086 | The IRS Is Getting Smarter. Are You Ready? Tax Survival Tips from Stephen Weisberg

Patrick: [00:00:00] Have you ever found yourself staring down a massive tax bill, wondering how it got so high and how you’re supposed to pay it? Or maybe you’ve poured every extra dollar back into your business growing fast, doing all the right things, only to realize the IRS still wants their cut. And they’re not exactly known for being patient that sounds familiar or like something you’d really like to avoid.
This episode is going to be a game changer. Welcome back to another episode of the Vital Wealth Strategies Podcast. I’m your host, Patrick Lonnergan, and today we’re diving into the one of the most stressful and misunderstood parts of entrepreneurship. What to do when you owe the IRS and how to make sure you never end up there again.
Joining me today is Steven Wiseberg. The founder and lead attorney at the W Tax Group, Steven spent over a decade helping individuals and business owners resolve tax debt audits and disputes with the IRS. He knows this system inside and out, and more importantly, he knows how to protect entrepreneurs like you from the most [00:01:00] common and most costly mistakes.
In today’s conversation, Steven breaks down exactly what to do if you can’t pay your tax bill. The truth about IRS payment plans and the one move that could cost you 25% in penalties if you don’t get it right. He also shares how to defend yourself if you’ve ever audited what the IRS is really looking for when they review your return and why some of those two could be true tax strategies you’ve heard about could land you in serious trouble down the road.
This isn’t just theory. This episode is packed with practical, real world strategies that could literally save you tens, even hundreds of thousands of dollars. So if you’re serious about keeping more of what you’ve earned and build a business that’s protected from IRS, surprises. Stick with us through the end.
If you’re ready to take the next step to stop guessing and start building a custom tax strategy that actually fits your business head over to vital strategies.com/tax. That’s where you can connect directly with our team and we’ll help you map out a proactive plan that keeps you ahead of the IRS and in control of your [00:02:00] finances.
All right, let’s jump in. Today on the podcast we have Steven Weisberg, who is the founder and lead attorney of the W Tax Group, and he’s bringing over a decade of experience helping individuals and businesses and business owners resolve tax debt audits and other IRS disputes. So Steven, thank you so much for joining us here today.
Stephen: Yeah, I’m glad to be here. Thanks for having me.
Patrick: Yeah, I, I think this conversation is. Just so relevant to, to entrepreneurs, you know, if we think about the entrepreneur and they’re, they’re working so, so hard to, uh, earn another dollar, their biggest expense, generally their tax liability. And so they’re, they’re looking closely at, you know, how do I reduce that, that tax debt or tax bill as much as I can.
And, um, oftentimes, especially when the business is growing, they, they don’t recognize that they’re going to have a pretty healthy tax bill. Mm-hmm. And they’re reinvesting in their business, maybe somewhat illiquid, and then they can find themselves in, uh. Uh, a little bit of trouble with owing money to the ira.
So I’m looking forward to getting into this discussion to figure out, uh, [00:03:00] uh, how we avoid and then also resolve some of those issues.
Stephen: Yep. Sounds good.
Patrick: Looking forward to it as well. All right. Very good. So, you know, I, I think when we look at the, the entrepreneur, they can feel overwhelmed, uh, by all the legal jargon and disconnected from the strategies that they don’t fully understand when it comes to, to working with the IRS.
And they also are worried about, you know, the IRS can be scary. How do I avoid making a, a wrong move and suffering penalties or missed opportunities? And then finally we think about, you know, it just doesn’t seem fair that the entrepreneur who, who builds value and creates jobs, they shouldn’t be fun, punished for, uh, I’ll say an unfair tax burden that’s out there.
Mm-hmm. So, um, can you give us a little bit of your background on, on how you. Uh, got into the, the arena of tax and helping people solve these types of problems.
Stephen: Yeah. Um, so I was a, a corporate bankruptcy attorney for about five or six years. Um, I was here in Detroit. I’m, I’m from Detroit, so I’m here in Detroit, [00:04:00] 2008 when I graduated law school, which was an interesting time in Yeah, the country, the world, but especially in Detroit.
Um, so, um, you know, the car company that had had filed for bankruptcy, uh, or Yeah. Well, Chrysler did. Mm-hmm. So, yeah, I mean, they’re filing, filing for bankruptcy and suppliers were filing for bankruptcy. And, and to, to make a long story short, it was representing suppliers, large suppliers in bankruptcy, and they always had.
The, the big three, you know, Chrysler, GM and Ford had always lent, lent them money, um, which is a secured claim. So they always got paid back in full the car companies. And then there’d be another 50 million of, uh, debt that was owe creditors who were really kind of like mom and pop shops, whether it was suppliers or, or anything else.
Um, and that was all unsecured. You know, that was, there was no security stacked behind those loans. And so the mom and pop places [00:05:00] got, uh, literally 1 cent on the dollar, uh, when the bankruptcy was over. So, uh, I didn’t find that as rewarding as I would like to. I felt like I was just kind of working for the car companies to get them their secured claims back.
And listen, don’t get me wrong, you know, in Detroit especially, car companies are very important to the ecosystem here. But at the same time, I wanted to kind of see on a daily basis, you know, I wanted to work with, with entrepreneurs, just small business owners, medium sized business owners. I wanted to kind of see the look on people’s faces as I was helping them.
So. Um, the story of how I got into tax is not that exciting, except for I knew I wanted to do something different. I knew I wanted to, like I said, you know, see directly the, the difference that I was making and I, I was, worked with an attorney who was in tax defense, you know, learned everything that I know from him, uh, and then ultimately opened up my own shop about 10 years ago.
Patrick: I love it. This is fantastic. So I, I’d like to walk through a [00:06:00] scenario where. We’ve seen entrepreneurs, they, they end up, and then we can talk a little bit about how we, we should handle that scenario. So we see entrepreneurs and they go from, let’s say, 250,000 of, of net income to 500 to seven 50 to a million dollars.
Okay? I just picked nice round quarter million dollar increments there. And the interesting thing is as the, the tax. As the income goes, the tax rate, you know, starts to, uh, increase. And some of those deductions that, you know, maybe I was getting with some depreciation and that type of thing, were wiping out a fair amount of my tax bill when I’m starting to make really healthy income.
Uh, and I go, great, let’s, let’s sort of keep this, this momentum going. We’re gonna take this free cash flow and reinvest back in my business. But what can happen there is I can buy real estate, I can, you know, hire new people. But some of the issue is, is that I may not. You know, especially when I’m making a capital purchase, like putting down payment on real estate, that’s not tax deductible.
Mm-hmm. I put a half a million dollars down on a, [00:07:00] uh, a real estate project. I still have to pay tax on those dollars. Right. But I don’t have the dollars to pay the tax. Right. And so, uh, I could be in a scenario where I owe $200,000 to these, to the IRS, but I don’t have any cash to, uh, actually actually pay that bill.
So can you walk us through the scenario? Uh, somebody comes to us and we’re like. The sort of, the ship has sailed on on resolving this tax problem for last year. Now we’ve gotta manage the tax debt. Can you, can you talk us through maybe some, some good steps on, on how we should approach that?
Stephen: Yeah. I mean, taking one step back, and like you said, it’s kind of gone by the wayside.
You’ve already in this position, but I just kind of wanna go back. It seems like a very simple concept and, and it is in theory, but especially when you’re a new entrepreneur, you don’t realize is, like I said, when you bring in revenue. You gotta pay taxes on that. So you’ve gotta try to find an automatic system that almost kind of mimics if you were a W2 paycheck, you know, a wage earner where your taxes come out [00:08:00] automatically, right?
So that’s why it makes it so easy. But when you’re an entrepreneur and you’re bringing in money, you, the taxes aren’t coming right out. So you wanna come up with an automatic way of bringing a certain amount of money, a certain amount of money that goes into a separate account that to pay your taxes and then pay your taxes.
Um, on a quarterly basis. So, seems simple, but you really wanna think about that because, uh, that’s where everyone gets themselves into trouble. And that’s most of my, my client. I
Patrick: love that. And I, I think one thing, a few things to, to highlight there is my CPA might tell me what my safe harbor payments are.
Okay. And that’s going to help me avoid some, um, some penalty because I made my quarterly payments based on what last year taxes were. But if my, my. Business is growing dramatically, and I’ve got lots of, uh, profit this year that I didn’t have last year. That doesn’t mean I’m not gonna have a tax bill.
Right. And so I, I think one of the things that we work closely with our clients on is, um, we’ll call it the cash flow calendar, [00:09:00] where we’re, we’re forecasting net income, we’re forecasting the tax bill in, let’s say, we like to do that in July because we, we’ve got six months of data. We can look forward and go, okay, maybe the first six months is gonna look like the next six months, here’s what the tax bill’s going to be.
Mm-hmm. And um, then we can make sure we’ve got either the money set aside or sent into the IRS proactively to, to pay that tax bill. ’cause some people are like, oh, I made my safe harbors, I’m in good shape. Right. And they’re not, you know, they, they’re still, you know, it could be a few hundred thousand that’s, uh, that’s out there.
So I think that’s, that’s wise counsel. Those quarterly payments and just getting money to the IRS consistently is, is good. And a lot of times our entrepreneur clients will, will push against that a little bit. They’re like, but I can use those dollars better than sending ’em into the IRS. Right. And it’s like, maybe, but more often than not, we see they get themselves in a liquidity crunch and they don’t have the money to, to pay the tax when it comes due.
And, uh, you know, that that can be exactly, can be a problem. So, alright. I love that. I [00:10:00] love that stepping back, making sure you make your quarterly payments is Yeah. Is step one Exactly. Good.
Stephen: But going back to your original question, I mean, the first thing you just, you have to recognize, or I should say, when you recognize that you’re not gonna have the money to pay for your taxes.
You need to make arrangements. I mean, the first thing that happens to a lot of people, um, maybe surprisingly, but if they don’t have the money to pay what they owe in their taxes, they just won’t file the return at all. They just say, well, I don’t have the money. I’m not gonna file the return and kind tip them off.
And that’s kind of the first misstep because there’s failure to file penalties and failure to pay penalties. So when you don’t file your tax return, um. You’re gonna pay up to 25% of, of what you owe just in penalties. Mm-hmm. Um, so even if you had just filed your return and paid nothing on it, you’re saving yourself 25% of the total amount owed in penalty.
And so, so [00:11:00] that being said, you, you wanna file it. And there’s also this, this idea, or this thing that I see all the time is where people, you know, they stick their head in the sand. Um, which I understand, and by, by the way, and I don’t mean to minimize any of these things, like I understand why people do these things.
I understand why they don’t file a return. I understand why they might sticker. I understand and pretend like it’s not happening, but you wanna get in touch with the, a tax attorney really as soon as possible, once you realize you can’t pay the amount owed. Yeah. Um, you, you need to get the council to make sure that you’re taking the steps moving forward so that you don’t dig yourself in a bigger hole.
Because the longer you weigh the lo the, the less, um, leverage you’re gonna have with the IRS.
Patrick: Yeah, I love this and we’ll, we’ll get into some of our options here in a second, but I think one of the things that’s happening in the IRS and, and feel free to, uh, you know, opine on this uhhuh, but it seems like the, the IRS is maybe getting smarter, more efficient.
You know, they’ve got, they’ve got fewer employer employees, but they’re [00:12:00] starting to utilize technology to like highlight like, oh, hey, this person’s filed a tax return for the last few years. They didn’t file one this year. We better start sending them notices and figure out what’s happening here. So. I think the, the thought process of, I’m just gonna pretend this problem doesn’t exist Right.
Uh, is gonna come back to h especially with the IRS, maybe being, uh, a little more on top of their game. So can you talk a little bit about how, you know, maybe the IRS is getting a little more
Stephen: efficient than they used to be?
Yeah, I mean, you know, there’s a whole big debate, and I dunno if it’s just in my bubble or not, but a debate about, you know, node culling of the people in the IRS and all that. True and reasonable. Um, and, you know, there’s concerns about that. But also, you know, the idea that they’re going to try to rely or utilize more artificial intelligence, uh, more technology.
That’s a real thing. And you know, the interesting thing about this is, [00:13:00] you know, um, the IRS in terms of their automated collection service have started levying. Just this year, way more than they have in the past five years, uh, you know, since the pandemic. So everyone’s talking about how there’s no one left at the IRS to, to talk to.
Or work there. And that might be true, but they are loving bank accounts and wages and third parties if you’re, you know, an entrepreneur. So, so it’s kind of a double whammy because one, they’re, they’re actually levying more, but also there’s no one to talk to, so, yeah. Uh, and no one to work the files. So it’s very important that you get on top of this, actually now more than ever because there’s a lot of people that are saying, oh, well, whatever the IRS is no one working for them anymore, I’m not gonna worry about it.
Mm-hmm. Well, it’s actually completely the opposite.
Patrick: Yeah. Yeah. Okay. This is great. So we figure out we’re gonna have a tax bill due, so we’re gonna file the return, but we don’t have the dollars to pay it. Can we walk through a little bit of what are our options? Then? [00:14:00] How do we navigate this? Because you know what I’m, I’m scared of, I’m scared of what the IRS is going to do to me if I don’t pay the bill.
And I don’t even know the first thing about how to set up. Some sort of structure with the IRS to like, get this, this debt paid. So where, where do we go from here?
Stephen: Yeah. I mean, then you start looking at your options in terms of resolution. Um, you know, there are different types of installment agreements.
You know, basically monthly payment plans. Uh, there are hardship provisions now, you know, and, and maybe your listeners hardship might not be something they’re, they’re looking for, but there are hardship provisions in terms of like currently not collectible. Um, but in terms of, of getting, uh, a resolution in place type of payment plan, um, the way you go about getting it is, is the most important thing here.
’cause people, some people do think, Hey, I’ll just call the IRS and just figure it out. Well, the IRS is, is the most powerful collection agency at the planet. [00:15:00] In reality, that’s what they are. They’re not there to tell you what’s in your best interest. They’re tr there to get as much money for, from you and for themselves as possible.
So they’re not gonna say, well, you know, well, they’ll just tell you, Hey, you’re gonna pay us this much, and they’re not gonna tell you, well, actually you don’t have to do it that way. So, and, and like I said, there’s different types of resolutions in terms of even just payment plans, um, that you want to make sure you’re aware of and make sure you’re aware of based on your specific circumstances.
So that’s going to be a lie of what the resolution is based on, is your specific financials and circumstance. Yeah.
Patrick: So Steven, this is great. I guess my question is when do I call you? When do I call somebody like you? Because my, my thought process is I don’t, I don’t wanna make a wrong step in the process.
Yeah. So I feel like getting wise counsel to, to help me along the way early on is better than. Me going out there screwing something up, then calling you, and then now you gotta fix a mess. [00:16:00] So when’s the best time?
Stephen: Yeah, I mean, I would never call the IRS on my own. Like I said, they’re not there to help you.
They’re trying to really get as much money as possible, so I. M my, my preference in, in terms of, you know, when you call me, but for yourself in terms of you to get the, have the most leverage and for you to get the best representation is once you know that you’re gonna owe money to the IRS. So even before you, you file the return, if you know you’re gonna owe money to the IRS or have I gonna have some other issue, once you file the return, that’s when you need to get me a vote because I can, you know, I’ll have the time and that’s when we have the most leverage to make something happen.
Patrick: Yeah. Yeah. Got it. That’s, uh, that’s fantastic. I think it makes a ton of sense, especially when we’re, we’re dealing with the most powerful collection agency, you know, on the planet. You know, I think about the IRS, they’re attached to the federal government, which also controls all the military. You know, they, they effectively have missiles.
They can point at me, which, you know, yes. So can we talk a little bit about some of the resolution options? ’cause sometimes our clients, you know, there, [00:17:00] there might be access to other capital, right? Like I could maybe go draw on a line of credit, you know, it might. Hamstring my ability to do business. But, uh, if borrowing that money is cheaper than the IRS dollars, like how much, how much does it cost to set up a payment plan?
’cause I assume the IRS isn’t going to let me do that for free.
Stephen: Well, it doesn’t cost necessarily. I mean, it cost something minimal to, to set it up. But the penalties are, are really high, really outrageous. Like I was talking about, the failure to file penalty will ultimately get up to 25% of, of the balance of what you owe.
And, and the failure to pay penalty, which will continue to accrue even if you’re in a payment plan, is another 25% of the balance of what you owe. So ultimately, let’s just say both of those are tapped out. You know, you’re gonna owe 50% more than what you owe just because of penalties. So it’s expensive. Um, I guess even if you’re in a payment plan and you’re gonna pay those extra penalties.
You also got [00:18:00] interest. Interest is not terrible actually. I think people think there’s gonna be some sort of like usurious, you know, interest because of the like eight A lenders or something like that. It’s not terrible. It’s basically kind of what the general interest rate is currently. To put it in layman’s terms, you know, it’s probably around 7% or so now back in the day when when interest rates were low, it was low as well.
So the interest isn’t so terrible. It’s really the poundings.
Patrick: Yeah, no, that makes a lot of sense. So let’s, let’s assume. A listener here takes your advice and they do file their tax return, but, and, and they owe a hundred thousand dollars. ’cause it’ll keep the math simple for us. So they owe a hundred grand, but they can’t pay.
So now they’re gonna owe the 25% penalty on top of the a hundred grand. Right? So they’re gonna be at 1 25 uhhuh. And then that’s, that whole balance is gonna start accruing interest at 7%. Uh, I assume, you know, uh, divide that by 12 and it’s just on a monthly basis. On the unpaid balance is that, uh. Is that a fair assessment of how, like more, I’m just trying to wrap my head around Yeah.
[00:19:00] Simplicity sake. Yeah. Yep, yep. Because I, I could see a scenario going, okay, you know, let’s, let’s go find some access to capital that isn’t going to charge me 25 points, you know, to, uh, to borrow the money. And by the way,
Stephen: not to, sorry to interrupt you, but also, you know, if you didn’t file, file your return on time, that’s another 25%.
So,
Patrick: yeah. Okay. Yeah. So yeah, those dollars add up, uh mm-hmm. Awfully quickly. So, um, I think that’s just good information. You know, it might make sense to borrow the money from a line of credit. Go call, you know, mom or dad, see if they can help you out in some, some capacity.
Stephen: So, yeah, there, I mean there’s more to talk about there in, in the fact that, you know, the IRS they got, depending on when you get to them, the IRS is gonna file a first and foremost before they do any sort of levy.
So, you know. If there’s real estate that you own personally or something and, and you want to take, you know, do a home equity line of credit, something like that, you’re gonna have a lien on your property. You know, no one’s gonna give you the, the home [00:20:00] equity line of credit with a lien. Now you can do, you know what’s called a lien subordination.
We can negotiate that so that you can actually get the money out and then you can pay the IRS on it. But just my point is, you know, when you’re trying to get loans. Uh, there are going to be things that are, are gonna get in your way, uh, of trying to do that. Sure. Yep. No,
Patrick: that’s, that’s great. Alright, good.
So, I, let’s say I come up with a payment plan with the IRS. What else, if anything, I should be thinking about, because I, I think this is all, all good, but I’d like to, after we figure out, you know, all the proper steps, I start making payments on that loan. Is there anything else that I need to be aware of if I’m, I’m setting up a payment plan with the IRS.
Stephen: Just that you, you file your returns timely from then on on, if you don’t file your return, your returns timely and, or you don’t, uh, you, you, you owe money on a, a subsequent return that you don’t pay, well then your payment plan with the IRS is gonna default and you’re gonna have to get [00:21:00] into a entirely new payment plan and pay a tax attorney again to get that, to get that together.
So that’s one Sure. One.
Patrick: Okay. Yeah, that’s that’s great.
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That’s vital strategies.com/tax, where your strategy starts. Starts.[00:22:00]
So Steven, I’d like to explore maybe two different routes and you can decide which way we go first. The first route will be. I’ve stuck my head in the sand. It’s been a few years. I haven’t filed any tax returns. Mm-hmm. And I, I think there was probably some leniency through COVID, right? Yeah. Where yeah, absolutely.
The IRS just wasn’t, you know, uh, enforcing these things. But I think that’s now changed. And so, yep. Let’s say I’m, I’m down the road and I’m starting to get notices from the IRS and the outstanding balance is, is up there. It’s a real problem. I’m scared of it. What do I do about that?
Stephen: You call me. That’s what you do.
I mean, that’s the first thing to do is find out what your options are. I mean, you know, penalty abatement is possible. Um, there is what’s called like a first time penalty abatement. So if this is like the first time you’ve had a problem and you’re, you’ve been clean for three years prior in terms of filing on time and pain on time, um, you might be eligible for a first time penalty abatement on that year.
There’s also reasonable [00:23:00] cause penalty abatements. Now that’s generally, you know, kind of like. Oh, there was a hurricane or someone died or, or something like that. So those aren’t always available, but they might be. Um, so, you know, you wanna look into, to penalty abatement, but you wanna discuss with your, your attorney that you, that you have, um, you know, brought on, look at the circumstances of, of the, the balances owed.
There’s also, by the way. A 10 year statute of limitations. So the IRS only has 10 years only. I mean, it’s a long time, but not that long. Yeah. Only has 10 years to collect from you. So if you happen to have not filed, um, your re if you haven’t filed a return, the IRS can also file substitute returns for you.
But let’s step back from that for a second. Let’s say you filed your return, let’s just say it’s 2021. You filed your return for 21 and 22. The IRS has until, uh. 2032 to collect from you. So let’s [00:24:00] say you stuck your head in the sand, that doesn’t necessarily always happen, but the IRS hasn’t gotten to you and it six years later.
Well, the IRS only has four years to collect the entire balance from you. There might be ways you wanna look at it to decide, you know, can I get away with, um, maybe paying something to the IRS, but never paying off a total balance because again, in four years. That money’s gonna drop off. So that’s something you wanna think about.
Uh, for sure, especially when it comes to the statute of limitations. But again, that’s my whole point. All the circumstances are different. It’s your financials, it’s the circumstances that’s related to the debt and related to the IRF, um, there’s a lot that goes into determining what the best option is for you.
Patrick: Yeah, no, this is, this is fantastic. So I, I think there’s the, the short answer is there’s lots of complexity around. IRS tax debt and it’s not something you should try to navigate on your own. Correct. So I, I think [00:25:00] this is good. Okay. Can we shift topics a little bit and, and think through? Sure. Let’s say I’ve done everything right.
Let let you know. Uh, but now the IRS comes along and I can think of an example of a strategy that, um, the IRS didn’t necessarily have a problem with until it started to get abused, and then the IRS went, okay, we’re going to sort of apply the rules, uh. Across the board and limit some of these deductions.
And what I’m referring to is there was a conservation easement that we saw a lot of, we didn’t have any clients, uh, involved in conservation easements ’cause it just, uh, it seemed a little. Funny, right? Yep. Mm-hmm. And, and I don’t know if the Alliant Group got raided by the FBI because of conservation easements.
I don’t know if it’s ever really come out, but this was a huge firm that mm-hmm. That got raided by the IR or mm-hmm. The FBI. Yeah. Uh, for something, you know, right. From a tax related perspective. Right. And, uh, I suspect it might have been conservation easements, ’cause there was a lot of collusion going on between the [00:26:00] appraiser and the organizers, Uhhuh and like, you know, all of these things and.
You know, short story is people would put in a hundred thousand dollars and then they would end up with maybe $200,000 of tax savings. Not deduction, but tax savings. Yeah. And, uh, the IRS went, hold on this field, like abuse, we’re gonna go like, you know, crack down on this. Yeah. So they, they did, and then they started coming back and looking at almost all the conservation easements.
Right. And yeah, you had to go hire. People like you to help sort of get out of those. So let’s say I’m getting audited for something that, you know, maybe was legitimate at some point in time. Mm-hmm. Can you talk us through maybe some, some best practices for how to handle that?
Stephen: Yeah. The short answer, and maybe it’s too simplistic, is you, you just need to paper up everything a hundred percent.
You know, you know everything that you’re doing, whether it seems a little shaky or not, make sure it’s papered up. Make sure there’s a paper trail. Make sure you can show exactly what was done and why. But when [00:27:00] it comes to specifically these things, like you’re talking about conservation easement, the same thing happened with the, uh, you know, the ERC, which was the credit that was given to employers for COVID, for, for, um, you know, personnel that they held onto.
And the same thing has happened where it, it, you know, everyone was doing it. At some point there, I said, well, whoa, this is wild. You know? And by the way, ease the conservation and the ERC. Both aren’t, were legitimate, but so many people took advantage of it in the wrong ways. And these companies kind of pop up and say, we’re gonna do it for you.
And we know exactly what we’re doing. They don’t know what they’re doing. It gets into a problem. So, especially when you’re looking into one of these kind of new credits that come out, you gotta be really careful about who you’re choosing to help you with that. And you’ve gotta make sure that you know exactly how they’re doing it, why they’re doing it.
Are they giving you the background as to how they’re doing it and why? And [00:28:00] all that stuff needs papered up again. Um, and you need to understand why it makes sense. If they can’t explain to you how they did it and why it makes sense, then you’ve got a problem and you shouldn’t be doing it. But all that stuff needs to be very clearly outlined if you’re going to get them audited by the IRS.
Um, so you can show them exactly, you know, why
Patrick: in
Stephen: the right manner.
Patrick: Steven, I think you make a fantastic point here and, and let’s use the, the employee retention credit as, as an example. So all of these firms were popping up and, you know, the amount of, I’ll say spam I was getting about filing for the ERC credits was amazing to me.
And what these firms would do is they would file the ERC credit for you. Okay? Now. They would typically take a percentage of the, the credit that you receive. Mm-hmm. So the thing that people don’t realize is because they file the all of the [00:29:00] paperwork and you get the money, doesn’t mean it was legitimate.
Like they can, they can sub submit all of this stuff, not give you any of the supporting documentation. So the paper trail matters, just like you said. And then when the IRS comes looking a few years later and says, Hey, there’s some problems here. Right? That company’s long gone. Like, they’ve got your money.
They’re gone now. You owe the money back plus penalty, plus interest. Like, you know, there can be all sorts of, of problems with that. And so I think you’re on onto something that’s super important. Like we, we work with a number of reputable firms that Right. Have been in the business for a long time.
Mm-hmm. You know, they, they’ve been doing things in the tax credit space, have. Um, you know, a long track record, they’re not going anywhere. They’re not gonna pop up and be gone. Yeah. And it’s like, and the way they handled these things is they were, they took a totally different approach than these popup shops, and they were like, Hey, you either qualify or you don’t.
Like here in Iowa, it was really hard to qualify because we weren’t really shut down. You [00:30:00] could keep operating. Mm-hmm. And so if you, you tried to file that claim, it was a, it was a challenge. And a lot of these ERC companies were like leaning on supply chain and it’s like. When you look into the supply chain language, like you, the, it had to be completely unavailable, not, not really expensive.
Mm-hmm. But completely unavailable. And it was like that, that wasn’t necessarily the case for, uh, a lot of firms. So thank you for that. That distinction, I think it is, is very important. And I think for any, anybody doing tax planning, tax strategy in general, your paper trail of. You know, just, just making sure that the deduction you’re taking is ordinary and necessary.
It’s documented, you know? Mm-hmm. We, we’ve got all of those pieces in place I think are, um, are just so important for defending an audit. And we’ve got clients that, you know, from time to time get an audit. And the fact that they’re so well organized makes the audit process fairly [00:31:00] straightforward. Yeah. If I’ve got all my receipts in shoebox, it’s a, it’s a different scenario, right.
So, right. Um, that’s great. Anything else on the, I’ll say, uh, audit defense side of things that we should, we should talk about? Um,
Stephen: no, I mean, well here in terms of, you know, making sure that you’re ready, it’s all about having everything, a paper trail, everything papered, everything organized, and especially with these credits and all that stuff, like, you just need to understand, you know, unfortunately or fortunately.
However, what other, what however, side you end up on this, you know, you need, they need to be able to explain to you what they’ve done and show you how they’ve done it. So. Mm-hmm. Bottom line in terms of, uh, you know, an audit, the only main thing that I would say is limit your responses to audits to the specific issue that they’re pip pinpointed.
’cause once you send in other stuff, then it just opens the audit up into a whole big can of worms that they [00:32:00] really weren’t initially interested in. Just make sure your responses, you don’t just throw, like you said, a huge shoebox of, of receipt that may or may not be related to, to the issue at hand. Um, and, and open yourself up to more liability.
Patrick: Yeah. This is good. So, let’s see. I’m thinking about, um, you know, audit in general, and I don’t know in, in your experience, is there anything out there that people should be looking at that, um. Is is gonna throw up a red flag for an audit that the IRS is gonna see that and go, okay, we’re, we’re gonna, we’re gonna dig into that.
I dunno if there’s anything that, that’s because I hear, the reason I bring that up is I just had a client yesterday talk about like, oh, home office deduction. Isn’t that a red flag? Isn’t the iris gonna come like. You know, audit my return if I take the home office deduction. And our, our thought process is, no, there’s a legitimate way to take the home office deduction, but I didn’t know if there’s anything out there that, that sort of throws up a red flag for, for the [00:33:00] IRS.
Stephen: Well, small things, I mean, the home office deduction, I wouldn’t say it throws up a red flag, but they are looking at it. Um, and if it looks right, then you’re fine. But a lot of people don’t do it. Right. And so there is something to the idea of they know people don’t do this, right? And so they are looking at it, but I don’t think it necessarily makes it so that you’re more likely to get audited assuming you did it right?
Mm-hmm. If they see it looks wacky, that’s a different thing. But they definitely are looking at it more than other thing. And, and it’s the same thing with mileage, uh, on the car. You know, if you’re, well, I can’t think of a good example, but if you’re taking, you know. Tens of thousands of miles in a mileage and you’re a profession that shouldn’t be doing that.
They’re gonna honor you. I mean, they just are. That’s a big one. The earned income tax credit, which again, is, is not, maybe not necessarily, you know, uh, relevant to, to your audience, but that’s one they look at a lot because there’s a lot of fraud. And it’s kind of like a back to what [00:34:00] we just talked about with that.
The conservation easement and the ERC, anything that poses the potential for fraud or where fraud has occurred a lot in the past, that’s really the things that they’re looking at more closely to, uh, decide
Patrick: whether they wanna audit. Yeah, no, I think this is great. And, and I think there’s also, um, one thing I just wanna point out, your website is such a treasure trove of like fantastic data for.
These types of, of discussions, like you’ve got a number of articles on there. Um, and it’s, it’s wiseberg, we’ll have a weisberg tax, so W-E-I-S-B-E-R-G tax. We’ll have a link to that in the show notes. But like right here, you’ve got, um, uh, small business IRS audit guide, you know, how to, how to survive tax examination.
Mm-hmm. And so I, I think that, uh, is absolutely worthwhile for, uh, our listeners to go check out. Also, a lot of information in there about, you know. If you’ve got some tax debt, here’s Yeah, here’s [00:35:00] opportunities to, uh, for sure a lot of that to resolve that. So, um, I, I appreciate that. We’ll have some, uh, again, links to that in the show notes, so.
Perfect. Great. So Steven, we’ve talked a lot about tax debt audits. Is there anything else we should be thinking about when it comes to dealing with the IRS that we should make sure that we’re prepared for so we, we can keep ourselves, uh, that we’re prepared for? Uh, so we, we can keep up the taxing authority.
Well, yeah, I
Stephen: mean the one main thing that I would bring up, and I was gonna bring it up in relations that year, same kind of deal where people do weird, fraudulent things. Um, I don’t know if you’ve ever heard of the offering compromise. I. It’s the, you hear these, you know, on the radio, you hear these ads on the radio, you know, sports radio, this, you probably see the commercials at 2:00 AM and all that stuff.
It’s the same idea. You have all these companies who are out there that say, we can resolve your text that for 10 cents on the dollar, um, without, and they don’t know [00:36:00] anything about your tech. They’re just saying, we can do it. And they’ll give you examples. You know, this guy owed a hundred thousand dollars, we resolved it for $500.
Um. So the offering compromise, is it real? Yes, it’s real. Just like the easement issue, just like the ERC, it’s real. And you know, may they have resolved a hundred thousand dollars debt for 500. Yes, they very well could have. I’ve resolved almost a million dollar debt for, you know, $500. You know, you have to be totally desolate though to qualify for that.
So my point is most people don’t qualify when you hear it on the radio. Don’t get so excited ’cause you, first of all, they, they don’t know whether you qualify for the offer and compromise until they see the specifics of your situation in terms of your financials, in terms of circumstances surrounding your debt.
So they’re just lying when they say, Hey, we’re gonna save you 10 cents. We’re gonna, you’re gonna pay 10 cents to the dollar. So I guess my main point is just [00:37:00] be very leery of those kind of promises. And again, the offering compromise is real. I’ve had plenty of success with the offering compromise. But that’s only when I know there’s an actual offering compromise that the person qualifies for.
You know, the IRF at this point, you know, they’ve been pretty much across the board for the last 10 years probably. They accept 40, they agree to 45% of the offering compromises that come through. And that’s because there’s all these huge firms out there that file them. ’cause they tell their their clients, they can file them.
Uh, they file them, they get rejected and they go back to their clients and say, yeah, we tried, it didn’t work. When I found an offering compromise, I’m probably at 98% acceptance rate. Sure, because I’m only filing offering compromises where it’s an actual qualification or when you actually qualify for the offering.
Compromise. Just be very clear. You probably don’t qualify. It sounds great. You’re gonna pay, you know, a hundred dollars or a $50,000 debt. It sounds great, but you probably [00:38:00] don’t qualify. That said, you might. So speak to someone about it, um, and see whether you
Patrick: do. Yeah, yeah, no, this is great. And one thing we haven’t touched on that I think is also important is the state taxing authorities.
Right. You know, we, we’ve been talking a lot about the federal government. I know you’re in Michigan. They’ve got state income tax. California might be the worst. Uh, I know some of the East coast, you know, New York, New Jersey, they’re also awfully aggressive. I dunno if you have any thoughts on, you know, state income tax and if there’s anything we should do necessarily different if we owe a state tax bill, a state income tax bill, not an estate tax bill.
Yeah. But yeah. Any thoughts or comments there?
Stephen: You know, to some, to some extent the same process. Um, you know, I’m in Michigan, I can represent taxpayers all I’m nationwide, um, because I belong a member of the bar here in Michigan, and that’s all you need to be is the member of a bar in one of the states.
So I represent taxpayers across the country with federal issues, but also with the states. And the process is [00:39:00] similar, you know, pretty, pretty similar, but the states, um, have left. Ability to really cut good deals. I mean, it’s more so that they don’t have the, the firepower, they don’t have the money to create these large, full scale administrative rules to help you out.
Now there’s usually an installment agreement somewhere in there. A lot of them even have an offering compromise, but they’re actually much more aggressive than the IRS and they’re harder to deal with. But in terms of the process, the process are the same. You wanna get on it as quickly as possible.
Patrick: Yeah.
I love it. Thank you. Alright. Uh, Steven, this has been fantastic. We get so excited about talking about all of the opportunities to, you know, minimize our tax bill, but sometimes uh, people out there listening are on the opposite side of that and Uhhuh there, there’s nothing they can do about the tax that’s sort of already been.
Earned, for lack of a better term, that, that they owe to the IRS. And [00:40:00] so I, I think these have been some fantastic, um, ideas to, to think about. You know, I, I think I’m just gonna recap the things we talked about. So step one, file your tax return. Even if you’re gonna owe the money, file the tax return, it’s gonna save you 25% off the top.
Then from there, call a professional, call Steven and his firm and they can help start walking through. Here’s what appropriate next steps are on how to, uh, navigate this, uh, this tax liability that’s due. And, and that might be, let’s set up a, a payment plan. Let’s go see if we can borrow money from somebody else, you know?
Mm-hmm. Uh, I think those are great steps. Now, uh, if it’s a number of years down the road, again, don’t, don’t call the IRS, they’re, they’re one of the best creditors on the planet. They’ve got lots of leverage over you. Again, make a call to a professional so they can help walk you through the process on getting unstuck.
Right. Like, it is so tempting and I, I totally understand this. We’ve been in, uh, a situation, [00:41:00] um, with our, you know, 2008, you know, that was, we, we owned a bunch of real estate. It was hard, you know, 2008 mm-hmm. Trickled into nine and 10. Just trying to navigate, uh, resolving all of the, the debt that we had from some of the real estate stuff and.
And it was tempting to stick our head in the sand, but like any creditor, we worked with the banks and, uh, because we were proactive, it just, it made our lives so much simpler and the lenders appreciated us just being like, right, uh, forward. Like, Hey, we owed the money, we need to figure it out. Mm-hmm.
Let’s, let’s come up with a game plan. So, uh, I assume the IRS is somewhat similar. You start an open conversation Yeah. Real, with the, the situation. So, um, so that, that’s great. And then. And then I think we can move on to Okay. If you do get audited, if you’re running a business, make sure you got a great paper trail, work with professionals that, uh, have been there, done that not, not some internet ad that, uh, you know, or something you hear on the radio or late night TV that, uh mm-hmm.
Says they’re gonna, uh, help save you tens of thousands of [00:42:00] dollars. Yeah. Either income tax or tax credit. Right. So, right. Um, wonderful. Anything else that we should touch on before we, before we wrap up?
Stephen: No, I think that was a great conversation. I think, I think we hit on a lot of the main points and I think you’re, you’re doing a good service by, by your listeners.
You’re doing a great job.
Patrick: Wonderful. Thank you Steven. So if somebody has an issue, what is the best way for them to, to get in touch with you?
Stephen: Yeah, you can go to weissberg taxes as you have you talked about that? You know, that’s kind of a page directly featuring myself. Um, the, the, the company that I founded is, is called, uh, the W Tax Group.
Um, you can go to our website there as well. It’s w tax attorney.com. I’ll just give you my direct number to be honest, because I do like talking to people and, and I like understanding, you know, what their situation is as opposed to it kind of trickling through my firm. So my direct number is 2 4 8 9 7 1.
0 8 8 5 2 4 8 9 7 1 0 [00:43:00] 8 8 5.
Patrick: Great. And, uh, we’ll have that number also in the show notes along with your email, website, and all of the great, uh, resources you’ve got. Again, fantastic newsletter, uh, as well that, uh, people should sign up for. Yeah, i’s
Stephen: I was gonna say the last thing is I’m very active on LinkedIn, so if you wanna get a sense of who I am and what I do, find me on LinkedIn.
Uh, you can also, uh, get in touch with me there. Um, but, but I do some of my best work in terms of putting out articles, uh, discussing different topics and kind of showing you who I am mm-hmm. And what I do. A lot of it’s on LinkedIn.
Patrick: Wonderful. Steven, this has been great. I think about, you know, when we, we take action and we’re proactive on the, the tax side of things.
Um. You know, it’s gonna save us a ton of money in penalties, interests, hassle, you know, just stress in general. And if we just continue to, to stick our head in the sand, we’re gonna pay more money to the IRS. It’s really gonna be hard to escape that, that tax bill. Uh, and it’s just gonna cause [00:44:00] us a ton more stress.
So, uh, if you’re in that situation, we think it makes a ton of sense to reach out to Steven and their team to just to get the ball rolling. So. Uh, this has been wonderful. Thank you so much for, for joining us here today, and we’ll talk to you soon.
Stephen: Yep. Thanks for having me.
Patrick: Appreciate
Stephen: it.
Patrick: That’s a wrap on this episode of the Vital Wealth Strategies Podcast.
Thank you so much for tuning in today. I hope you found tremendous value in this conversation with Steven Wiseberg, and more importantly, I hope you walk away with a few powerful insights to protect your business. Reduce your stress and get ahead of the IRS before it ever becomes a problem. If this episode sparks something for you, or if you know someone who’s navigating a similar situation, do me a favor, share this episode with them.
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Before the year end. [00:45:00] We’ll help you create a proactive plan tailored to your business so you can keep more of what you earn, stay compliant, and focus on what you do best. And remember, you’re a vital entrepreneur. You’re vital because you’re the backbone of our economy, creating opportunities, driving growth, and making an impact.
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