed. And if you don’t file on time, the whole ballgame is over and you’re still liable for those taxes.
It depends on the timing of the bankruptcy filing and when you filed your tax returns. It’s a complicated process and many of us don’t get it right the first time.
How long do you see, like some of these issues taking to get resolved?
Now it’s taking a longer time because many of the IRS offices are not open yet. All of their agents are working from home. It takes, you have to figure at least a year at least a year before they can get to everything
I know you mentioned they could garnish your wages, take some of your social security benefits and maybe even go into an IRA. What else are there other things that they can do?
In theory, they can take away your house, but that has to go up the ladder and they have to get permission from the higher ups before they can take your house away. Unless they feel that they’re in jeopardy of not getting anything. Or they feel that you’re trying to pull the wool over their eyes and you’re not playing with them. But whatever you own they can take.
Do you see them doing that a lot of times going to those lengths?
Not right now. They haven’t been doing that sort of stuff. From what I understand is that they’re gearing up to enforce on the people who owe back taxes.
Do you see it happen a lot where taxpayers just don’t even file a return?
Yes, and a lot of times it’s not on purpose. Someone may have gotten sick, gone through a divorce, lost their job. They think I don’t have the money right now so I’m not going to file my return. That’s a bad mistake. I tell them to file the return and then we can negotiate the payment later. But you have to get the returns filed. What happens is they miss the first year, and then the second year comes along and someone else happens and that one doesn’t get filed either. It builds up and before you know the whole five years worth of tax returns aren’t filed. It can snowball quickly.
To fix it we have to go back and recreate every year. We have to go back and prepare the current year and then go back six years prior to that.
Payment Plan to Pay Back the IRS
I know you mentioned being able to negotiate for a reduced tax payment that you have to make. Yes, they can also come up with a payment plan where you don’t owe the full amount at once, and can spread out the tax payment over a certain period of time.
Generally they will spread it out over 72 months.
And I guess that’s that option is something that’s better to do before they come in and start garnishing wages and putting liens on things.
Well, even when they get to the point of levying things you could still negotiate a payment plan.
I know you have your own podcast, The Tax Resolution Ninja Show. What do you talk about on your show?
We talk about all matters of life. We talk about taxes and economics. We talk about medical stuff, sales and marketing. I’m all over the board. I enjoy doing it. I have a lot of fun.
If you’re talking about taxes and tax problems all the time, which can be some deep topics, who is going to listen to that.
Thank you for joining us today. If anyone wants to find out more about you or more about the services that you can help with, how best can they reach out to you?
They can reach out to me at www.tristatetaxresolution.com. Or my phone number is (718) 841-7317.