March 14, 2025 • 21 mins
Uncover the keys to navigating IRS tax issues for painting business owners with expert insights from Richard Dunton, a seasoned Enrolled Agent. Learn how understanding and tackling your tax obligations can alleviate the stress of dealing with IRS scrutiny. In our conversation, Richard explains what it means to be an Enrolled Agent and the role they play in representing and advocating for taxpayers. We explore the mental burdens of overdue filings and tax debts, and how taking a proactive stance can safeguard your business from potential pitfalls.
Facing unfiled tax returns or mounting penalties? Don’t face the IRS alone. This episode highlights the essential steps to compliance, from obtaining IRS transcripts to seeking guidance from trusted tax professionals. Richard and I delve into the potential consequences of ignoring tax responsibilities, such as the IRS filing a Substitute for Return on your behalf. By enlisting a tax professional, you can create a plan that addresses your tax debt effectively. Join us in this enlightening discussion aimed at empowering you to focus on growing your business, free from the shadow of IRS concerns.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:04):
this is daniel.
I'm a cpa that worksexclusively with painting
business owners to help themknow their numbers and what they
mean and save big in tax, andI'm the founder of bookkeeping
for painters.
And today I'm here with richarddunton enrolled agent enrolled
agent, yes, yeah and uh.
Speaker 2 (00:21):
Advising director for bookkeeping for painters.
So people ask me sometimes,like what does that mean?
Enrolled agent?
That's something that wehaven't actually heard of before
and it's actually a very oldcredential.
It's one of the oldest in thecountry.
It is a credential that isoffered by the IRS and it means
that the person who has thatcredential is allowed to
(00:44):
represent taxpayers.
Before the IRS it's generallyused to do things like tax
resolution, resolve back taxdebt problems, that sort of
thing.
And enrolled agents are kind oflike CPAs, who focus very
narrowly on taxes, who focusvery narrowly on taxes.
(01:07):
And today we thought we'd talk alittle bit about what happens
if you maybe have a little bitof a bad history with the IRS.
Maybe we haven't filed all thetax returns that we're supposed
to, maybe we've got some backtax debt that we haven't taken
care of yet, and then what canyou do about it, what shouldn't
you do about it and what shouldyou do?
(01:28):
You know, as a business ownerit's very easy to get in over
your head with some of thefilings and the forms and the
payments.
It's a very complex tax codethat we have in this country,
probably one of the most complexin the world and sometimes we
don't know what we are supposedto do and sometimes we get so
(01:52):
busy running our businesses thatwe don't, you know, take the
time necessary to find out andmake sure that we're filing all
the forms that Uncle Sam isrequiring, sure that we're
filing all the forms that UncleSam is requiring.
So you know, daniel, you and Ihave talked to a lot of business
owners and it's not uncommon tosee people kind of fall behind
on their filings.
Speaker 1 (02:13):
Yeah, it definitely comes up a lot where folks come
to us and they haven't filedtheir tax return for the last
three years or whatever the caseis, and you know it happens,
life happens and the biggestthing you can do in this
situation is to tackle it headon.
(02:34):
You know, don't bury your headin the sand and it's a
judgment-free zone, you know,and I'm sure that's the case for
tax professionals everywhere.
They're there to help you and itis complex, but it can be
solved.
Most of these things can besolved and the worst thing you
can do in these situations is tobury your head in the sand,
(02:56):
because it's going to makethings a lot worse as opposed to
just tackling it head on,getting it taken care of and
getting that off of your, yourmind, you know, so you don't
have to worry about it anymore,which I think is a huge tax on
your, your mental space.
I mean no pun intended there,but like keeping, not not
(03:17):
handling these things, um, likethese irs issues, these tax
issues, really has a uh, takesup some bandwidth on your
ability to think about your lifeand your business, and just get
it taken care of so that youcan move forward, because if
you're going to hit any level ofsuccess in your business, you
(03:37):
got to have this taken care of.
Otherwise you're just.
You have a huge target on yourback.
Speaker 2 (03:42):
Yeah, you don't want the IRS living rent-free in your
head keeping you up at night.
But you know, in a way the IRSthey almost encourage that
behavior because the IRS is notgoing to be proactive, right,
like if you forget to filesomething or don't know about a
requirement.
It's not like they're going tocall you up on the phone and say
(04:04):
, hey, make sure you get thistaken care of before the
deadline next month.
They are more than happy to letyou miss the deadline and then
not contact you for months,years, while the whole time
penalties and interests arebuilding up.
Because the IRS knows that thestatute of limitations or in
(04:28):
other words the amount of timethey have to assess and collect
those taxes, that clock does notstart ticking until you file
your return.
So if it's five, eight, 12years, they're okay with it.
The clock hasn't started forthem.
Only once you file and thetaxes are assessed do they then
(04:50):
have an additional 10 years tocollect on it.
So they've got time.
Hopefully they might send you aletter if you're missing a
return.
But don't expect a lot of helpor proactiveness on the part of
the government, which I thinknone of us is really.
The government's a pretty lowbar.
(05:13):
I don't think any of us areexpecting anything too
intelligent from them, but thepoint is it's not going away
Right.
You can't outrun it.
As long as you have a SocialSecurity number, they know that
you exist, and as long as youare alive on this planet, they
(05:40):
can come after you for thoseback tax returns.
So if you're in that situation,what is the first thing you want
to do?
Well, it's like any kind oftriage situation.
You want to assess the damageand understand what you're
looking at.
So if it's more than a year ortwo of noncompliant filings, or
if it's more than a few thousanddollars of back tax debt, I
(06:00):
recommend that you talk to atrusted tax professional.
Cpas are good.
Enrolled agents are very, verygood, because they specialize in
this sort of thing.
Not all of them do, but most ofthem do.
Look for those who advertisethose services.
We certainly have been able tohelp a lot of our clients with
(06:21):
this sort of thing, and thefirst thing that I want to do is
pull your IRS transcripts.
This is getting our baselineinformation.
We're going to find out howmany tax returns still need to
be filed.
We're going to find out whatkind of action the IRS is taking
behind the scenes that they maynot have notified you about.
(06:42):
We're going to find out whatinformation has been reported to
the IRS on your behalf andthat's really going to be
necessary to start crafting aplan to become compliant and
take care of the back tax debt.
I've got an example of what anIRS transcript may look like
(07:03):
here.
Now this report is from somevery powerful tax software that
we use.
The raw data that you might getfrom the IRS is not going to be
this well put together, but ifyour professional knows what
he's looking at, he'll be ableto make heads and tails of it.
If your professional knows whathe's looking at, he'll be able
(07:23):
to make heads and tails of it.
In this report you can seethey've got every year listed
and they know whether a returnwas filed or not.
In this case they're missing areturn for 2018 and also 2023.
We also know if there is abalance on the account.
In this example there is nobalance, but if there was money
(07:44):
owed, it would appear here.
We know if there's collectionsactive on the account.
We know if the IRS is taking acloser look at it when the
examination is active.
We know if they've put liensagainst your property to try and
collect.
So this is just a tiny part ofthe overall report.
A lot of good information inhere to help you understand
(08:06):
where you stand.
Additionally, we know whatinformation has been reported to
the IRS on your behalf.
On the bottom here we've got aportion of the wage and income
summary.
So for this taxpayer, we cansee that the credit card he was
processing credit card paymentsin his business and the credit
card company sent him a 1099-Kwhich shows that he had $655,000
(08:33):
of credit card receipts in 2021, $844,000 in 2022, $465,000 in
2023, and so on.
It's going to show W-2s, 1099s,schedule K-1s all sorts of
information, and it's importantto know because, well, one, we
want to make sure that's right,but two, we also don't want to
(08:57):
miss anything because we don'twant to try and file a return
and get compliant.
And then, oops, there's a wholebunch of brokerage statements
that never got on there and nowwe've got to amend the thing
best to at least know what theIRS knows, and then we can
tackle it head on.
Speaker 1 (09:17):
Yeah.
So I think a lot of folksthey'll get kind of complacent.
Like if you haven't filed for ayear or two, two, and you're
not really hearing anything fromthe IRS, like nobody's coming
to your door or sending younasty letters, you can kind of
start to think.
I think some people might maybestart to think like, oh, I can
(09:37):
maybe just get away with this.
But if you have a socialsecurity number, you have a tax
transcript, what Richard justwent through and the IRS
probably has a good amount ofinformation on you to act on.
And they maybe haven't acted onthis information yet, but it
doesn't mean that they won't atsome point in the future.
(10:00):
They're probably justprioritizing other folks over
you and they're working throughthat list.
Speaker 2 (10:06):
Yeah, and if they've got data and no tax returns,
they do have the option to dosomething that's called a
substitute for return, and thatis where the IRS uses the
information they have to createa tax return on your behalf.
This tax return is not in yourbest interest.
This has all of the income theIRS can scrounge up on you none
(10:31):
of the deductions, none of thecredits, none of the good stuff.
So a SFR or substitute forreturn is good for the IRS.
Sfr or substitute for return isgood for the IRS.
(10:53):
It's terrible for you.
Don't let the IRS file yourreturn for you.
Be in control of it and youtell them what information they
need to know at.
The next step is getting thosemissing tax returns filed.
So that is going to requiregetting your business
information.
Hopefully you've got some kindof books and records.
If not, maybe we have bankstatements.
Maybe we've got a shoebox ofreceipts.
(11:15):
We're going to have to compilethis together because we want to
make sure we get all thedeductions that we're entitled
to.
This together because we wantto make sure we get all the
deductions that we're entitledto.
This is where a good bookkeepercan come in and help too.
We've done many cleanups forfolks who have been behind in
their bookkeeping and we've beenable to reconstruct a profit
and loss and a balance sheetfrom bank records and receipts.
(11:37):
It's a bit labor intensive, butif you have a significant
amount of income, you want tomake sure that you are not
overpaying your taxes becauseyou've missed expenses.
So a good cleanup, a good setof books, will go far.
Once we get that together, wecan go ahead and get those
(11:59):
returns filed and we can plugthose missing gaps in the tax
transcript.
All right, so that's thepaperwork part.
Right Now comes the really hardpart, and that is now that it's
filed.
They're going to startassessing the tax.
Assessing the tax just meansthey're taking the numbers off
(12:21):
your return and they're saying,okay, now you owe it.
And now that you owe it andit's been assessed, we can start
talking about how they're goingto collect it.
This is when the clock starts.
They've got 10 years to collect, so they probably aren't going
to get too aggressive up front.
They're going to send you someletters, they're going to add
(12:42):
the penalties and interest.
You're going to get a hugeamount due At this point.
We now shift from complianceover into resolution, so we want
to come up with a plan tohandle all of this back debt.
Now, I know nobody's got abunch of money sitting around,
(13:03):
so it's almost certainly goingto involve some kind of
installment plan.
Or if you don't have enoughincome to pay it back over the
next six years, you mightqualify for what they call a
partial pay installment plan,where you make less than the
full monthly payment.
Or you might qualify for theoffer and compromise.
(13:25):
Offer and compromise is thatthing that maybe you hear on
like late night TV commercials.
You know, settle your debt withthe IRS for pennies on the
dollar.
I wish it was that easy.
The ads tend to make it soundlike you know a car negotiation
where you sit down at the tablewith the car dealer and you jot
(13:47):
a number down on a littlepost-it note and you slide it
across the table and you crossyour fingers in hopes that he
takes it.
It doesn't work that way withthe IRS.
There's paperwork involved, bigsurprise, there's a lot of
numbers, there's a lot offormulas.
Have assets?
(14:12):
Then an offering compromisecould be a possibility, but more
often than not we're going tobe looking at either a partial
pay or possibly, if you'rereally hard up, we might be able
to get the account classifiedas currently not collectible,
which is a pause.
The 10-year clock keeps running, but the IRS doesn't come after
you while you're currently notcollectible.
Keeps running, but the IRSdoesn't come after you while
you're currently not collectible.
(14:33):
So we could do a whole episodeon, we could do several episodes
on resolution options, but Ijust want everyone to know that
you're going to see a big numberand it's going to scare you and
(14:57):
you're going to think I can't,I can't deal with this.
We can work through it and aslong as you are making a good
faith attempt to work through it, the IRS is not going to take
collection activity against you.
So if you're in a payment plan,you don't have to worry about
waking up and having your bankaccounts levied where they've
just contacted Chase Bank andyanked the money out and now you
can't make payroll.
You don't have to worry aboutyour passport getting seized.
You don't have to worry aboutany of the nasty notes, nasty
(15:20):
letters.
All of that's going to be puton hold as long as they think
you're making an effort.
But if the IRS doesn't hearfrom you or you stop making your
payments and they can't get ahold of you, they're going to
think the worst and that's whenthey're going to start bringing
in the bigger guns and makingyour life miserable.
(15:41):
So this is just one of thosethings where it sucks.
I get it.
Get a trusted advisor on yourside, let them get between you
and the IRS and be proactive,and it will suck a lot less if
you're putting forth that effort.
Speaker 1 (16:12):
Well said, it's just one of those things you got to
bite the bullet on.
Once you get this past, youjust imagine what you would the
sense of relief like gettingthis taken care of, not having
that nagging thing in the backof your head like, oh, this is
kind of haunting me, likegetting that off of your out of
your mind, getting it care ofcan can really free up some of
your headspace to to worry aboutthe important things in life
(16:35):
instead of the IRS.
So yeah, absolutely.
Speaker 2 (16:39):
And you know we're not.
We're not trying to scareanybody here, but it's.
It's good to understand thatthere are some consequences for
not dealing with your IRSproblems.
If you're not compliant withyour taxes, the IRS can revoke
or deny the renewal of yourpassport so that you can't
(17:00):
travel abroad.
They do have that right.
Another thing is that you mightnot qualify for loans.
Maybe you want to buy a houseor a new car.
Your business needs an SBA loan.
If the banks do not have pasttax returns, they're not going
to feel comfortable giving youmoney and that could put a real
(17:21):
damper on your financialsituation.
Another problem if you try, oneof the first things the IRS is
going to do is put a lienagainst your property.
If you owe taxes and you mightnot be able to sell your house.
If there's an IRS lien on there, it will absolutely come up at
closing.
(17:41):
Another disadvantage is if youhave a business like an LLC or
especially a corporation, andyou have not paid your business
taxes, you will lose yourcorporate veil protection.
So if somebody is to sue yourbusiness, they might want to go
(18:03):
through it into your personalassets, your personal savings
account, your personal home.
You want the protection of thatcorporate veil to keep them out
.
And if a judge looks at yourbusiness and says, hey, you
haven't really been operatinglike a true business entity, you
haven't done your tax filings,I don't think you should get
(18:26):
corporate veil protection.
And it happens all the timewhere a plaintiff blows right
through that and goes aftersomebody and attacks their
personal assets because they didnot maintain that protection of
the LLC or the corporation bytreating it like a legitimate
business and tax returns isgoing to be one of the first
(18:48):
things they look at.
Additionally, you might betrying to bid on jobs like
government jobs.
Those are some of the mostlucrative contracts out there
government work.
Daniel and I have met paintingbusiness owners who make well
over a million dollars a yearpainting military housing
(19:08):
installations or federalbuildings.
It's kind of their bread andbutter.
But if you're not compliantwith your taxes, there's a good
chance the government will denyyour ability to make a bid so we
could be missing out on futurework.
So just you know there's amillion reasons to take care of
your tax debt.
(19:29):
So just you know there's amillion reasons to take care of
your tax debt.
And the truth is it doesn'thave to be scary.
There is a light at the end ofthe tunnel.
But we do recommend you knowfinding a trusted advisor to get
between you and the IRS to helpyou understand what needs to be
done and to present your bestoptions.
(19:51):
They're well worth theinvestment and can usually get
you a much better outcome thanyou could on your own.
And just one more tip, sinceI'm up here spilling If you're
in a really bad situation andyou're thinking about hiring
somebody to help you, do notcall the IRS and talk to them
(20:13):
first.
Contact your tax professional,get your power of attorney
signed, make your plan.
But do not contact a revenueagent or a collection agent on
your own, because what you sayto them will be recorded and it
could seriously impact theamount of options you have
(20:36):
moving forward.
Speaker 1 (20:40):
Yeah, good stuff, all right.
Well, if you have any thoughtsabout getting help, or if you
have any experiences you want toshare or ideas for a future
podcast, go to Facebook, type inGrow your Painting Business.
We'd love to hear from you andwith that, we will see you next
(21:03):
week.
this is daniel.
I'm a cpa that worksexclusively with painting
business owners to help themknow their numbers and what they
mean and save big in tax, andI'm the founder of bookkeeping
for painters.
And today I'm here with richarddunton enrolled agent enrolled
agent, yes, yeah and uh.
Speaker 2 (00:21):
Advising director for bookkeeping for painters.
So people ask me sometimes,like what does that mean?
Enrolled agent?
That's something that wehaven't actually heard of before
and it's actually a very oldcredential.
It's one of the oldest in thecountry.
It is a credential that isoffered by the IRS and it means
that the person who has thatcredential is allowed to
(00:44):
represent taxpayers.
Before the IRS it's generallyused to do things like tax
resolution, resolve back taxdebt problems, that sort of
thing.
And enrolled agents are kind oflike CPAs, who focus very
narrowly on taxes, who focusvery narrowly on taxes.
(01:07):
And today we thought we'd talk alittle bit about what happens
if you maybe have a little bitof a bad history with the IRS.
Maybe we haven't filed all thetax returns that we're supposed
to, maybe we've got some backtax debt that we haven't taken
care of yet, and then what canyou do about it, what shouldn't
you do about it and what shouldyou do?
(01:28):
You know, as a business ownerit's very easy to get in over
your head with some of thefilings and the forms and the
payments.
It's a very complex tax codethat we have in this country,
probably one of the most complexin the world and sometimes we
don't know what we are supposedto do and sometimes we get so
(01:52):
busy running our businesses thatwe don't, you know, take the
time necessary to find out andmake sure that we're filing all
the forms that Uncle Sam isrequiring, sure that we're
filing all the forms that UncleSam is requiring.
So you know, daniel, you and Ihave talked to a lot of business
owners and it's not uncommon tosee people kind of fall behind
on their filings.
Speaker 1 (02:13):
Yeah, it definitely comes up a lot where folks come
to us and they haven't filedtheir tax return for the last
three years or whatever the caseis, and you know it happens,
life happens and the biggestthing you can do in this
situation is to tackle it headon.
(02:34):
You know, don't bury your headin the sand and it's a
judgment-free zone, you know,and I'm sure that's the case for
tax professionals everywhere.
They're there to help you and itis complex, but it can be
solved.
Most of these things can besolved and the worst thing you
can do in these situations is tobury your head in the sand,
(02:56):
because it's going to makethings a lot worse as opposed to
just tackling it head on,getting it taken care of and
getting that off of your, yourmind, you know, so you don't
have to worry about it anymore,which I think is a huge tax on
your, your mental space.
I mean no pun intended there,but like keeping, not not
(03:17):
handling these things, um, likethese irs issues, these tax
issues, really has a uh, takesup some bandwidth on your
ability to think about your lifeand your business, and just get
it taken care of so that youcan move forward, because if
you're going to hit any level ofsuccess in your business, you
(03:37):
got to have this taken care of.
Otherwise you're just.
You have a huge target on yourback.
Speaker 2 (03:42):
Yeah, you don't want the IRS living rent-free in your
head keeping you up at night.
But you know, in a way the IRSthey almost encourage that
behavior because the IRS is notgoing to be proactive, right,
like if you forget to filesomething or don't know about a
requirement.
It's not like they're going tocall you up on the phone and say
(04:04):
, hey, make sure you get thistaken care of before the
deadline next month.
They are more than happy to letyou miss the deadline and then
not contact you for months,years, while the whole time
penalties and interests arebuilding up.
Because the IRS knows that thestatute of limitations or in
(04:28):
other words the amount of timethey have to assess and collect
those taxes, that clock does notstart ticking until you file
your return.
So if it's five, eight, 12years, they're okay with it.
The clock hasn't started forthem.
Only once you file and thetaxes are assessed do they then
(04:50):
have an additional 10 years tocollect on it.
So they've got time.
Hopefully they might send you aletter if you're missing a
return.
But don't expect a lot of helpor proactiveness on the part of
the government, which I thinknone of us is really.
The government's a pretty lowbar.
(05:13):
I don't think any of us areexpecting anything too
intelligent from them, but thepoint is it's not going away
Right.
You can't outrun it.
As long as you have a SocialSecurity number, they know that
you exist, and as long as youare alive on this planet, they
(05:40):
can come after you for thoseback tax returns.
So if you're in that situation,what is the first thing you want
to do?
Well, it's like any kind oftriage situation.
You want to assess the damageand understand what you're
looking at.
So if it's more than a year ortwo of noncompliant filings, or
if it's more than a few thousanddollars of back tax debt, I
(06:00):
recommend that you talk to atrusted tax professional.
Cpas are good.
Enrolled agents are very, verygood, because they specialize in
this sort of thing.
Not all of them do, but most ofthem do.
Look for those who advertisethose services.
We certainly have been able tohelp a lot of our clients with
(06:21):
this sort of thing, and thefirst thing that I want to do is
pull your IRS transcripts.
This is getting our baselineinformation.
We're going to find out howmany tax returns still need to
be filed.
We're going to find out whatkind of action the IRS is taking
behind the scenes that they maynot have notified you about.
(06:42):
We're going to find out whatinformation has been reported to
the IRS on your behalf andthat's really going to be
necessary to start crafting aplan to become compliant and
take care of the back tax debt.
I've got an example of what anIRS transcript may look like
(07:03):
here.
Now this report is from somevery powerful tax software that
we use.
The raw data that you might getfrom the IRS is not going to be
this well put together, but ifyour professional knows what
he's looking at, he'll be ableto make heads and tails of it.
If your professional knows whathe's looking at, he'll be able
(07:23):
to make heads and tails of it.
In this report you can seethey've got every year listed
and they know whether a returnwas filed or not.
In this case they're missing areturn for 2018 and also 2023.
We also know if there is abalance on the account.
In this example there is nobalance, but if there was money
(07:44):
owed, it would appear here.
We know if there's collectionsactive on the account.
We know if the IRS is taking acloser look at it when the
examination is active.
We know if they've put liensagainst your property to try and
collect.
So this is just a tiny part ofthe overall report.
A lot of good information inhere to help you understand
(08:06):
where you stand.
Additionally, we know whatinformation has been reported to
the IRS on your behalf.
On the bottom here we've got aportion of the wage and income
summary.
So for this taxpayer, we cansee that the credit card he was
processing credit card paymentsin his business and the credit
card company sent him a 1099-Kwhich shows that he had $655,000
(08:33):
of credit card receipts in 2021, $844,000 in 2022, $465,000 in
2023, and so on.
It's going to show W-2s, 1099s,schedule K-1s all sorts of
information, and it's importantto know because, well, one, we
want to make sure that's right,but two, we also don't want to
(08:57):
miss anything because we don'twant to try and file a return
and get compliant.
And then, oops, there's a wholebunch of brokerage statements
that never got on there and nowwe've got to amend the thing
best to at least know what theIRS knows, and then we can
tackle it head on.
Speaker 1 (09:17):
Yeah.
So I think a lot of folksthey'll get kind of complacent.
Like if you haven't filed for ayear or two, two, and you're
not really hearing anything fromthe IRS, like nobody's coming
to your door or sending younasty letters, you can kind of
start to think.
I think some people might maybestart to think like, oh, I can
(09:37):
maybe just get away with this.
But if you have a socialsecurity number, you have a tax
transcript, what Richard justwent through and the IRS
probably has a good amount ofinformation on you to act on.
And they maybe haven't acted onthis information yet, but it
doesn't mean that they won't atsome point in the future.
(10:00):
They're probably justprioritizing other folks over
you and they're working throughthat list.
Speaker 2 (10:06):
Yeah, and if they've got data and no tax returns,
they do have the option to dosomething that's called a
substitute for return, and thatis where the IRS uses the
information they have to createa tax return on your behalf.
This tax return is not in yourbest interest.
This has all of the income theIRS can scrounge up on you none
(10:31):
of the deductions, none of thecredits, none of the good stuff.
So a SFR or substitute forreturn is good for the IRS.
Sfr or substitute for return isgood for the IRS.
(10:53):
It's terrible for you.
Don't let the IRS file yourreturn for you.
Be in control of it and youtell them what information they
need to know at.
The next step is getting thosemissing tax returns filed.
So that is going to requiregetting your business
information.
Hopefully you've got some kindof books and records.
If not, maybe we have bankstatements.
Maybe we've got a shoebox ofreceipts.
(11:15):
We're going to have to compilethis together because we want to
make sure we get all thedeductions that we're entitled
to.
This together because we wantto make sure we get all the
deductions that we're entitledto.
This is where a good bookkeepercan come in and help too.
We've done many cleanups forfolks who have been behind in
their bookkeeping and we've beenable to reconstruct a profit
and loss and a balance sheetfrom bank records and receipts.
(11:37):
It's a bit labor intensive, butif you have a significant
amount of income, you want tomake sure that you are not
overpaying your taxes becauseyou've missed expenses.
So a good cleanup, a good setof books, will go far.
Once we get that together, wecan go ahead and get those
(11:59):
returns filed and we can plugthose missing gaps in the tax
transcript.
All right, so that's thepaperwork part.
Right Now comes the really hardpart, and that is now that it's
filed.
They're going to startassessing the tax.
Assessing the tax just meansthey're taking the numbers off
(12:21):
your return and they're saying,okay, now you owe it.
And now that you owe it andit's been assessed, we can start
talking about how they're goingto collect it.
This is when the clock starts.
They've got 10 years to collect, so they probably aren't going
to get too aggressive up front.
They're going to send you someletters, they're going to add
(12:42):
the penalties and interest.
You're going to get a hugeamount due At this point.
We now shift from complianceover into resolution, so we want
to come up with a plan tohandle all of this back debt.
Now, I know nobody's got abunch of money sitting around,
(13:03):
so it's almost certainly goingto involve some kind of
installment plan.
Or if you don't have enoughincome to pay it back over the
next six years, you mightqualify for what they call a
partial pay installment plan,where you make less than the
full monthly payment.
Or you might qualify for theoffer and compromise.
(13:25):
Offer and compromise is thatthing that maybe you hear on
like late night TV commercials.
You know, settle your debt withthe IRS for pennies on the
dollar.
I wish it was that easy.
The ads tend to make it soundlike you know a car negotiation
where you sit down at the tablewith the car dealer and you jot
(13:47):
a number down on a littlepost-it note and you slide it
across the table and you crossyour fingers in hopes that he
takes it.
It doesn't work that way withthe IRS.
There's paperwork involved, bigsurprise, there's a lot of
numbers, there's a lot offormulas.
Have assets?
(14:12):
Then an offering compromisecould be a possibility, but more
often than not we're going tobe looking at either a partial
pay or possibly, if you'rereally hard up, we might be able
to get the account classifiedas currently not collectible,
which is a pause.
The 10-year clock keeps running, but the IRS doesn't come after
you while you're currently notcollectible.
Keeps running, but the IRSdoesn't come after you while
you're currently not collectible.
(14:33):
So we could do a whole episodeon, we could do several episodes
on resolution options, but Ijust want everyone to know that
you're going to see a big numberand it's going to scare you and
(14:57):
you're going to think I can't,I can't deal with this.
We can work through it and aslong as you are making a good
faith attempt to work through it, the IRS is not going to take
collection activity against you.
So if you're in a payment plan,you don't have to worry about
waking up and having your bankaccounts levied where they've
just contacted Chase Bank andyanked the money out and now you
can't make payroll.
You don't have to worry aboutyour passport getting seized.
You don't have to worry aboutany of the nasty notes, nasty
(15:20):
letters.
All of that's going to be puton hold as long as they think
you're making an effort.
But if the IRS doesn't hearfrom you or you stop making your
payments and they can't get ahold of you, they're going to
think the worst and that's whenthey're going to start bringing
in the bigger guns and makingyour life miserable.
(15:41):
So this is just one of thosethings where it sucks.
I get it.
Get a trusted advisor on yourside, let them get between you
and the IRS and be proactive,and it will suck a lot less if
you're putting forth that effort.
Speaker 1 (16:12):
Well said, it's just one of those things you got to
bite the bullet on.
Once you get this past, youjust imagine what you would the
sense of relief like gettingthis taken care of, not having
that nagging thing in the backof your head like, oh, this is
kind of haunting me, likegetting that off of your out of
your mind, getting it care ofcan can really free up some of
your headspace to to worry aboutthe important things in life
(16:35):
instead of the IRS.
So yeah, absolutely.
Speaker 2 (16:39):
And you know we're not.
We're not trying to scareanybody here, but it's.
It's good to understand thatthere are some consequences for
not dealing with your IRSproblems.
If you're not compliant withyour taxes, the IRS can revoke
or deny the renewal of yourpassport so that you can't
(17:00):
travel abroad.
They do have that right.
Another thing is that you mightnot qualify for loans.
Maybe you want to buy a houseor a new car.
Your business needs an SBA loan.
If the banks do not have pasttax returns, they're not going
to feel comfortable giving youmoney and that could put a real
(17:21):
damper on your financialsituation.
Another problem if you try, oneof the first things the IRS is
going to do is put a lienagainst your property.
If you owe taxes and you mightnot be able to sell your house.
If there's an IRS lien on there, it will absolutely come up at
closing.
(17:41):
Another disadvantage is if youhave a business like an LLC or
especially a corporation, andyou have not paid your business
taxes, you will lose yourcorporate veil protection.
So if somebody is to sue yourbusiness, they might want to go
(18:03):
through it into your personalassets, your personal savings
account, your personal home.
You want the protection of thatcorporate veil to keep them out
.
And if a judge looks at yourbusiness and says, hey, you
haven't really been operatinglike a true business entity, you
haven't done your tax filings,I don't think you should get
(18:26):
corporate veil protection.
And it happens all the timewhere a plaintiff blows right
through that and goes aftersomebody and attacks their
personal assets because they didnot maintain that protection of
the LLC or the corporation bytreating it like a legitimate
business and tax returns isgoing to be one of the first
(18:48):
things they look at.
Additionally, you might betrying to bid on jobs like
government jobs.
Those are some of the mostlucrative contracts out there
government work.
Daniel and I have met paintingbusiness owners who make well
over a million dollars a yearpainting military housing
(19:08):
installations or federalbuildings.
It's kind of their bread andbutter.
But if you're not compliantwith your taxes, there's a good
chance the government will denyyour ability to make a bid so we
could be missing out on futurework.
So just you know there's amillion reasons to take care of
your tax debt.
(19:29):
So just you know there's amillion reasons to take care of
your tax debt.
And the truth is it doesn'thave to be scary.
There is a light at the end ofthe tunnel.
But we do recommend you knowfinding a trusted advisor to get
between you and the IRS to helpyou understand what needs to be
done and to present your bestoptions.
(19:51):
They're well worth theinvestment and can usually get
you a much better outcome thanyou could on your own.
And just one more tip, sinceI'm up here spilling If you're
in a really bad situation andyou're thinking about hiring
somebody to help you, do notcall the IRS and talk to them
(20:13):
first.
Contact your tax professional,get your power of attorney
signed, make your plan.
But do not contact a revenueagent or a collection agent on
your own, because what you sayto them will be recorded and it
could seriously impact theamount of options you have
(20:36):
moving forward.
Speaker 1 (20:40):
Yeah, good stuff, all right.
Well, if you have any thoughtsabout getting help, or if you
have any experiences you want toshare or ideas for a future
podcast, go to Facebook, type inGrow your Painting Business.
We'd love to hear from you andwith that, we will see you next
(21:03):
week.
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!