Skip to content Your Guide During Tax Season Gary Keesee May 26 · 24 min ...more
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Fixing The Money Thing with Gary Keesee will educate and equip you to walk out your God-given purpose and provide insights and solutions on the topics of faith and finances.
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0:00 We're talking about taxes and your money today on fixing the money thing.0:06 It is tax season. I know that's your favorite time of year, but, gosh, we have a great guest. Dan, the IRS. That's is that a good topic? I mean, you know, people0:18 don't wanna talk about the IRS, but they don't wanna pay taxes either. So we gotta help them understand what's going on.0:24 You're right. Nobody wants to deal with the IRS, but everybody has to deal with the IRS whether you like it or not.0:30 What do we need as a consumer need to know about what's going on at the IRS right now?0:35 This employee retention credit is is the mother of all complex elements of the tax code.0:41 Gary and his friend, tax litigator, author, and executive director of the Tax Freedom Institute, Dan Pilla, discuss what you need to know for this tax season today on fixing0:53 the money thing.0:56 I'm Gary Kasim, and for 9 years, we lived in a chaotic, stress filled, visionless life. I cried out to God. He said, I want1:08 my people free.1:09 America's financial coach, Gary Kasim, shares the kingdom principles that changed his life, defeated his death, and set him free.1:20 You'll never find your destiny until you fix the money thing. Hey. Welcome to fixing the money thing. I'm Gary Kasseed, and we've got some1:32 amazing things to discuss today. It is tax season. I know that's your favorite time of year, but, gosh, we have a great guest. Dan Pilla has been here every spring with1:43 us, I don't know how many years, long time, to help us prepare for tax season. So many things changing. Let's bring Dan on right now. Dan, how are you doing?1:53 I'm well, Gary. How are doing? It's1:55 good1:55 to see you it's been a Good.1:56 Well, IRS, that's is that a good topic? I mean, you know, people don't wanna talk about the IRS, but they don't wanna pay taxes either, so we gotta help them understand what's2:08 going on.2:09 Yeah. We we do need to help people, Gary, because you're right. Nobody wants to deal with the IRS, but everybody has to deal with the IRS, whether you like it or not. This is the only area of the law, Gary, that touches2:20 every American, and it doesn't make any difference how old you are. You could be a little bitty baby, 1 year old. You could be a senior citizen, 99 years old, and still have a tax obligation. The obligation to deal with2:31 your tax return filing and payment has nothing to do with your age. A lot of people think, well, I'm a senior citizen, I don't have to worry about it. Not true. It depends on what your income is. It's all income driven.2:42 Yeah. So we all have to be aware of this stuff.2:44 That's right. Before we get started too long, Dan, just give me a little bit of your credentials. I mean, you've been doing Sure. You're an IRS attorney or tax attorney, I should say, taking on the IRS on behalf of the2:56 of the consumer for how many years?2:59 Yeah. So it's north of 45 years now, Gary. Just for clarity, I've never worked for the3:03 IRS. I fixed that.3:05 Said, friend, Gary, don't accuse me of having I3:09 caught myself. I caught myself. Yeah. And how many books have you written about the IRS? How many books have written about the IRS?3:14 I've written about IRS. So How many? I've spent I've spent 45 years as as as more than 45 years as as as as a as a litigator working on3:26 behalf of individuals and small businesses, specifically in the area of taxpayers' rights issues, problems resolution, and taxpayer and IRS abuse prevention and cure. I've written 14 books on dealing with3:38 the IRS. I've written dozens of research reports on tax policy issues. And I've written more than 1000 articles on various aspects of the IRS over the3:49 years. I'm regularly published by National Review. And I do hundreds of interviews a year on media across the country, helping people cope with the Internal Revenue Service. So Gary, I don't4:01 prepare tax returns for a living. I get into the act after the IRS calls the return into question, and then I deal specifically in this problems resolution world.4:10 Yeah, well, thank God for people like you, Dan. I know we've been friends for a long time. I think it's going on 26, 20 don't know how long. It's been a while.4:18 It's got to be north of that because we did that. Radio shows together back when you were on the radio in the mid-90s.4:25 Yeah. Yeah. That's right. Well, anyway, quite frankly, IRS scares people. Taxes scare And I've heard you say many times, the tax code is how many words or how many pages is4:37 it?4:38 Well, it's about 14 it's about 4000000 words in length, and it was changed more than 6000 times just since 2001 alone. So this is what the problem is.4:49 Yes.4:49 You know, it's 1 thing to have a complicated tax code. No matter how complicated something is, Gary, if you spend enough time on it, you can work your way through it and get your arms around it. The problem is we have a5:00 tax code that's constantly changing. So not only is it complex, it's changing all the time. So once you think you understand something, they change it. The rules are different. Now you gotta start over again.5:11 Yeah. I know you also train CPAs or people that prepare taxes too about what you've learned. But today, let's focus on, first off, bring us up to speed. What changes?5:23 What what do we need as a consumer need to know about what's going on at the IRS right now?5:28 Yeah. That's a good question. And let's focus on businesses in particular. You are probably aware, Gary, of the Employee Retention Credit was part of the CARES Act that was passed in March5:40 of 20 20. The Employee Retention Credit was a tax credit that was granted to businesses who kept employees on the payroll during the period of these government shutdowns that5:52 started in early 20 20 and rolled through much of 20 21. The employee retention credit's a refundable credit. And what that means is that you actually get more money back from the6:04 government than you paid in as a business in employment taxes in the first place. And this was a huge, a huge windfall for businesses. Millions of businesses collected6:15 hundreds of billions of dollars. I think I think the treasury allocated about 8 8 50000000000 dollars to fund this employee retention credit, and businesses all across the country claim that6:27 credit. Now, Gary, you probably remember that almost overnight, these marketing companies showed up on the scene offering to make the employee retention6:39 credit claims on behalf of businesses in exchange for a percentage of recovery,6:43 Right, right.6:44 So these companies were out there all over the place offering the services of preparing their tax returns to get the credit. Well, it turns out, Gary, that a lot of these businesses6:56 were submitting claims, a lot of these marketing companies were submitting claims on behalf of businesses that did not qualify. So the IRS started to panic about this in the summer7:08 of 20 23. I think it was August of 20 23. They announced that we're gonna slow down our processing of these credits. We're gonna start taking a more careful look at these things. Then in September of 20 23,7:20 they froze the processing altogether, and they stopped processing these things. Now we're at the point, Gary, where there's 2 programs that the IRS initiated. 1 program is a withdrawal7:32 program. It allows companies to actually withdraw the employee retention credit claim they filed if they haven't been paid on it yet. And the other program allows companies what's called a voluntary7:43 disclosure option where they can go in there and say, look, if we were induced by a marketing company to file a claim that's not legitimate, we wanna withdraw that claim also. And so that gives them an opportunity to pay7:54 back the credit without penalties and interest. So businesses out there that made an employee retention credit claim need to look at what they did. It's not just a cut and8:06 dry thing because there's all kinds of We talked about complexity a minute ago. This employee retention credit is the mother of all complex elements of the tax code. First of all,8:18 the credit started, as I said, March of 20 20, March of 20 20. It was changed 3 more times and then finally repealed retroactively. And every time they changed it, they8:30 changed the rules for the credit, Gary. So this thing is monstrously complex, but we have figured out how it works. So my point8:42 is that businesses that have claimed this credit need to take a look at what they did because there is a potential. I'm not saying it's absolutely true, but there is a potential that they made an incorrect claim that8:53 needs to be looked at.8:54 Now you just said they should take a look at what they did in the same sentence. You said there's nothing more complex in the world. How are they going to know anything about if they did it right or9:06 wrong?9:07 Well, that that's, you know, that's a good question. And and the typical business person does not know whether they did it right or wrong. And that's where counsel comes into play. There's plenty of competent counsel out9:17 there, Gary. Attorneys and and and accountants and enrolled agents that have a lot of experience with the employee retention credit from a tax professional standpoint, not from a marketing standpoint. In other words, you9:29 want to deal with professional counsel, not a marketer. You want to deal with somebody that's got experience in the area as a tax pro, not somebody who's hustling a refund claim to get a percentage of the9:41 recovery that they get on your behalf. That's the difference here. That's who you need to consult to get some insight into this thing.9:49 Now assuming that a business has not filed that yet, and there are competent people, when does the deadline occur that they would not be able to file that?10:01 Yeah, that's a good question too, because what we're talking about here is we're talking about amending employment tax returns on which the credit is claimed. All right, so now the employment10:12 tax year 20 21 was the last year for which an employee retention credit was available. It was the first 3 quarters of 20 21. In rare10:24 circumstances, the fourth quarter of 20 21 is also available. So the way the statute of limitations works is it starts running with the filing of the last tax return. I'm talking about10:35 employment tax returns forms 9 40 forms 9 41 here now. So that would have been filed in January of 20 22. You got 3 years from that date. So that would bring us to10:47 January of 20 25 in which to file an amended return for any of those quarters in 20 21. So that's when the deadline for making the claim would be.10:58 Okay. Any advice on how to recognize a reputable CPA or somebody that could handle that? Is there something I should look for?11:09 Yeah. Yeah. That's a good question. And let's say let's answer that question by by by just listing a series of questions. You know, what experience do they have in making employee11:21 retention credit claims? Have they done this before? Have they actually read the statute themselves, or are they looking at other people's analysis of the statute? 1 thing that I try to do, Gary, and all the things that11:33 I write is I refer or is I rely on primary source material. I never rely on secondary source material. So by that, I mean, I'm not looking at somebody else's opinion. I read the statutes. I read the11:44 regulations. I read the internal revenue manual. I read the court cases. These are primary source materials. So you wanna deal with somebody that is focused on understanding primary source authorities so11:56 they know exactly what's coming out of the horse's mouth. And we don't worry what's coming out of the other end of the horse, if you know what I mean. And so that's gotta be the focus. You do12:08 not wanna be dealing with a marketing company. You don't wanna be dealing with somebody that's got the call center and they're saying, Oh yeah, qualifying people over the phone. You don't wanna be dealing with somebody12:18 who's qualifying people over the phone. Your qualification needs to be based on your materials. And that's the other important focus that somebody needs to look at in determining whether they're dealing with a12:30 competent professional or not. Are they looking at your paperwork? In this case, are they looking at your wage statements that you paid to employees? Are they looking at the12:42 activities that you were involved in? Are they looking at the manner in which you operated your business? These things all have bearing on whether that ERC claim is legitimate.12:50 Okay. Yeah. We do hear that on the radio a lot. Of course, I run into it quite often. People I've run into a lot of people that have heard of the IRS kind of slowing down, and they're13:02 afraid to touch it. Know, they're13:05 I'd rather just pay my Yeah. Yeah. And that's another common problem. Now that the IRS has slowed down the processing of these things, there's there's some pros some people out there say, oh, I'm not gonna touch this.13:16 I'm not gonna look at that. Well, look at it. It's it's not kryptonite, and and it you know, you you can touch it without dying if you know what you're doing. That's the key is to know what you're doing. Now an an13:26 another thing that that people need to be aware of here, I don't share this say this to scare folks. I I don't I don't as you know, I don't scare people for a living. I I give people hope and and and a and a and a way13:37 out of any situation. But we do need to know that the IRS is very carefully looking at these ERC claims. So I talked about the 2 programs. The number 1 program is the withdrawal program. If13:49 you file a claim that is questionable, that turns out not to be accurate, and the IRS has not paid you on that claim, you can withdraw the claim, and the IRS's attitude is no14:01 harm, no foul. So we just withdraw the claim, we're good. If they paid you on the claim and it turns out that they shouldn't have, you can involve yourself in what's called the voluntary disclosure14:12 program that the IRS has set up. That program allows you to step up to the IRS and say, look, guys, we made a claim we shouldn't have made. They don't really even ask for an explanation. You just14:24 admit you shouldn't have made the claim. You agree to pay back 80 percent of the claim, Gary. So if they paid you 100000 dollars, you pay back 80 grand with no14:36 penalties and no interest. And again, they call it even. All right? So there's no penalties there. So this is a good opportunity. This is an excellent opportunity for people to correct this situation without getting14:48 ground into powder as a result of the mistakes they made. Now that said, the IRS has been very aggressively setting up an audit program to look at these14:59 claims. So if you think you've got a problem with an ERC claim, don't wait to be audited. Have it looked at now and take advantage of 1 of these 2 programs if you need to.15:11 Okay. Okay. That's good. Let's change topics now. Dan, what else what's happening elsewhere in the IRS?15:19 Well, here's another thing that people need to know about, Gary. Starting in the middle of 20 20, again, in the teeth of the COVID shutdown, of course, you15:31 probably remember that the IRS itself shut down for about 6 or 8 weeks during the summer of 20 20 and got massively, massively backlogged in terms of managing their letters and15:43 processing tax returns and so on to the point, Gary, where there was 35000000 documents in the Internal Revenue Service piled up in their mail rooms that were not getting processed. The IRS was just15:55 overloaded with this stuff. So they actually shut down their collection notice machine. They turned the switch off on the collection notice machine and they did that, I believe it was about July of 20 20. And16:07 they said, you know, we're getting so many letters back from people that we can't process that's gonna lead to further problems. So let's just shut down this notice program. So there's a series of16:18 preliminary notices that the IRS stopped mailing out in the summer of 20 20. Now, fast forward to the summer of 20 21, the IRS was still overloaded with16:30 documents that they couldn't process. And so they suspended the mailing of a additional series of collection letters. So now we've got about 12, 15 or so16:42 collection letters that the IRS has completely stopped mailing out. And they stopped mailing They continued that pause period, let's say, where the collection machine was16:54 turned off through the rest of 20 21, all of 20 22, and most of 20 23. Now in January 20 24, the IRS announced that it is turning that machine17:05 back on. So if you've got a delinquent tax liability and it's been sitting there and you're saying to yourself, the IRS forgot about me. I haven't been getting any notices. Well, what friends? They didn't forget about17:17 you. They just turned the switch off on the mailing machine. That switch is now going back on. The letters are starting to come out and you are going to be back in collection. So now is the17:29 time to take advantage of an opportunity to negotiate with the IRS, especially if you've got a tax debt, Gary, that you owe and can't pay. A lot of folks out there that have delinquencies have17:40 very, very significant tax problems. 60 percent of the people that owe money to the IRS owe more than 10000 dollars And for folks that owe 30, 5100 grand, might17:52 as well be all the money in the world. So here's an opportunity now to take advantage of this lull to get your situation resolved through some kind of a settlement program. So that be18:05 something that I would very seriously consider if I had this delinquent tax problem.18:09 I I know you work with people all the time that do have those kinds of problems. But, you know, let's talk about before the problem. I mean, how can people avoid getting themselves in that18:21 situation?18:23 Well, yeah, that's a good that's a good question. Now let's talk about small businesses because, small businesses probably more than anybody else, Gary, are the ones that are in trouble with the IRS. And and the reason18:33 small businesses are in trouble with the IRS is because well, there's a lot of reasons. But the chief reason, in my opinion, is that small businesses don't have the luxury, if we can call it a luxury, of wage18:44 withholding, where they don't have money coming out of their paychecks every week or every month that gets automatically paid to the IRS by somebody else So you don't have to worry about writing a check to the IRS. As a18:55 matter of fact, you know, about 80, 85 percent, roughly 80 percent of the people in America get a tax refund at the end of the year precisely because they have that money coming out of their paycheck every month, and19:05 they don't have to write a check to the IRS. In fact, people overpay their taxes, which is a whole different mistake, you know, that we can talk about as well. But as far as small businesses are concerned, they don't19:16 have that luxury, Gary. That money's not coming out of their paycheck. They have the responsibility to write that check on a regular basis. Now, a self employed person is supposed to write a check to the IRS at least19:26 quarterly for estimated payments. Well, most small business people don't do that because as my dad used to say, was self employed all his life. When you're a self employed19:38 person, 1 month you eat the chicken, the next month you eat the feathers. The income is up, down, up, down, and then for a lot of small businesses, it's unpredictable. And so that becomes a difficult handicap.19:50 How much do I send in? How much don't I send in? I need the money for the rent this month. I need the money for the kids braces, whatever the situation may be. A small business person needs to get in the habit20:02 of producing a profit and loss statement on a month, at least a quarterly basis. I suggest that it should be done on a monthly basis so you can see exactly where you're at as far20:14 as your business profit is concerned. Your estimated payments need to be based on your profit. So if you're doing the profit and loss statement at least quarterly, if not monthly, then you take the big20:26 swings out of the situation. If your income is high, you pay a little more to the IRS in estimated payments. If your income is low, you pay a little less. But the point is that you're making the estimated payments on a20:38 regular ongoing basis, and you don't get yourself into the problem of the big delinquency. What blindsides small businesses is they go into their tax preparer's office in March. They dump all20:50 their documents on the desk. The preparer puts together the tax return, and the preparer says, I got good news. Your tax return's all done. Come on in and pick it up. Well, they're e filing these days. But the point is21:00 that the guy goes in to sign the tax return, and he's staring at a 15000 dollars tax bill. Well, I didn't know I was gonna have a 15000 dollars tax bill. Why do I have a 15000 dollars tax bill? Well, the reason is21:11 because you haven't been making estimated payments along the way, taking small bites of the apple over the course of the year and not trying to swallow the whole thing in 1 bite in April. That's the problem that small21:23 businesses have. So we gotta get in the practice of making this profit and loss statement on at least quarterly, if not a monthly basis, and making the estimated payments as you go along. You don't have a21:35 responsibility to overpay your taxes, but also you get penalized for underpaying the taxes. So you need to get your arms around what your profit21:47 and loss situation is. Now let me talk about another mistake that small businesses make, and it grows out of this first 1 we just talked about. Guy walks into his accountant's office. He's looking at the tax return on21:57 the desk. He owes 15 grand. He doesn't have the money. Well, I'm not gonna file the return. Give me an extension. This is the mistake they make all the time. They'll say to their accountant, give me an extension, I'll22:07 have the money by October. Okay, accountant files the extension, they don't have the money by October. All right, because now we are 9 or 10 months in to the next year's tax22:19 liability, right? You got a tax liability every single year if you're earning income. So I owed money for last year. Here it is October of the following year. I haven't paid last year. I haven't paid anything for this22:29 year. Now I got 2 problems instead of just 1. And so they don't file the returns. And this pattern of non filing starts and it grows and it grows and it grows. And before you know it, they've got 6, 8, 10, 12 tax returns22:41 that are not filed. I'm dealing with a guy right now, a client that I got on my desk, hasn't filed tax returns, Gary, in the last 10 years. And this is exactly the model that he followed to get himself in this kind of22:52 trouble. And so I laid out a whole plan for him that's gonna focus on getting him, getting this situation turned around and where does it start? It starts with estimated payments in 20 24 based on23:04 20 24 income and expenses. We're what, 5 weeks into the new year, 6 weeks into the new year, Alright. Already, we can make a profit and loss statement based on the first month of his operations and make23:16 a small estimated payment for 20 24 and start to get him out of the woods. This is the thing that we gotta do is get him on track to get out of the woods. So small businesses need to wrap their heads around this.23:26 Yeah, it's good. You know what, Dan? We're gonna have to continue this to the next program tomorrow because we've just scratched the surface. But great information, Dan. Great information. We'll be right23:38 back here in a minute. Tomorrow, we carry this on. But I wanna thank all of you for joining us here at Fixing Money Thing. And, Dan, before I actually hang up with you right here, what's the name of your book for small23:48 business? Can you tell me about that real quick?23:50 Yeah. The book is Dan Pillow's Small Business Tax Guide. It's available at taxhelponline dot com. That's taxhelponline dot com.23:58 Excellent. Yeah. It's great, great book.
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