Understanding Tax Resolution: Part 1

Understanding Tax Resolution: Part 1

Have you missed filing your taxes with the IRS? Do you owe back taxes? In this edition of the Trucker CFO Podcast, we will present Part 1 of a series of episodes that will discuss the very important considerations that go into Tax Resolution. Trucker CFO Colton Lawrence will be talking with Robert Hazen about Tax Resolution. Robert is a member of the Trucker CFO Team who specializes in the area of Tax Resolution.

TRANSCRIPT

Announcer:
Coming up next on PodWheels, you'll hear The Trucker CFO Podcast which is being hosted by Colton Lawrence, The Trucker CFO.  Robert Hazen, a member of the team at Trucker CFO will be Colton's guest for this episode of the podcast.  Colton will be talking with Robert about what owner-operators and independent contractors need to know regarding all the very important considerations that go into tax resolution.  Here's a preview of their conversation...

Colton Lawrence:
A lot of people come to us thinking and hearing on the radio that they should be able to get their tax debt significantly reduced.  Let's say they've got a $50,000 tax bill and they come to us thinking that they'll be able to just wipe that out completely.  They've been sold this golden parachute idea and in fact when you really get into this situation and understand what's going on with that client, sometimes you find out that that is the case that maybe they can significantly reduce their liability but other times they can't.  It's all a function of the way the IRS calculates things.  Let's just talk high level.  Where do you start?  What should a listener do if they have not filed for several years?  They have balances that are owed to the IRS and they just don't know where to start.  What do they do?

Robert Hazen:
Well I talk to clients all day long Colton, and the first thing that we need to do on behalf of the client and also for us on the Trucker CFO side of things is we need to know what the problem is.  I'm blown away with the number of clients I speak with that have already gone to national tax firms.  That they have been charged thousands of dollars but they don't even know what the solution is, yet alone they don't even know what their problem is.  We like to break our tax resolution engagements into three different stages.  The first one being discovery, the second one being the filing of the tax returns, and the third one being the resolution.

Colton Lawrence:
Hello everybody, this is Colton Lawrence, back with you on The Trucker CFO Podcast.  And as you heard in the opening, we'll be talking with Robert Hazan from our team here at Trucker CFO about tax resolution.  Rob, it's great to have you on the podcast.

Robert Hazen:
Thanks Colton.  It's good to be here with you and all of our listeners.

Colton Lawrence:
Rob when it comes to tax resolution, the first thing that comes to my mind is, do folks even know what tax resolution is.  So why don't we start by just having you explain to the listeners today a little bit about tax resolution and some of the things that they may be experiencing out there.

Robert Hazen:
Sure. So one of the big things that we run into are taxpayers that haven't filed, haven't paid.  They have some sort of tax problem.  It could have been from multiple years.  It could be just from a couple of years.  And they could have filed a tax return and had a balance due and not been able to have the funds to pay it.  So they find themselves in some sort of a tax problem, meaning that they're not in good graces with the IRS.

Colton Lawrence:
Rob, in the years that you and I have been doing this with Trucker CFO, we've had a lot of different stories come across our desks and a lot of crazy things out there that we've seen.  One comes to my mind of a client who had actually been in hiding from the IRS for 10 plus years.  He had spent some time up on a fishing boat, hadn't filed his taxes for 20 plus years and he finally had had enough.  And I know that for most of our clients, their situations are not gonna be quite as drastic as that.  But what are some of the things that you've seen out there with some of the clients you've worked with before?

Robert Hazen:
I've been doing this for over 25 years so I think that I've seen pretty much everything at this point.  It could be something as simple as just not having the funds.  What we just recently went through with COVID and a lot of people lost their jobs.  People are always going to put other things before their taxes, whether it means putting food on the table or putting their kids through school or paying the rent.  A lot of times the taxes get put on the back burner.  I had a client who their spouse was under the Cypress structure during the 1989 earthquake and that caused a mental issue to where they were unable to, they just stopped filing taxes, it wasn't important to them.  We have some clients where they get to the end and they have a balance due that they just don't know how to handle that.  They don't have the funds available to pay the taxes.  We have sometimes where there may be divorces or there may be lost records.  So there's really a number of different reasons why people run into these problems.  But at this point I think that we between our collective efforts at Trucker CFO, I think we've seen it all.

Colton Lawrence:
I do think we've seen it all, if not all, we've seen quite a bit.  Throughout the podcast series, a theme has emerged as I've spoke with Greg Thompson, our podcast producer.  And in doing interviews with him, we talk a lot about the need for planning and for having that plan in place as an owner-operator.  To plan for your taxes.  To make sure that they are saving for their tax liabilities, paying their quarterly estimated taxes.  All of those things are great ways to avoid situations that would result in needing Trucker CFO’s services as it pertains to tax resolution, but as you and I know that is not always the case and too often in fact owner-operators will end up in situations where they find themselves not having the funds necessary to pay their tax liability.  Rob, talk to us a little bit about what other options are available to them out there.  And maybe some of the things that they should try to avoid when it comes to the other solutions they may hear on Sirius XM Radio or perhaps on cable TV.

Robert Hazen:
Sure, when people have their tax problems, they are either one of two situations.  Number one, they just don't know where to start.  Number two, they may have already started and they may have gone to one of these national firms and they may have gotten burned.  Now, don't get me wrong, there are good companies out there.  There are good firms out there, but I can tell you that there's a lot of people that have gone to these national tax firms and they've been given a sense of hope that their tax problem will finally be resolved only to find themselves still in the same situation but a few $1000 less in their pocket.  Those are really what I see quite often.

Colton Lawrence:
As we go through this series of podcasts discussing tax resolution, we'll get into more of the details about the different options that are available out there in terms of offers and compromise, installment agreement, currently not collectible.  That may not make sense to our listeners right now, but what I've found and you tell me if you agree with this or not Rob, a lot of people come to us thinking and hearing on the radio that they should be able to get their tax debt significantly reduced.  Let's say they've got a $50,000 tax bill and they come to us thinking that they'll be able to just wipe that out completely. They've been sold this golden parachute idea.  And in fact when you really get into this situation and understand what's going on with that client, sometimes you find out that that is the case that maybe they can significantly reduce their liability.  But other times they can't.  It's all a function of the way the IRS calculates things.  So talk to us a little bit about those golden parachute ideas that our clients are sold, and really what our clients should be looking for in knowing if they are going to qualify for some of those types of opportunities.

Robert Hazen:
Sure.  Well the first thing that you hear about a lot on the radio is about this Fresh Start Initiative.  So the Fresh Start Initiative was rolled out in 2008.  It was further revised in 2012.  And all that was is a simple way that the IRS would collect the tax.  We have existing programs such as an installment agreement, penalty abatement, lien filing, offer and compromise, and what the Fresh Start Initiative did is it changed the terms of those different programs.  I hear clients all the time, I want to participate in the Fresh Start Initiative.  Well the Fresh Start Initiative isn't a program.  We have to deal with something specific with the IRS.  Let's say we get done filing the tax returns and we have a balance due.  So there are a number of different options.  We can enter into a payment plan that's called an installment agreement.  We generally have anywhere between 72 to 84 months to pay that.  We can set up a partial pay installment agreement.  That's when the IRS only has 10 years to collect the tax.  So maybe we're in year seven or eight of that 10 years and we just need to set up an installment agreement to let that 10 year statute blow and for that remaining tax to fall off.  We're accomplishing the same thing as a settlement.  The tax is going away but we're just going about it a different way.  Sometimes if the taxpayer is unable to pay, we would need to provide some financial statements.  And based on their income and expenses, they just aren't able to pay.  So the IRS could put them on what's called a currently not collectible or hardship status.  The nice thing about that is that they won't collect the tax for a period of time.  They usually review the financials every year but they'll leave them alone.  That means that they're not going to collect, they're not going to levy the bank account.  They're not going to garnish the wages.  So it's a nice way to have peace of mind knowing that the IRS isn't coming after you.  The other way also that you mentioned is the offer and compromise, and that's kind of the golden darling in the industry.   The offer and compromise is settling for less than you owe.  And what happens there is we need to go through and take a look at the financial situation.  What are the assets?  How much cash is there?  Is there retirement accounts?  How much equity do we have in a home?  Are there other things like collectibles that would go into the asset computation?  The next thing is, how much do you have available on a monthly basis?  The IRS takes a look at the total income and then they have local and national standards that are applied to that particular taxpayer based on the size of the home.  Based on what county they live in.  And then they take a look at how much is available, combining those two.  And that's how the offer and compromise comes up.  There is no set rate of say 10% or 10 cents on the dollar.  It's an actual computation based on that particular taxpayer's situation.  So that's why we don't know until we actually do the financial analysis if they're going to qualify.

Colton Lawrence:
Rob, what I hear you saying is that for an individual who perhaps has been sold this golden parachute of an offer and compromise.  They need to be very aware and perhaps wary of the fact that they may not be able to get all or even some portion of their tax liability forgiven by the IRS.  They may be able to but there are some very specific things that they're going to have to show. And if they have any kinds of assets, cash, guns, retirement accounts, they're probably not going to qualify for that offer and compromise.  Is that what I hear you saying?

Robert Hazen:
Yeah, that's very true. But the thing that's nice about the different options that we have out there is, we may not be able to do an offer and compromise, but there may be another option out there, whether it may be penalty abate, currently not collectible, partial pay installment agreement.  So we may be able to accomplish the same thing by reducing the taxes, but we may not end up filing an offer and compromise.  So we end up in the same spot in a lot of these cases but it may not be through specifically an offer and compromise.

Colton Lawrence:
I think the most important thing for our listeners to understand is that if they have tax situations that are unresolved, the best thing that they could do is to talk with us, get a plan in place, and we will talk more about what those plans look like.  But first and foremost get in touch with Trucker CFO and we'll get them in touch with you.  In your evaluation with them you can put a plan in place and decide which of these different options they will qualify for.

Robert Hazen:
Yeah Colton, that's absolutely correct. The thing that is sure about these IRS problems is that they're not going to take care of themselves.  They're not going to go away themselves.  So give us a call.  We'll figure out how we can help you and give you a hand getting these tax problems resolved.

Colton Lawrence:
Yeah as I like to say, we do not want our listeners or our clients to take the head in the sand approach or what I like to call the ostrich approach.  Definitely we want them to give us a call.  So with that Rob, let's kind of jump to the start.  We've talked kind of high level about some of the options that are out there for them.  And we're gonna go into more detail in subsequent podcasts about those different things, whether it's a payment plan or an offer and compromise or currently not collectible.  We'll have further conversation on all of that.  But for right now let's jump up and let's just talk high level, where do you start?  What should a listener do if they have not filed for several years?  They have balances that are owed to the IRS and they just don't know where to start.  What do they do?

Robert Hazen:
Sure. Well I talked to clients all day long Colton and the first thing that we need to do on behalf of the client and also for us on the Trucker CFO side of things, is we need to know what the problem is.  I'm blown away with the number of clients I speak with that have already gone to national tax firms that they have been charged thousands of dollars but they don't even know what the solution is yet alone, they don't even know what their problem is.  We like to break our tax resolution engagements into three different stages. The first one being discovery, the second one being the filing of the tax returns, and the third one being the resolution.  The first one of the discovery that's kind of where do I start?  And what we'll do is we with every client, is we get a limited authorization.  The limited authorization allows us here at Trucker CFO to contact the IRS on our taxpayers behalf and to find out what is the problem.  We do what's called a compliance check.  And when we call the IRS, we're going to find out a number of things.  Number one, are there any balances due. Number two, are there any unfiled tax returns?  Number three, if there are any unfiled tax returns, we will order the wage and income information which is the W-2s, 1099s.  The information needed for us to file the tax returns.  Number four, we’ll find out is, how much longer does the IRS have to collect.  So these are all tools for us to help to figure out the resolution side of things.  So once we have that compliance side of things, we now know which tax returns need to be filed.  I would say a majority of our clients have unfiled tax returns.  This is an issue because the IRS won't talk to us until we have all tax returns filed. After we've spoken with the IRS, After this compliance check, at that point we're able to put together a plan of how we're going to get this case resolved.

 

Colton Lawrence:

Rob, that's a great summary of what Trucker CFO can do to help our listeners if they are in a situation like this.  But what happens in a case where folks don't actually have their records.  Let's say they don't have their W-2s or their 1099s and they're just missing all of that paperwork that would normally go into the preparation of a tax return and that we will be asking of them.  What then?

Robert Hazen:
Well, part of our compliance check is we will be requesting any tax transcripts from the IRS.  If there was income that was reported to a taxpayer, Social Security number, we would be able to pull the W-2s the 1099s.  If the taxpayer, one of our drivers was using an EIN or a business name, if we had that business name and we have that EIN, we can request those 1099s that were issued to that business name as well.  In some extreme cases we may need to rebuild the records.  We can do that from bank statements, we can do it from industry standards, we can do it from the IRS transcripts.  So we can come up with the information that's needed legally and ethically based on experience, based on bank records, based on industry standards that will help the taxpayer prepare that tax return.

Colton Lawrence:
Rob, what I think a lot of our clients don't realize is that not everything is sent to the IRS.  You have your information from the motor carrier such as income that is sent to the IRS and that's what shows up on a 1099.  In the event that you're a company driver or employee of another company in general, you can have that W-2 that obviously is going to have tax withholdings.  But when it comes to being an owner-operator, a lot of that information such as your fuel, expense and truck payments and interest and all of these operational expenses that go into being an owner-operator,  that is up to the taxpayer to provide and justify that information when it comes to the tax return.  And so in the case where a client doesn't have that information.  What I hear you saying is that we can go back to things such as bank statements or credit card statements and use that to kind of rebuild the picture of that given year in a way that allows us to create or prepare the tax return. Is that accurate?

Robert Hazen:
Yeah Colton, that's absolutely correct.  One of the things that's nice about dealing with the Trucker CFO, someone that specializes in the trucking industry, is we know what should be on a tax return.  We know what the fuel should be based on a percentage of revenue.  That's usually gonna be around 30%.  I have yet to speak with the driver who didn't know how much his weekly lease payment was.  We know every driver out there has a heavy use tax that's $550.  So there's a lot of expenses out there that we can go back into just based on historical data.  We can go back and look at what were the fuel prices during this particular time period that we're trying to reconstruct.  So that's one way that we can certainly recreate those records.

Colton Lawrence:
So for our listeners out there who have not filed tax returns and are thinking, I just don't have the information.  I don't even know where to start.  They can get in touch with Trucker CFO.  Through this compliance check with the IRS and through the rebuilding of records that they may have lost or don't have.  What I'm hearing you say is that we can put together a complete picture of what that client's tax situation looked like in a given year.  We can then prepare the tax returns.  But what happens then Rob if after we prepare the tax returns or maybe the listener already had their taxes prepared but they're just sitting on a liability or when we do the tax return we find out that they've got a large liability due.  What then, what would be the next steps for clients in that situation where they can't pay that liability after the tax return has been prepared?

Robert Hazen:
Well the first thing we want to do is make sure that we file those tax returns. The IRS is going to charge penalties.  They have what's called the late filing penalty which is 5% per month with a cap of 25%.  So if we can stop that late filing penalty from accruing, that's a good thing.  So the first thing we want to do is file the returns.  Then we need to take a look at the resolution.  What's going to be the best way to keep the IRS out of the bank account, keep them away from the settlements from your carrier, and allowing our driver to continue to function without looking over their shoulder at the IRS.  That's where some of the resolution programs come into play.  Could be an installment agreement.  It could be currently not collectible.  It could be penalty abatement.  It could be the settlement that we talked about, the offer and compromise.  So those are all different options that we can work on once we have balances due.

Colton Lawrence:
Yeah as I mentioned, we're gonna have subsequent podcasts on each of those topics.  But really what I hear you saying is what I mentioned just a moment ago and that is that the worst thing our listeners could do is take that head in the sand approach because the longer they sit on those issues, whether the IRS has contacted them or not, the longer they take, the more expense they're going to accrue.  I heard you say 5% per month with a cap of 25%.  So if somebody is in a situation where they owe $50,000, 25% can add up to be quite a bit.  We don't want them in a situation where they are paying any more than they have to pay in tax liability.

Robert Hazen:
Yeah Colton, one thing that I find that makes me a little bit nervous is right now the IRS just isn't collecting.  We have a couple of reasons for that. Number one is they don't have the resources.  Every year, Congress cuts their budget so they just don't have the resources to go out and collect.  The second thing is a year ago we were all experiencing Covid.  Then the IRS along with many other businesses and individuals shut down.  As a result of that they stopped collecting.  So there were no notices that were being sent out. There were no levees, there were no liens.  And so I think right now a lot of people are thinking, well I haven't heard from the IRS so my problem must be resolved.  There's nothing further from the truth.  I've noticed that the IRS is starting to send out letters again.  They're starting to enforce collections.  I have a client last week that received a levy to his carriers.  The IRS is coming again.  So these problems that are out there, whether it may be unfiled returns or balances due, they can't be ignored.  Right now is a great time to get this taken care of.  But the IRS is coming back again.

Colton Lawrence:
Rob, those are all very good points.  And it leaves me wanting to ask the question for our listeners.  How much do you charge for your services?

Robert Hazen:
The golden question.  How much do you charge?  This is a very important question and it's one that needs to be answered upfront and honestly.  One thing that we do Colton, is once we have an idea after pulling transcripts, we’ll have a very detailed idea of what needs to be done to resolve this case.  At that point, I'll quote the fees to the client.  If it's acceptable. we'll put it in an engagement letter.  So both parties know exactly how much is going to be charged for this engagement.  The thing that I find is crazy is I talk to clients again that have already spoken with the national firms.  Many of the national firms, they have reps on the phone that are just paid sales people.  So they have no idea what is the problem.  But they do know how much they have to sell to get their commission. I look at this kind of as an example when we go to a doctor's office, when we walk into a doctor's office and the doctor starts prescribing something for an issue that he doesn't even know what the problem is.  What if I walk in there with a knee problem and all of a sudden he's putting my arm in a splint.  We need to find out exactly what is the problem, diagnose it, and then we'll quote the fee.  One thing I will tell you based on experience here at Trucker CFO and knowing what the competition charges, we’re very competitive with our fees.  Very rarely, have we been beat with our fees and one of the reasons is that we don't have these outrageous marketing costs.  We're not on Sirius Radio.  We're not on cable TV late at night so we can pass some of those marketing savings onto our clients by reducing the fees.

Colton Lawrence:
Rob, I'm glad to hear you say some of that because one of the biggest frustrations I have as I'm talking with clients or prospective clients that have these tax issues is when I hear them say they've already engaged with one of these national firms.  They've put out thousands and thousands of dollars and yet they've not seen any real movement on a resolution to their problems.  So I want all of our listeners to know that they can come to Trucker CFO.  And the first thing we're going to do is diagnose their problem.  Put together a plan and then quote them a fee.  And that fee is going to be very reasonable and it's going to be a fee that we can work with them to get these issues taken care of and get the IRS off of their back.

Robert Hazen:
Yeah Colton, that's one of the things that I do like working with clients here at Trucker CFO.  We’re able to charge a fair fee.  We're able to sleep at night knowing that we're not gouging the client and turning out a good product as well.

Colton Lawrence:
With that being said Rob, who is it that's going to work on a particular account?  What can the listeners expect if they find themselves in this situation when they make that called Trucker CFO, they get their problems diagnosed.  Who is it that they're going to be working with? 

Robert Hazen:
Let me be very specific.  When we're dealing with a client who has a tax problem and a tax problem means that they need to have a representative speak to the IRS on their behalf.  There's only a few different designations that can do that.  It can't be a tax preparer only, it can't be an office assistant.  It can't be a sales rep.  Per the IRS rules, it has to be a CPA, an enrolled agent, or an enrolled actuary.  And those are all governed by IRS rules.  Unfortunately, a lot of these individuals that are answering the phones at the national tax firm, like I said, they're just paid sales commission people.  They have a title of a tax consultant but they're not authorized per IRS rules to represent a client before the IRS.  So one thing I always tell clients is who will be working on my case.  There may be an attorney in the back office that you'll never speak to.  There may be a CPA that the client would never speak to.  Here at Trucker CFO, you're going to be speaking with the licensed CPA, licensed enrolled agent along with our team assisting to get the tax problem resolved.

Colton Lawrence:
Rob, thank you very much for the time you spent with us today.  We appreciate all the great information that you've gotten out to our clients.

Robert Hazen:
Thanks Colton, it was fun.  Look forward to speaking with you about this and more tax problem issues in the future.



Colton Lawrence:
And for any of our listeners, I recommend you go take a listen to our many other podcast topics that are out there that are also now streaming on all of the major podcast platforms.

Announcer:
Thanks again for listening to The Trucker CFO Podcast.  As always, please keep in mind that every tax situation is unique and the perspectives shared on this podcast should not be considered as tax advice.  If you have questions regarding your specific tax situation, you should consult a qualified tax professional.  

Before we close out the podcast, we would like to talk to you about Trucker CFO.  Do you have a team of tax, accounting, and business advisory professionals who understand the complexities of the trucking industry?  There are a number of ways you can contact the team at Trucker CFO.  Visit the company's website at TruckerCFO.com.  From the homepage, you can fill out the contact us form which will send an email to a Trucker CFO representative.  Also through the Trucker CFO website, you can connect to the company through the find a time to talk button and set up an appointment or you can use the chat feature.  If you would rather email Trucker CFO directly, you can reach out to the company through the following address, info@truckercfo.com.  That's info@truckercfo.com.  You can also call Trucker CFO toll free at 1-800-533-4230 and hit option two for sales.  The toll free number once again is 1-800-533-4230 and choose option two. 

Once again, thanks for connecting with us on PodWheels .  You can stay up to date on the latest from PodWheels by downloading the PodWheels app.  It's available in the Apple Store and on Google Play.  Just search PodWheels in either store and download the app.  

Be on the lookout for the next edition of The Trucker CFO Podcast right here on PodWheels.  As always, Trucker CFO and PodWheels send our best for your safe travels out on our nation's highways.  And finally, we would also like to remind you that in addition to staying safe, you take the necessary steps to also stay healthy as you do the critical work of keeping the American supply chain moving.

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