What should you do if you get a letter or notice from the IRS? In this episode of The Agent of Wealth Podcast, Marc Bautis meets with Allan Rolnick to discuss the ins and outs of an IRS tax 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. Tune in to learn strategies to protect yourself from the IRS!
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!
On today’s show we have a special guest, Alan Rollnick. Rollnick is a CPA based in Sunnyside, Queens. Welcome to the show, Alan.
Thanks for having me, Marc.
Can you start off by giving us some background on your practice in Queens?
I started out having a small, traditional accounting practice. I was doing accounting for about 25 to 30 years before I decided that I didn’t want to do it anymore. Along the way, I discovered that I liked solving people’s problems with the Internal Revenue Service (IRS), so I decided to move into that direction — which brings me to what I do now.
And can you describe your current role?
When a client is having a problem with the IRS, I get involved to help solve it. It all starts with clients getting a letter from the IRS stating that they’ve adjusted their tax return and the client owes money. People tend to see a letter from the internal revenue service and put it on the side because they don’t want to deal with it. Then a second letter comes, then a third… and finally, a certified letter is delivered. By that time, the government is prepared to levy a client’s wages and take away their bank account — which usually kicks a client into high gear, and they employ me.
The First Step to Approaching a Letter From the IRS
What’s the process of dealing with a letter from the IRS? Where do you start?
I start by getting a power of attorney to pull information. From there, I look at a client’s tax returns to see what’s going on. Then we start to problem solve. In some cases, clients will qualify to have their tax liability reduced. In many cases, a client can implement a payment plan. And in other cases, a client can partially pay the liability until the statute of limitations runs out.
Is the best-case-scenario for a client to call you after receiving the first letter from the IRS?
Yes, absolutely. Then we can deal with the situation before the IRS begins taking wages from paychecks or social security checks.
Does the IRS ever make a mistake?
Yes, they make mistakes all the time. And it’s my job to locate mistakes, if any, and protect the rights of the client.
Are you usually the CPA that has filed the tax return with the client?
In most cases no, I haven’t worked on the client’s tax return.
What Is the Most Common Reason For the IRS to Send a Tax Notice?
It could be any number of things. Here are some common reasons:
- They could have reported their income incorrectly.
- They could have taken a deduction that they shouldn’t have.
- They could have overstated their deductions.
- A mathematical error.
- The Audit Lottery.
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. That’s the worst thing that you can possibly do — it is a federal crime.
And can a tax issue drive someone to have to declare bankruptcy?
Yes. But 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’s a complicated process and many people don’t get it right the first time.
How long does it take for these issues to get resolved?
As of recently, it’s taking more time because many IRS offices are not open (due to COVID-19 restrictions). But generally speaking, you should figure it will take at least a year for a resolution.
I know you mentioned they could garnish your wages, take some of your social security benefits and maybe even go into an IRA. Are there other assets that the IRS can take?
In theory, they can take away your house, but that has to go up the ladder for permission. Usually this only happens when the IRS feels that they’re in jeopardy of not receiving anything, or that a person is trying to pull the wool over their eyes and ignore them. But whatever you own, they can take.
Do you see the IRS going to those great lengths often?
Not right now, they haven’t been doing that sort of stuff so much. From what I understand, they’re gearing up to enforce on people who owe back taxes right now.
Is it common for taxpayers to not file a return at all?
Yes, but a lot of times it’s not on purpose. Someone may have gotten sick, gone through a divorce or lost their job, all of which leading to them not filing. This is a bad mistake. If this were a case with a client, I tell them to file the return late — because you have to get the returns filed.
I also frequently see clients who miss one year of filing, then another, and then another. The procrastination builds up and before you know it, five years worth of tax returns aren’t filed. It can snowball quickly. To fix this, we’d have to go back and recreate every single year.
Payment Plan to Pay Back the IRS
You mentioned negotiating with the IRS for a reduced tax payment.
Yes, and payment plans are also available.
What is the duration of those payment plans?
Generally, they are 72 months long.
So I suppose that’s a better option than allowing the IRS to garnishing wages and put liens on assets. Is that correct?
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 taxes, economics, and really all matters of life. I’m all over the board, and I enjoy doing it.
That’s great. Well, thank you for joining us today. If anyone wants to find out more about you or your services, how can they reach you?
You can visit my website and reach out to me there. It is www.tristatetaxresolution.com. Or my phone number is (718) 841-7317.