Epic Real Estate Investing - How to Settle with the IRS (without paying) | 545

Episode Date: December 18, 2018

Are you terrified because you owe money to Uncle Sam? Today we are telling you how to settle with the IRS. Besides showing you the way out of the problem, we are also telling you how you can make them pay you back the money they took from you. Learn what the currently non-collectible concept is, how much you are allowed to earn in order to get the CNC status, and what your options are if you do not qualify for it. Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. Did you know that up to 50% of your lifetime income will be wiped out by taxes? What if you could stop this madness? Isn't it about time you play on a level playing field with the wealthiest 1%? Now you can. Tim Berry, attorney at law, shares here each and every week current tactics and strategies that anyone can implement to hack the tax code. Protect your assets and keep what's rightfully yours.

It's time. for Tax Hacker Tuesday. Everybody's going to have a different solution. Now, what are some of the options for the people who are living their quiet life of desperation, who are terrified that they owe the IRS money? What are the options available to them? But there's several options.

But then you also elaborate on something, which is very interesting. I'm kind of smiling because a lot of people don't know this, that there can be two master files. And the IRS doesn't tell you there's two master files. they put a little asterisk. So in other words, I send for the blueprint in a lot of cases. I get back to blueprint and I go, wait a minute, there's another file, maybe on the spouse,

or a different time period for this person. In other words, you've got to notice stuff to get this information so that we can go to the next step. Remember I told you when I usually talk to Mr. and Mrs. Smith. I say Mr. Mrs. Smith is a three-part problem-solving process. One, let's send for the blueprint, let's analyze the information, gather up information that you're going to, to give us also, after the analysis of it, due to tax returns, and then I'm going to sit down with you, Mr. and Mr. Smith, and I'm going to tell you what your options are, and here are your options. Number one, don't do anything.

Okay, now we got the tax returns prepared and filed, and you owe this amount of money. Don't do anything. In fact, this is what I tell with clients. In fact, call up the IRS and say, listen, I owe you a great deal of money, you've got my tax returns, now go to Blazes. and I say, you know, if they'll do that, then they're going to destroy you. And you know those two guys I was talking about with the glasses and the gun here and everything? They're going to show up my front door. So doing nothing is not a very good option. Option number two, beg, borrow, steal.

I don't care where you get the money from. Pay the taxes. Next option is an estuarine agreement. I'm referred to as an IA. That's where you analyze what your income and expenses are, Annie, if you have money left over, we set an installment agreement. We negotiate an installment agreement with the IRS. The next option is put the key in the front door and disappear for 10 years, and you don't own it anymore.

And I have clients that are doing that, by the way. The next option is called a negotiating settlement with the Internal Regner Service. And there are certain hoops you have to jump through to get this. And we'll cover this in another module. The next option is file a Chapter 7 bankruptcy. Hello, I did say file a Chapter 7 bankruptcy. Well, what good is that going to do? And then the final option is called currently non-collectable.

And that's where the IRS puts you in an uncollectable category and leave you alone. And by the way, that's federal law. Now, you see the IRS puts you in an uncollectable category. Does that mean they take off the liens and they stop the levies? What does that mean exactly? The liens will stay. The liens will stay unless and until the tax that is paid or that there is a statute of limitations, okay, and then the liens are removed.

But if a person, a lot of people now don't even have any houses, so liens filed don't really mean anything, because they only mean something if you have equity in your house anyway. But levies are stopped immediately. In other words, if somebody comes in to me and says to me, I got this levy on my wage, okay, and I don't have any money. I don't have the money to pay the rent, the telephone, the gas electric, whatever. What can you do?

I get information from them on special forms that I have. I contact the IRS, and I say to the IRS, my client qualifies for a CNC currently not collectible. We in a field called Code 53, right? And they say, okay, send us the information on this form that you've filled out with, you know, supporting documents. And they put the client in an uncollectible category and leave them alone. In fact, in October of 06, remember I talked about the Internal Affairs, the Treasury Inspector General, they issued a publication that basically says, once you determine a CNC, you are to put them in an uncollectable and no active personnel is to work the case unless there is additional information in the future.

Now, Bernie, the power of this is currently and not collectible, I don't think many people understand how powerful this is. Bernie, let me tell you or share with you the power of this currently not collectible. I'm an attorney. I'm a tax attorney. My father-in-law had some tax challenges, and it got so bad that the IRS started levying his wages. Now, he's a plumber, and, you know, he was making about $35,000, $40,000 a year, and the IRS took every single dime of his paycheck, except they left him $150 a week, $150 a week, $600 a month. $600 a month.

That's not too good of a standard of living for the guy. So obviously, he picks up the phone and calls me up and says, Tim, you married my daughter, you're a tax attorney, you've got to help me out. Now, I've got to tell you, I don't deal in tax problem solving like Bernie does. Bernie's the man on this. So obviously, who do I go to to get some help in my father-in-law's situation? I go to Bernie, and Bernie says, oh, that's really simple. All you need to do is have your father-in-law declared as a current husband.

not collectible account. So we go through the hoopla, the rigmarole, and we get my father-in-law declared as currently not collectible. What did that do? The IRS immediately stopped levying his wages. He was able to take home 100% of his paycheck now. And then even more amazing, they sent him, the IRS sent my father-in-law, my father-in-law who owed the IRS money, the IRS sent my father-in-law, the money that they had taken out of his paycheck. That's how powerful this currently not collectible process is. They cease all collection activities, and if they took money away from you,

whenever you qualified for this currently not collectible, they give it back to you. Bernie, I never would have known that without you. I want to say thank you. And stop and think how powerful that is. A lot of people, once again, I just go back to that phrase I love of, they're living their lives of quiet desperation.

They're absolutely terrified. They can't reveal to anybody that they owe all this money to the IRS. And yet for a lot of people, they qualify for this currently not collectible, don't they? Well, they do. And let me give you, I wrote an article on this, and I kind of gave an example. Suppose you've got a guy that's married a second time. And he has two children from his first wife, and he's ordered to pay support, and maybe some alimony. and he now has a second wife and maybe they have one child.

He's hiding from the IRS because he doesn't know what you just elaborated on. He doesn't know about currently non-collectable, plus the other options. He really is ill-informed, all right? So now, think about this for a minute. He's probably driving a clunker, okay, which is dangerous. He probably got cash for that clunker. No, he didn't get cash for it. He's driving a clunker.

that clunker is dangerous to your family as to his family because who knows if something goes wrong with it because it's a clunker it's not any good why is he trying to conquer why is he living in in substandard housing because he can't afford more and why can't he have health insurance or life insurance if he dies all these families are left hold in the bag right the reason is he hasn't filed the IRS he thinks is looking for him they're going to put him in jail they're going to do these bastardly things to him. So he goes to these different employers. They pay him cash under the table, but not what he's worth, but smaller. He can't afford anything. Think about this for a minute. The first family isn't getting child support, so they're affected. This family, they can't put food on a table. He's driving the car that's unsafe. What about if we show him how we can get the information from the IRS and file the last three, four, five, six years, even if he owns a million dollars. It doesn't matter what he owes. He is entitled to go out and buy a car and have car payments. He's entitled

to have health insurance, life insurance. He's allowed to have proper housing. He's entitled, by the way, that the court ordered child support to pay the child support. And if you add up all of this, he probably qualifies for uncollectable. He can get back into system and he can take care of his family. Amazing. Let's take it a step at a time, Bernie. I'm kind of slow here. So step one, we've got to get the IRS blueprint. Correct. You analyze his information. Step two, you bring him into compliance.

You make sure the returns are filed properly and adequately. And the way you do that is with IRS blueprint, seeing what the IRS knows about the client. Plus what the client provides you. Plus what the client provides you and getting the client in compliance. That's correct. And now, once the client's provided you with their financial information, at that point in time, the IRS has what? They're called the national standards. Yes.

What they do now is you compare your client's income with their expenses. Right. And if the client's income, if their income is low. If their expenses equal to or exceed income. Or to put it differently, if their income is lower than their expenses, the allowable expenses by the IRS. Yes. They qualify for currently not collectible.

Bingo. So once again, if my income is below these national standards, and once again, my father-in-law, he was making $35,000 a year as an individual, he qualified for currently not collectible. And then again, what you said before in the first module, as well as this, every case needs to be analyzed. Suppose your father-in-law had a standard of living that he had 35,000 allow him to be put into current and I collectible. There are people making $45, $50, $60,000. that qualify for uncollectible. People are making $40, $50, $60,000. And by the way, is this before taxes or after taxes?

Well, that is your gross income. Let's say your W-2 wages. Let's say you're earning $80,000. Yeah. In order to qualify for currently not collectible, by the way, you have to be in compliance. Sure. Remember the buzzword I keep saying. Compliance, compliance, compliance.

So what happens is you make your money. And by the way, if certain deductions are, mandatory by your company, they are the allowable expenses as well as federal withholding tax, state, estate, et cetera. Now you get down to your net, take-home pay. Now you start deducting all your insurance, all your rent, telephone, gas, electric, and everything. Let's walk through some numbers, Bernie. I've got the sheets, the stats, and this is directly off the IRS website, directly off the IRS website. Let's say we have a family of four. We have husband and wife and two kids. A family of four is allowed to spend $1,370 a month for food,

clothing, and other items. Correct. So right off the top, they're allowed to spend $1,300 a month. Right off the top. Then, that's just for food, clothing, and other, miscellaneous stuff, your shampoo and such. For housing, you're allowed to spend money for housing too, for the room and board the shelter above your head. And these expenses for housing and for transportation, they vary by where you live, don't think? Exactly. You do a lot of work in San Diego. Let's talk about San Diego. For a family of four, you're allowed to spend $2,556 a month. That's in addition to the first figure. Okay, that's an addition to the first figure. So right off the top, where what, $3,800, a family of four is allowed to spend before the IRS can touch them.

Right. Okay. Add to that. But wait, there's more. There's more. Chances are husband and wife are both working. Okay. Chances are husband and wife both need a car.

Okay. So now if you have two cars, you're allowed to spend $978 on the payments of those cars. cars. So we started off at 1,300, then we added on another $2,500, and now we're going to add on another $1,000. We're at $3,800. Now we're at $4,800. Oh, but wait, it gets better. That was just the car payments. We're also going to have to pay for fuel and for insurance and repairs. That's another $488. Right, right. Oh, but wait, it gets better. Then we have medical expenses. We're allowed to have medical expenses too. Usually I'm the one that gets excited to say, this is exciting, isn't it? It's beyond exciting, and this is the biggest mind-blower

to me, just on the basic stuff, on the miscellaneous expenses. And it doesn't even include insurance premium. Life insurance. It doesn't include health insurance. It doesn't include out-of-pocket medical expenses. Allimony, child support. So you can see, at first it could be earning $70,000 a year and still qualify for a CNC. Just on the figures we used, ignoring the alimony, the child support, the insurance, all that stuff, just on those basic figures. A family of four could have up to $5,392 of monthly expenses, which if we annualize that, that's roughly $65,000 a year of income they get to keep before the IRS can touch them.

And this is after taxes. Right. And once again, medical expenses, we add that on. Healthcare expenses, we add that on. Bernie, to me, this is earth-shattering information. Most of America doesn't make $65,000 a year. And you know what you're shaking? What?

Most professionals do not know that the CNC exists. I'm going to shake my head. It's unbelievable. Absolutely unbelievable on this thing. And here's the other thing. Let's say that I owe the IRS $20,000. Can I still get this currently not collectible status where they have to cease collection activity on the account?

Agreed. Let's say I owe $100,000. Can I still get this currently not collectible status? It could be a million dollars if you wanted to be. What about $500 million? It could be $500 million. It doesn't depend on the amount old. It's what I say a little differently than you.

Sure. If your expenses equal to exceed your income, you qualify for CNC. This is America. Everybody's expenses exceed their income. So this is just for Joe Lunch Bucket. A family of four can be making $65,000 a year before medical alimony taxes, all of that stuff. And they can qualify for currently not collect, but where the IRS has to, buy long, cease, collection activity. Correct. Now, what's being left out here is I'm a small business

owner. Let's say I'm a life insurance agent. Let's say I'm a real estate agent. I've got my own sole proprietorship, whatever it may be. I'm still allowed those necessary and ordinary, those required business expenses to lower this as well. Totally. More people need to know about this. If you're self-employed, what you do is you deduct all your business expenses that are allowable, and then that gives you a net, which then you start from, there, then you reduce your estimated taxes and your life insurance and your housing and your transportation, et cetera. So, yeah, so you can maintain your business. You can pay your taxes, present taxes, and not have to pay on back taxes because of the CNC concept.

Unbelievable. Now, the thing is the CNC, currently not collectible concept, it's all about cash flow. Let's say that I've got, I don't know, $200,000. I just inherited $200,000. And I still want to qualify for this currently not collectible. Is there any way to qualify for currently not collectible and yet still have this 200,000 sitting off to the side? Well, I'll give you a perfect example. I have a client that has recently interviewed with me that her mother has money to give her, but she's afraid to because she has a major tax problem. So what I explain to her is that there's something called a spia. You know what a spia is? Sure. Okay. It's, It's a single premium insurance annuity.

She can invest, it's her mom's money, so she invest in a spia with the daughter as a beneficiary, and set up either a five-year, 10-year, or 15-year, or a life income payment. Nobody, no creditors, the IRS, or any other tax authorities can go through and get that corpus that lump sum because it doesn't exist anymore. The only thing that exists is a monthly payment. And if you have that monthly payment, plus some other work you're doing, and you still qualify for currently not collectible, then the mother feels good.

So the secret here is you need to convert the asset, the lump sum of 200,000, into the cash flow. And now as so long as the income being generated by that, as well as other income that the individual, the recipient has, is less than the allowable living expenses.

They're still currently not collectible status. That's correct. Mom takes care of what she wants to do for her offspring. You can run your own business, have business deductions. You can go on business trips. You can go on other ordinary and reasonable expenses. Plus, live in your home, pay your mortgage,

have your telephone, your gas electric, et cetera, and make sure your back alimony or support payments. Your insurance paid for, your life insurance premium paid for, and you're living a normal lifestyle and having income that is guaranteed. more people need to be aware of this. Yes, I agree with you. Going a little bit further, if mom didn't want to give the assets outright to the daughter,

she has the choice of maybe put inside the spia for the daughter, or the other thing also is a trust. I don't know how many trillions of dollars passed down to the next generation over the next 15, 20 years. And a lot of people are going to be inheriting that money outright. And if they inherit that money outright and they have IRS issues, what's the IRS going to do? If the IRS are going to take it. Sure.

And if the beneficiary has the ability to get the money, so there's one key word, isn't there? There is. I mean, you got to use that discretionary trust because even with the spinthrift trust, a lot of people think that spinthrift trust is going to save them. The IRS can assert its lien typically against spinthrift trust.

It just has to be a properly structured trust to protect the whole family. That is correct. Now, let's say that we get the client into currently not-collectable status. To a certain extent, have we done anything for them? Because all we've really done is push back the day of reckoning, isn't it? Bernie?

Well, yeah, I call it a Band-Aid effect. And what you have to do is that if a person qualifies for a currently non-collectable, then you use that as a basis for other options that are available to you that can either totally eliminate the tax penalties and interest, or get them to a settlement purposes. Now, let's talk about earlier you mentioned a cryptic phrase, C-SED. C-SED, right. Could you please tie in Sally sold C-Sold C-SED by the time?

I'm sorry, guys. Please tie in the C-SED date with currently not collectible. How could they work hand-in-hand to achieve some amazing results? When you are assessed taxes, there is a statute of collections. C-Says means collection, statute, expiration, date. So each day we're getting to that point, right? So to put it in normal language, CED stands for, at what date do your tax liabilities disappear?

The IRS only has so long to come after you. That's correct. And if you're an incurringly non-collectable, you just simply go forward until that day comes. So conceivably, statute of limitations is what? 10 years? 10 years from date of assessment. Conceivably, if I'm not making enough income,

and I am able to not make enough income for the next five years, seven years, 10 years, I could rack up a bill of $500 trillion with the IRS. I stay in currently not collectible. And once that date of statute of limitations comes, poof, everything disappears. Do you remember what I told you about the guy with $500,000? Yeah. That's exactly what happened. Well, let's go a step further. A lien. You said the liens are the tougher ones to deal with. Let's say they slapped a lien against his house for $500,000. Okay. And he was in currently not collectible. And now he

goes past the C-SET date. He goes back to the statute of limitations date. Poof, the debt disappears that he owes the IRS. What happens to the lien on his property? Let me answer it this way. Sure. Then I told you when you go into a currently non-collectable,

any levies that are out there are removed immediately. When you run the statute, the IRS has to release the lien. Unbelievable. So if I'm hearing things correctly. We go into currently not collectible, which a ton of people can qualify for. Millions. Probably 80% of America. So we go into currently not collectible. IRIS has to cease

all collection activity. Agreed. And now we just go through normal. We're not playing any games or anything. We just have these regular living expenses. And we wait four or five years. The statute date comes and goes. And now we don't. owe another dime to the IRS? If you don't owe any money the IRS, they can't have a lien. So if there's no money owed the IRS, the lien has to be removed. You know, Bernie, I got to bring it up.

This sounds too good to be true. It is true. It's law. It's not IRS policy. It's federal law. And the funny thing is, is that all the Irish people know this. That's why in the other module when I was talking about the $400,000, and I called up the IRS, and she said, oh, yeah, and she did

internally, even though I did do a, well, you had to remind me. I wanted to do a letter, so I had a paper trail. They understand this. Are we allowed to talk about this? This seems like secret information, you know, the helicopters are going to swoop down the suburban's going to pull in front of us. No, no, no. The only difficulty is if you're in a C&C and all of a sudden next year you're making $150,000, there will be an automatic look-see. Okay? And then you may come out of the CNC. But as long as you maintain the income and expense structure that puts you into the CNC,

you're home free. Now, Bernie, let's say you get into CNC. And let's say that you do make that $150,000. Is there a duty on your part where you have to call it the IRS and say, hey, look, guys, I'm making more money? Well, they will find out, and I'll tell you how they find out. Because when you file your tax return, there's a scanning. They have the computer system now.

So normally you just don't advise them because it's going to be found out anyway. So when I interview with people, I tell them, you know, there is a time in the future if you, and by the way, most of my clients aren't going to make $150,000. There's another factor. They remember something. During the time period in the CNC, there's two other odds. that may become available to you because of the CNC, and that is called a negotiation for settlement and a tax bankruptcy.

And which will be covered in the next model. In the next module, we're going to talk about that. And now, final concept I want to talk about. Let's say you don't qualify for CNC. Right. You have maybe $100 a month over and above the CNC requirements, the national standards, allowable expenses and everything. But you don't have the cash to pay the debt.

Right. What's the option available to you? An installment agreement. And there's a special form that we negotiate with the Internal Revenue Service, and we say, okay, my client has $200 a month left over, so we will pay you $200 a month. And it's done. The statute keeps running, by the way. Statute keeps running. So what I'm hearing then is there's a form I can file, and the IRS gives me an automatic loan to pay them off?

Well, you want to call the loan, because yes, you're paying off that. $200 or $150, $100, whatever it is, you owe this amount of money and you're paying this off until a statute runs. So my viewpoint, the IRS has just lent me money to pay their taxes. Now, if I went to pay that off of my credit card, I'm looking at 20, 25% interest. Yeah. What's the interest rate the IRS is going to gouge me with? Less than 8% per year.

Less than 8% per year. Yeah. Why aren't more people doing this? Why aren't more people, A, being aware of currently not collectible, and B, if they don't qualify for currently not collectible, making payments at the 8% interest rate? The first thing we would encourage everybody to do is to file your tax returns and pay your taxes. So we don't encourage people not to pay their taxes to get a simplified loan.

But if you find yourself in that situation, And usually because of business disaster, divorces, emotional breakdowns, etc., again, it's not as severe as everybody thinks. There are people who actually have committed suicide because they didn't know what you and I are talking about. I'm serious. They have committed suicide and they didn't have to. And that's what really is problematic because the professionals out there are not educating the people. That's why we need to tell people their options. Do nothing.

Go find the money. Do an installment agreement. Disappear for 10 years. There's a statute of limitations on a collection. Do a negotiation settlement. Do a tax bankruptcy. Do a Chapter 13 reorganization that stops anybody from even talking to or do a CNC. Every single person will fit in one of those options.

Nobody needs to commit suicide. And Bernie, you're being very forceful on that. I know that I had a client and her husband did, in fact, commit suicide over tax issues. And from hanging out with you, I know there is always a solution. And that's the part that to me is just so devastating and so sad, is that people who don't know any better, they're driven to the brink because they don't know. If this information was only available to everybody, hopefully they would be more aware of it and they wouldn't have to take it.

that solution. You know, when I interview people who have tax problems and they come in and I always keep tissues because they've been to other people, they don't know what we know actually. And after I finish talking with them, I have something I say to them, I say whatever that 5,000 pound block of cement, you're carrying on your back, leave it with me today and go out and have a great weekend. What I know and what we're educating the people at to this series is we're going to show you how to get control back in your life and have that control give you a future. And these options and the three-part problem-solving process is the answer to how to put control back in your life. I love that. Can you say that again, Bernie? Let me show you how to put control back

in your life and have that control give you and your family a future. That's it for today as we of a tax system that works just for you. But until then, you have Tim Berry. See you next Tuesday for another episode of Tax Hacker Tuesday. This podcast is a part of the C-suite Radio Network. For more top business podcasts, visit c-sweetradio.com.