The Mark Perlberg CPA Podcast
The Mark Perlberg CPA Podcast
EP 034 - Protecting Yourself from Back Taxes & the IRS w/ Michael Raanan
Join us with former IRS Agent Michael Raanan, to discuss how to protect yourself from the IRS! We will discuss what actions may increase your risk of audit, how to protect yourself in an audit, and how to resolve outstanding tax liabilities.
Former IRS Agent, Michael Raanan, MBA, EA, is known as the most sought after IRS Back Tax Expert in the tax relief community. He's famous for efficiently resolving IRS back taxes while protecting taxpayers and their assets, all without using pressure or scare tactics.
He's the proud founder of Landmark Tax Group™, and in 18 years has personally resolved over $500,000,000 in back taxes throughout the country.
To learn more about Michael, go to www.landmarktaxgroup.com
Welcome everybody. We are here joined by Michael Ronan, and he specializes in dealing with the IRS. He's a former IRS agent and IRS enrolled agent. Former IRS auditor. He helps protect people from back taxes and from the IRS. We often get asked questions by our clients on the risk of different activities and what they need to do to protect themselves. We're bringing in a specialist to answer some of your questions. He's going to answer some of the questions we get from a lot of our clients that I'm going to ask you. It's going to be a wonderful conversation. Michael, can you introduce yourself in 60 seconds or less?
Michael Raanan:Yeah, I appreciate that, mark. Thanks for the intro. One slight variation there. So former IRS collector, not auditor, I don't think people are going to like me anymore as the collector, but a former collector I was doing that.
Michael Raanan:My quick background is I graduated college just after 9-11 happened. I was looking for work and jobs were very scarce at that moment in time. I went to numerous job fairs trying to find something that would be a good fit. My degree at that time was management information system, so it was essentially information technology and business. I ended up going job fair job fair, being a diligent person that I am. It was hard to find something in general, let alone something that I was interested in and something that will have a stepping stone. So I was at another job fair, yet again in the corner. I was just going diligently booth to booth In the corner there were these two folks standing up in these dark suits. So I went over there and of course it said the dreaded letters that we all don't like to see, which is IRS. I was chatting with these two agents and they said at midnight that night that there's an introduction like test or examination online. That's about to close. They're doing a mass hiring of like 3,000 agents. So I ended up going as desperate for work we needed to find something because I'd been out of school a while. And then I've gone that night, taken the 150 question quiz, ended up getting rated whatever in order to qualify, and found myself flying across country from Florida to California to have an in-person meeting with the IRS and to go through stage two of their process. So I ended up passing that and I was eight years in the belly of the beast that the IRS is a collector, like I mentioned, knocking on doors, dealing with individual taxpayers, businesses, trying to figure out what caused these liabilities and then how to prevent them from owing in the future, which is basically assisting them.
Michael Raanan:How do you end up in this mess? But, more importantly, what can you guys do, as a business or as an individual, to prevent this problem in the future? Because, believe it or not, the IRS doesn't want to have collection cases. They don't want people owing. They actually want adequate withholding. They want people to make their estimated payments or, if they're running this, some issue where they owe no big deal. They just want the individuals or the business to set up a resolution of some sort, which I'm sure we'll dive into. So I was eight years doing that in the belly of the beast in California. Then, after eight years, I ended up starting my own practice, and it's been 12 years working with taxpayers, helping them resolve their issues.
Mark Perlberg:Gotcha. Now what would you say is the greatest misperception among people that you wind up helping? So they come to you with a problem and they probably have no idea what they've been doing or what they could have been doing. We're some of the big, key components and key items that you're able to help them out with.
Michael Raanan:Yeah, I would say the number one thing Lark is actually dealing with. The IRS is more simple than people think. I know that's a little bit counterintuitive, but the IRS has a finite amount of options. For example, when you're in an audit or when you're in a collections case, when you owe back taxes to the IRS, the IRS has literally a finite amount of options to work with because the IRS really doesn't make a decision. The IRS was given a set of instructions from our good friends in Congress saying here, irs, these are your instructions, this is your manual, follow the manual. So it's not that big of a problem when you owe the IRS, for example. It becomes a problem if you ignore it. It becomes a problem if you don't understand the options available.
Michael Raanan:But I think that's the number one thing is that vast majority of taxpayers who owe the IRS are actually in a simpler position than they may think. There's been a lot of conditioning through marketing and other means that the IRS is scaring. The IRS is intimidating and in fact they will be if you don't understand exactly what these frames, these frameworks, are. So everything is If you go out and try to start a business without doing any studying, you're not going to understand what's going to happen and what you should be doing. So same thing with dealing with the IRS. Dealing with the IRS, especially if you owe back taxes actually a pretty straightforward, simple manner. So I would say that's the number one thing. Secondly is we need to do everything as taxpayers we can to avoid having to deal with this agency in the first place. So that's where CPAs like you come in.
Michael Raanan:Tax preparers, tax planners is again, it's pretty straightforward. Most people are wage earners. Whenever you earn your wages, make sure you have adequate withholding. If you have any 1099 income, make sure you're making estimated tax payments, you're withholding from yourself and you're sending the taxes in advance to the IRS for that particular year. So a little bit of organization, a little bit of coaching, a little bit of know-how and understanding, I think will end up removing this fear factor from the most hated agency. And I think that's going to go a long way. And almost like anything, mark, when you have education and you're informed, you're able to make better decisions and you could do it in a more calm manner In the long term. It'll work out better than just kind of shooting by the hip.
Mark Perlberg:Right. So there's and I think this is you probably see this people in all stages of the game, but I imagine there are also people just getting started who really need your help. And when we find that people start their businesses, they don't really the last thing on their mind is what they're going to pay in taxes. They get so excited about closing their first deal, et cetera, et cetera.
Mark Perlberg:What I would say I've found is one of the most, one of the greatest challenges or tax areas that clients fail to budget for is self-employment tax, because they figure oh, I only made $50,000. My taxes are going to be too much. I'm in a lower tax bracket than last year. They don't realize that they're responsible for 100% of their social security and Medicare now. And when they see that tax bill for entrepreneurs just starting, it's a rude awakening how much they're actually paying in taxes if they don't have the support of a CPA, a tax planner, an advisor who helps them along the way with budgeting for this and understanding the tax implications of their activities and how to reduce their taxes throughout the entire year. But let's say we're out of luck. The years close, there's not as much we can do to reduce our taxes. You have these. What were some of the instances you've seen as far as what the clients may owe in taxes and what we can do for them?
Michael Raanan:Yeah, I remember we once had a client, a doctor, lots of doctors as clients, but this one particular doctor was paying every April when the tax return was filed $400,000. He would just write a check to the IRS. So he was paying after. He paid on time technically, but he was not paying throughout the year. He paid on April 15th when the tax return was due, and then what happened is his income started to change and for years he was just writing that check for $400,000, $450,000, whatever it was in April at the last minute and then his income started to change and he couldn't write the check anymore. So he owed for one year, then he owed for another year and another year and then all of a sudden it was seven or eight years down the road and that's when he contacted us, he got referred over to us and he owed millions of dollars to the IRS because it ends up accruing year after year. So he's a perfect example of no matter how much you're earning, you need to pay the IRS, either through estimated tax payments and we always recommend our clients do that monthly or through adequate withholding, or both, depending on what your situation is. So we, like I mentioned, we have our clients whenever they're working with us. They're very specific things we need to show the IRS during that collections case to get the IRS to do what we want them to do. And what we want them to do at first is no enforcement action. We want to make sure to protect their income, their assets and all that, and we want to steer the case to the resolution that's as favorable for the taxpayer as possible. So that's what we do and we're great at that. But one of the ways we do that and we accomplish that is by knowing what the IRS wants when that case is happening in real time.
Michael Raanan:So when the collections case is open, the IRS agent wants to see that the taxpayer is in current compliance. That means they have adequate withholding right now and they are making estimated payments right now if applicable. So that's key. So this client, for example, owed millions of dollars. The IRS was more concerned with the current taxes than the millions of dollars owed for the back taxes, because that's already done. That's in the past.
Michael Raanan:Now there just needs to be a resolution of some sort. Maybe it's a payment plan, maybe it's something else, but they want to make sure the IRS believe it or not, and this is where we all have common grounds with the IRS is that they want to make sure that the taxpayer is not accruing any more balances. They don't want what's called pyramiding. Pyramiding is where you owe year after year after year after year, or, if you're a business owner and you have an EIN, they don't want the business to accrue payroll taxes quarter after quarter after quarter. So very, very important to know exactly what the IRS wants. Feed them what they want. It doesn't mean agree with them if you disagree, but feed them what they need in order to see that this is an easy case and to move the case into the direction you want.
Mark Perlberg:Yeah, okay. So what's interesting here is you have, so you get them in compliance with the current year and usually, and to my understanding, when you have a large tax liability, there's usually some flexibility on your ability to resolve and maybe compromise on how much you owe. How much of that did the doctor want to ping the IRS on in-back taxes?
Michael Raanan:Yeah, yeah, so this is another one of those misconceptions and I'm glad you brought this up. So the IRS is a public entity. Again, they're given a very strict set of instructions. Congress never gave the IRS the ability to so-called negotiate. This is not the private sector. So there is no ability despite what we might hear from the so-called tax relief companies the ones that are touting pennies on a dollar and all this other nonsense that the IRS does not have the ability to say oh Mark, $10 million to the IRS, let's start negotiating a so-called settlement that doesn't exist. So what the doctor, in this case, wants to pay is irrelevant. Also, what the IRS wants the doctor to pay is irrelevant, which is actually great, because now there's a very objective framework of how do we decide what the resolution is, which is a good place to be right, always to have an objective way of resolving a conflict. So what is this objective way?
Michael Raanan:The IRS has a financial form. That's a standard financial form. So any of us who owe the IRS will fill it out, the taxpayer will look at it, the IRS will look at it, our office will look at it, for example, and we help prepared it and we would see, all right. The ability to pay objectively, just by math, is such and such. So does the taxpayer have any assets? Does the taxpayer have equity in those assets? And also, what's the income per month for the taxpayer and what are the expenses per month for the taxpayer?
Michael Raanan:So now people start to see okay, that's very objective. So whether you owe $5 million or $5,000, it really doesn't matter. It's the same exact process. The IRS approaches the case in the same exact way and this may be a little surprising for some taxpayers, but it's the same exact procedure. They look at the $5 million guide, they look at the $5,000 person and they say all right, let's look at the financial, and the financial will tell both the IRS and the taxpayer what the resolution is. Either you have the ability to full pay or, if you don't, based on the financial, then you could set up a payment plan or some other means to resolve it.
Mark Perlberg:Got you. So what would be the solution? Would it be just a payment plan, or what else would be a potential solution here?
Michael Raanan:Like I mentioned, there's a finite amount of solutions, so let's go over them. It takes literally five seconds. That's how few solutions there are per the IRS manual that they're given. So full pay and sometimes full pay makes sense. We had a, for example, the superintendent, which was a public figure somewhere in California that by no means could a lien be filed in his name. So it was very, very important for this person to not have a tax lien filed in his name by the IRS because that would end up becoming public information. So he found the means to full pay. He didn't have it. He ended up borrowing it and then addressing it that way. So full pay in many circumstances can be a great solution. We have folks who need their series seven renewed their license. We have folks who have top secret clearances that there's no way they could renew that or continue to maintain that with an issue. We have certain people of religious groups that cannot have a liability. Their church said you must not have a tax liability, believe it or not, and so on and so forth. So full pay can be a resolution. The vast majority of people don't full pay because they can't. They don't have the money. So what do they do.
Michael Raanan:Payment plan, option number two Another plan. So you end up having an affordable amount based on the financial. Now what the IRS wants you to pay is irrelevant, it's only based on the math and you could end up paying that monthly amount by the 20 of each month or whatever. You want to pay on whatever date and you pay that either until it's full paid, or this is the good one, or the liability expires. And, yes, the IRS cannot connect, cannot collect from you forever. They have a limited amount to collect from a taxpayer. So that's a payment plan.
Michael Raanan:The other one is a financial hardship. So if Mark owes $10,000 to the IRS and Mark is unable to pay, even on a payment plan, they'll temporarily set your case aside as a financial hardship. They call it currently not collectible, right? And the key word there is currently not collectible. We have clients that we've placed an uncollectible status mark where they stayed in that status up until the liability has expired. So imagine that, that you don't have to pay even anything towards your liability. Not because there's any magic, but because this is the one of the options available in the manual, right? So it's a beautiful thing to know how to navigate through this manual that the IRS has. So that's financial hardship currently not collectible.
Michael Raanan:And then there's some other options I could offer in compromise where, in very unique circumstances, the IRS accepts a certain dollar amount in lieu of full payment. Those are rare circumstances and these are the things that taxpayer has to look out for. You see a lot of these so-called tax relief firms that are advertising pennies on a dollar and tax settlements, and what they're talking about is this offer in compromise program, but it's very rare that taxpayers qualify, so it's also very rare that anyone should be pursuing that. So taxpayers to be very, very, very careful, because this is what all those advertisements are about. So those are some of the options. Mark, those are the main options and 99.9% of taxpayers end up resolving their case using one of those options.
Mark Perlberg:How long does it take for liability to expire?
Michael Raanan:So the IRS has a 10-year statute of limitations to collect. So basically, what that means is it's and it starts Mark from the time that you file a tax return. So 10 years from the date that the tax was put on the books, not from the due date of the tax return, like April 15th of 2023, for example, but whenever someone filed that tax return, it's 10 years from that date, plus any extensions. So there's certain things that could extend the 10-year statute.
Michael Raanan:By comparison, the state of California has 20 years to collect a tax liability, and it used to be forever so it actually got reduced from forever to down to 20 years in the state of California and the supposed big bad, irs, only has 10 years. So I think as some people start to listen to this, they start to see all right, we can navigate using these particular rules. We have folks that find us, mark where they're at the they just filed. So we have CPAs like you and other tax preparers and tax planners that refer their clients over to us because this is all we do. We don't do one tax return or tax planner and any of that stuff. So we have lots of clients refer to us or find us.
Michael Raanan:And we have folks who come in when they're just about to file. So now they have the whole 10 years. So this strategy for that. And then we also have folks who are maybe a one-year left or six months left and now they're assigned to an IRS agent who's being very aggressive because the IRS knows there's only six months left to collect on this balance. So it's very important the IRS cannot collect forever. You have 10 years plus any extensions.
Mark Perlberg:Yeah, so now. So we've had instances where some of our earlier clients they're you know it's their first time that they actually owe money in taxes and they didn't budget for it, and so they go on payment plans and, to my understanding, as long as you make consistent monthly payments on that payment plan and then you pay on time after that, you're fine. Some of the clients may have asked us here and there on how does that impact my credit score or my ability to qualify for financing of purchase of another piece of real estate? We haven't seen and correct me if I'm wrong but we haven't seen this creating issues with qualifying for purchasing real estate or impacting the credit score. But I could be wrong in this. Have you seen, do you have any thoughts on this, or have you seen anything different or what's your take on this?
Michael Raanan:I think it was about six or seven years ago now, because time flies that the three credit bureaus agreed not to include IRS tax liens in the credit score or the credit report any longer. So that was a massive change and a big win for taxpayers who find themselves out of compliance with the tax that so so the credit scores should not be affected just by an IRS tax lien alone. And there are folks who go on payment plans Some of these payment plans that you mentioned. They require a tax lien to be filed by the IRS. Some of the payment plans do not require a tax lien. In fact, some of the payment plans can actually be set up without a tax lien and without having to disclose the financial information.
Michael Raanan:I mentioned that financial form earlier. The IRS typically will use that where it's appropriate, but under a certain dollar threshold and other circumstances, sometimes the taxpayer doesn't even have to use the financial form to disclose their information. They could set up a payment plan and prevent a tax lien all at the same time. So it's very important just to know that a long term payment plans. Usually the IRS wants to file a tax lien, but sometimes you don't have to have a tax lien on the payment plan.
Mark Perlberg:So, and why do you? What's your purpose of getting clients to pay their taxes on a monthly basis?
Michael Raanan:Yeah. So when we have an actual open case, an active case, we're again. We're trying to get the IRS employee, the IRS agent that's assigned to the case, to do what we want them to do. So we're having to make their monthly estimated payments right, or we're increasing their wage withholding for taxes right, or we're just, or, if it's adequate, we're just showing the IRS in real time that this taxpayers no longer accruing any balances right by having inadequate taxes for now, for the current year, while simultaneously working on the back taxes with the IRS agent. So we want to make sure that our client and taxpayers in the best position possible and the way to do that is to have monthly estimated payments. In fact, I highly recommend everyone, whether they have an IRS debt or not, to make your estimated tax payments monthly, and you can do that very easily and I'm sure your office market help everyone listening to this. With that. You can just set up on auto pay very easy to send X amount of dollars over for current taxes for this year so that there's no reason for the IRS to bother you.
Michael Raanan:And we call this the preventative approach. You don't have to deal with IRS back taxes if you can actually do a little bit of planning in advance, and planning is pretty simple, you know, just a having adequate taxes for the current year, for example, like we talked about. So monthly estimated payments, adequate tax withholding for your wages, if you're a wage earner and you're on payroll, or a combination of both of those things, especially if, at the end of the year, you're expecting some bonus or something that doesn't have any withholding attached to it. So I think it's absolutely crucial to stay disciplined and have a certain structure. So it's just 12 times a year You're actually every month you're making your estimated payments to the IRS and guess what, in April comes around.
Michael Raanan:Everyone else is stressing it's April. Oh my God, the big bad IRS. They're coming after us. All sorts of other problems. You already have adequate taxes paid in from January to December, like we're supposed to be doing, and now January, february, march, april you're just getting everything to your tax preparer and you could just, you know, have a big sigh of relief that it's another, you know, easy tax season for you, and that's how we want to set up our taxes, if we can.
Mark Perlberg:Yeah. So one of the things that we promote is for our clients to be in the minority of people, excited to see the results of their tax return and looking forward to tax filing because they've done everything they had to do, they understand the liability and they've also done everything they can to minimize taxes throughout the year and then when they look at how low their marginal rate is and all the tax savings and the results of our collaboration is something to get excited about, especially if they have either they or their spouse has a high paying W2 job where the taxes is already coming out. They're W2s and then we can do something to get some of that tax liability back. Those are some of my favorite returns to prepare.
Mark Perlberg:We also have some clients who and you know you've probably seen this with real estate investors.
Mark Perlberg:One of their greatest bottlenecks is just their access to capital and we have found that some of them choose to not make quarterly payments because they would rather, in lieu of paying taxes, use that cash to buy assets and, for instance, put a down payment on a piece of real estate where you can do a cost segregation study to create tax savings to offset whatever liabilities they would have been paying with those monthly or quarterly estimated payments.
Mark Perlberg:So every now and then, you know, for some of our clients, that are where we can have a significant impact of the real estate. Some of them have actually decided that it's almost as treated. They treat it almost as a loan against the IRS to not make their quarterly payments. Or in other instances, they take the money that could have gone to taxes and put it into vehicles that all eliminate those taxes. So now, this is not the typical case for entrepreneurs. Real estate has some wonderful opportunities and those opportunities are going to be slightly phasing out over the next few years with the phasing out of bonus depreciation. So where are your thoughts on when, every now and then, we may find some alternatives and and and you know every situation is different we're some of the things that you're saying.
Michael Raanan:Yeah, you hit the nail on the head and that's why tax planners and tax preparers and I'll emphasize that, I'll say real tax planners and real tax preparers who focus just on those things are invaluable, completely invaluable to taxpayers. Taxpayers should be running to meet as many tax planners and tax preparers as possible and then pick one to work with, because we don't need to understand law if we're an illegal issue, we just need to know that we need to do something about it and find an attorney. We don't need to understand the entire tax code if we want to save on taxes. We just need to find someone like you, mark and others who are highly qualified in order to understand the tax code. It's extremely important that the taxpayers understand you don't want to look for the cheapest surgeon.
Michael Raanan:I get these questions a lot. We get emails even though we don't do any tax preparation. We get emails saying how much do you charge for tax preparation? It's understandable where they're coming from, because people are on a budget and so on and so forth. That's understandable. The other side of it is you've got to make sure you're investing in yourself. One way to do that is by having skilled people around you, especially someone on a budget. If they're saying I want a $40 tax return, you're never going to get out of that situation you're in if you're only looking for a $40 tax.
Michael Raanan:Prepare it's very, very important. This is one of the things I wanted to emphasize and to do all the time is because I see my role as an educator and former and I've been very lucky over the last 19 years to see behind the scenes of people's finances. These are 40-year attorneys. At these big firms that we all know they're all in the red and suffering financially, all the way down to mom and pop shops who are suffering financially. I had rock bands that were assigned to me when I was the IRS they're probably practice. I've had celebrities, athletes, all these people.
Michael Raanan:There's behind the scenes. I've had restaurants and other businesses on a Rodeo Drive because I was based out of California, all sorts of things. When you see behind the scenes, mark, you see that there are certain decisions being made and it's not in the best interest of those individuals making the decisions. A lot of that is only because of lack of understanding and education, which is what we're doing here just informing the public on what to do. It's very, very important that folks find proper professionals who are qualified Tax planners. Tax preparers are extremely important, especially if you're an entrepreneur, especially if you're a business owner, especially if you're a wage earner who's starting to earn a little bit higher wages or you're thinking about going into business.
Michael Raanan:Again, people don't need to understand everything about a tax code at all. They just need to understand. You need to find someone who knows about the tax code so that they could put that person to work on their behalf. That's what I've been seeing also for the last 19 years is that people are just not taking that extra step to find someone who can actually assist them. That's going to go a long way. That's a long-term strategy for your finances, for your health, for your family, for your marriage, which tax debt affects marriages? Health, all those things I mentioned all the time. Lawsuits and getting into business, growing the business all those things are all affected by these tax debts. A lot of the tax debts could have been prevented. The IRS says there's 20 million taxpayers in the collections inventory. Around 20 million taxpayers owe back taxes to the IRS.
Mark Perlberg:right now, as we're speaking, you mentioned professional athletes who are notorious for going broke. You have these kids who at a very young age, all of a sudden are making millions and they're super excited and they want to buy their family cars. Then they have all sorts of expenses they didn't budget for, like alimony and child support. Then they tear an ACL or whatever it is and then maybe that money stops coming in. Even if the money does continue to go in, to come in, they never think about having a budget and including taxes in that budget. One great way to look about this. Now, obviously you want to definitely set aside funds for taxes.
Mark Perlberg:Another way I explain this to business owners is you have almost what you would call a consumption tax. You have your revenue comes in minus. Your expenses is your net income, which you pay taxes on. When you spend money on your business, some items get capitalized. Generally speaking, your expenses are deducted and reduce the amount that you're going to pay taxes on.
Mark Perlberg:If you make an extra $100,000 but spend $100,000 investing back into your business, you're not paying any taxes on that $100,000. But if you spend that $100,000 on a Mercedes convertible, you're paying taxes on that $100,000 because you're spending it on your consumption items. If you spend that $100,000 on your personal residence, obviously you write off some of your interest on your personal residence. But if you spend that $100,000 on luxury items and jewelry, et cetera, et cetera, you're not going to be able to shelter that $100,000.
Mark Perlberg:There are advanced strategies on how you can reduce your tax liabilities. If you're making seven figures, you can have some more money to set aside and reduce the proportion amount you're setting aside for taxes. But a good, simplified way to look at this is how much are you making as a profit when you're spending your cash? How much of it is going to your own personal versus your business? I'd like to look at that as a way. Is that you're going to be paying a taxes on whatever you're taking out of your business for your own personal living expenses and understanding how much is it? How much do you actually need to set aside to support yourself and for your day to day? And then factor that into your budget and consider the tax consequences.
Michael Raanan:Yeah, yeah. And that just to me says do some backwards math, you know, just kind of break down what do you need at the bottom of the funnel and then you know kind of work your way up and see exactly how you could minimize your taxes and just maximize what's most favorable to you. So you mentioned earlier about, you know, some of the so-called advanced strategies like depreciation that offsets any of the income, and things like that. All of that is wonderful, and taxpayers don't even need to know that. All they need to know is a person who knows that. Yeah, so that's the shortcut. So it doesn't need to be the IRS and taxes in general. Those things don't need to be intimidating.
Michael Raanan:And this is, I think, the biggest point is that taxpayers don't need to know all of these things we're really talking about. They need to find someone who specializes in the specific topic that they need and go to that person. That person will know, that person will check off all the boxes. All right, you know, did they qualify for this? Did they qualify for you know for this? And this is exactly what we do at our office when we're dealing with the back taxes. So it's very, very important just to understand that number one don't be paralyzed and, you know, stick the head in the sand when there's a back tax or if you're trying to plan for your business or your personal taxes, just find someone who specializes in that and they'll hold your hand and they'll guide you.
Michael Raanan:And you know, I've been very lucky to chat with CPAs like you and other qualified people, because and I love speaking with different professionals, because it's so great to hear from other people who actually care about taxpayers and want to help them and will hold their hand and there are lots of them out there Very ethical, very moral tax professionals. So so taxpayers should definitely find a tax planner, tax preparer, if you have back taxes, you know someone who could help you with the back taxes and we're happy to do that. But taxpayers should not have to fear or be intimidated or even know about all these advanced strategies. And you're right, they exist and we have, you know, clients that we've seen where you owe millions of dollars and they have a zero tax bill. And how is that possible? Because of the strategies that you're talking about.
Mark Perlberg:Yeah, and, and you know there's. You know, just like you said, you want to have a team working for you of the best advisors and you know it's great to self educate and we but, but you know we get a lot of people who are active on forums and you know different Facebook groups and they're learning from. You know all the people putting producing content on what cost segregation is and rep status, and they've educated themselves. Well, maybe they purchase a cost that maybe they decided to do a 1031 before talking to their advisor and you just want to be careful. This is not something you want to dabble in. It's great to have self education, but you're.
Mark Perlberg:If you know more than your account or you're not using your account for your own tax strategies and you think you can do it all on your own, you're probably missing some huge opportunities here. And tax planning, even for real estate investors, is a lot more than cost segregation studies and 1031s. In fact, a lot of times we see 1031s that were completely unnecessary. So you know in. And then another thing about what just when we're talking about our you know the money that you spend on your personal expenses is usually going to be that income that you can't shelter against your taxes, but you know we also want to think about how can we be resourceful and find activities and events that are not only going to be fun and enjoyable for our personal lives but are also tax deductible events or travel, business meetings, or spending friends and family in your businesses, legitimately documenting a substantiating, legitimate tax deductions, doing things that you also enjoy. So you're having the occasionally you can be having the best of both worlds of enjoying the fruits of your labor, having fun and reducing your taxes.
Michael Raanan:And we've seen. We've seen, just because we deal with back taxes we see the aftermath of taxpayers not doing what you said. You know, not finding that, that tax professional not finding a tax planner, or they tried to get some information online and it just it was just piecemeal. And so we've seen some of them, everything that they needed to know just a little bit, or they got information from someone that was not really a trustworthy source. And there's a lot of information out there how to beat the IRS, how to you know how to pay pennies on a dollar, how to do all this stuff. We get information from a credible source, but we see the aftermath, you're right. We see business owners, we see entrepreneurs, we see wage earners who, who didn't use a tax planner and or didn't use a tax prepare when they they needed to do.
Michael Raanan:So you know, not everyone should be using a tax.
Michael Raanan:For example, you know there's some people that have certain tax issues tax, I would say tax scenarios is a better word and those tax scenarios require them to have a person qualified to help them navigate.
Michael Raanan:So that's a very, very important. And then you know, you had the nail on the head when it comes to certain expenses. There are certain expenses or certain things you can actually take on that are deductible and and people talk about work life balance there are certain expenses and ways to structure those expenses where you could actually have what you want to have and do it in a way that's on, that that qualifies under the tax code, that's legitimate, like you said, and that you could actually deduct, and it's not rocket science, you know. All you need to know is just the information that's in a tax code or you get with someone who actually knows that information. So so, again, that's the biggest thing is, we don't need to know everything in the tax code, we just need to find someone to help us move along when we're dealing with our taxes, and that's from January to December, not just in April or March when tax season comes around.
Mark Perlberg:Yeah, and you know I am, you know I and I. This is what I do personally as well. So I went to a wine tasting in Napa, but it was a group of all tax accounts. It was a business retreat. So we're drinking wine in Napa, we're hanging out in the sun, you know, exploring wine country, and we're writing off a hundred percent our taxes because there are is a legitimate business event. So there you know, if you're resourceful and you're an entrepreneur and this is a wonderful thing about being an entrepreneur Is you could actually have a lot of fun while racking up some nice tax deductions as well- yeah, yeah, the.
Michael Raanan:You know the flight. That was the. It was the flight deductible as an expense. It was a hundred percent deductible yeah, the hotel, the everything, yeah, the food. We were everything the tour.
Mark Perlberg:It was a legitimate business meeting. You know there were some presentations and discussions all at wonderful restaurants. Now Meals are 50 percent tax deductible, unfortunately, but we still got. You know this was in 2022 and we did it, so we were still good. And just by the way, if anybody has questions, put them in the Q&A. But the but, but, yeah, so they're. You know, just being aware and being proactive, I mean it can really change your life in and also give you peace of mind in all of these topics.
Michael Raanan:Yeah, you said earlier about being excited about taxes. It's really exciting, just as a taxpayer, when you reduce your taxes. It's exciting to not have your harder money being taken from you. I mean, that's how exciting is that? I was just chatting with someone the other day how we were talking about some in the countries that have zero income tax. How amazing would it be or a taxpayer here in the United States To go to work, which they work hard, everyone works hard and earn whatever they earn 60,000, 80,000, 200,000, whatever it is and you keep all 200,000, you keep all 80,000, right. Imagine that. So so how do you accomplish something close to that when we have an income tax here? And the way to accomplish that is by understanding what you and I are talking about is is to Reduce your taxable income, reduce what you know what you're talking about. You know what you have to pay in taxes and how to do that within the tax code, because no one could control the tax code, but we need to learn how to navigate and use the tax code to benefit us. So it's it's so important and it's such a beautiful thing when you're saving people money.
Michael Raanan:You know, as a tax professional, the best thing is. I mean, we've had clients who who owed millions of dollars to the IRS, not because they weren't paying, but because they had business transactions and other things that happened in their lives that actually ended up With a large liability. You know, an easy example is what we see all the time where you have taxpayers and they're selling a house so a regular average taxpayer, then I'm selling a house and they end up having a a large tax liability because of it. Or they got some, some bonus at the end of the year that was extremely unexpected. They've never gotten that before. It's more money than they ever thought they would be getting and they have a large tax liability on that. And without them, you know. And they ended up using that maybe for something else. And we've had kids. We have clients have kids have cancer.
Michael Raanan:We have clients who have, who haven't filed for seven or eight or ten years, and when we do a deep dive into why haven't you filed, they're dealing with a whole bunch of health issues, um, all sorts of stuff where where the the husband was a soldier, went overseas and dying overseas, that three or four kids at the single mom, the widow is now taken care of and, uh, the kid has autism, all sorts of problems all Simultaneously, and they haven't filed for seven or eight years, because April 15th Is not the biggest date when your kid has cancer, or your kid has issues. Um that right. Or or you have no money coming in, or your husband just died, or your wife just died, or or your elderly parents and we see now with the boomers, we see a lot of elderly parents are are being hospitalized and our clients, even though they some of them might even be considered high income, they still can't afford to live because they're paying hundreds of thousands of dollars for medical treatments and surgeries and operations for their elderly parents Just to keep them alive. So there's all sorts of scenarios and these are things we see, um where you end up having a liability, for example, and you can't full pay Um, and it's a great thing when you give them a a opportunity to have some relief when there's all this chaos going on in their lives, and that relief might come in the form of the iris says yes, we agree, we'll get rid of your penalties and interests. Um, because the iris has rules when it comes to abating, removing penalties and interests. So at our office we make sure we always look at that checkbox and we pursue that, if it makes sense to pursue Right, as some relief might come in the form where they say, yeah, you know x amount of dollars, you know 10 000 dollars or whatever it is, and we agree.
Michael Raanan:Right now You're in a financial hardship, um, and we know, based on the statute, that thing's going to expire soon, so they're not going to have to pay even a dime towards the balance. You know, we had a client mark. I'll tell you, um, so. So I mentioned earlier the statute of limitations is 10 years, right, plus any extensions. Well, we just closed the case out recently. The tax periods were 1978, 1979, 1980, 1981 and 1982. So this is way over 10 years right.
Michael Raanan:And this is an airline pilot who's stuck in litigation With it's a class action litigation with thousands of other airline pilots, and this has been going on for 40 years, this litigation. So so this liability still exists 40 years later and and the statute of 10 years keeps getting extended because it's frozen this whole time while they're in litigation. So, while it's a litigation, the iris puts a freeze on it because they have to. They're not allowed to collect Until litigation is resolved. So so this is a 1970s and 1980s tax periods that thing was put in for our client is put in uncollectible status, um, it's going to expire when it expires, and and and our clients probably not going to be paying anything towards it because of his age and other reasons.
Michael Raanan:So so, um, you know there are ways to navigate through these irs Problems. Whether it's, uh, you're planning ahead of time, which is what you should do and it would be great, or if things you know ended up going downhill for some reason, even out of your control, and you know Back tax, there's still options available, um, and taxpayers just need to understand where to go in order to get the help that they need. Um, and and help is out there, and it's not the end of the world. It's stressful and causes tremendous amount of anxiety For taxpayers. You know a lot of these tax relief firms, for example, like to advertise after midnight Because, because taxpayers with tax debt can't sleep by night. So they know this, so they're actually advertising after midnight, right? So it's not that big of a deal.
Michael Raanan:In fact, at our office, we've been, we've been, we've been for the last 12 years, we've been working one-on-one with taxpayers On, you know, helping them navigate through the back tax issues and then how to resolve their issue. We've finally automated Um and and, and this was my ultimate goal when I started my tax firm is to help as many taxpayers as possible, but there's 20 million and we could only speak to so many people at you know, one time. So we've finally automated how to resolve your back taxes, um, and that's what we created. It's called irs videos calm, and this is what I wanted to set up for taxpayers for years, so that in the future, when I finally leave the tax world, taxpayers are in a better position. They don't have to worry, they don't have to stress and we don't need to be scared of the IRS if we know exactly what to do. So when I so, we created irs videos calm, and it gives them a blueprint, just like I would do if I was speaking with them, step by step how to resolve penalties, how to resolve a tax lien, how to set up a payment plan, how to get a financial hardship, how to do all the things that we're talking about.
Michael Raanan:Um, and again, all that comes down is the education you know so like. I think it's incumbent upon us as tax professionals and any professional, by the way in any, in any um, any job sector, to help as many people as possible and to do it in a way where it's accessible and affordable for them. So, um, uh, so that's you know. That was my goal from the beginning and, and in fact, you know, one of the reasons I left the IRS is educating people. Um, I always wanted to work for myself, but I was educating people even while at the IRS, but I had certain constraints and limitations because you know, you're an employee and you have to deal with with the IRS's rules. Uh, but it was really education for my eight years at the IRS, um, and then, when I ended up going to the other side of the table, it was more education, except on a bigger level.
Mark Perlberg:So I was like, oh, oh, well, you know, um, you know, it's great to see you have all these resources and, uh, one of the things we're as we approach the the end of our time. I want to give a cautionary tale. A man I once met who, during 2008 or before change, until 2008,. And then休ia Only Beyond that was the only other company in the influential and an interesting listing. I think it made that much more exciting Now.
Mark Perlberg:He was in such a rough place he really couldn't pay for anything, so he self-prepared his returns. He recognized the sales of all these properties, but what he forgot to do was write off all the cost of goods sold and the cost basis on these properties, because he had massive losses. But he only reported the revenue and he filed his return. Not only was he unable to pay back the banks, now he can't pay back the IRS because he's reporting all this gain in profit even though he actually operated at a massive loss. This led him to having an incredibly low credit score, having tons of IRS debt all sorts of challenges.
Mark Perlberg:At this point when I met him, it was 2017, so a little too late to amend his return. Maybe he could have done something. I don't specialize in IRS remediation, but at this point he had, at this point, filed for bankruptcy and was in the process of fixing his credit score and his financials. But I was like, why didn't you just fix the return? Why didn't you write off any of these costs? He goes, I couldn't afford an account. What a rough excuse that is for all the challenges that he created for himself and how far he set himself back. Even in rough times, an account can be one of the most important investments that you ever have. If you don't, you can really really suffer some rough consequences.
Michael Raanan:With you 100%. It's much easier to do a little bit of planning in advance than to deal with an aftermath of something All of our clients we've had over the years. We told them okay, now that we've resolved this back tax issue, which is the past, you got to make sure you find someone in order to address the current times and going forward. So, 100% of our clients, we make sure that we put them in touch with someone like you who can actually assist them going forward. It's vitally important. It's great.
Michael Raanan:I would tell all the taxpayers who listen to this, as tax preparers and tax planners are some of the most friendliest people I've ever met, so it shouldn't be intimidating to go and reach out to them and say I'm trying to figure out how to improve my taxes, how to improve my financial situation. I think, after what people have gone through in 2020 and with inflation now and all these other problems, it affects people financially and the cost of living is not going to go down in the future. It's only going to go up, and that's not a problem as long as we all plan. As long as we all plan, how do we increase our income? How do we multiply that income? How do we decrease our taxes? How do we actually put ourselves in a better financial position? So we don't need to know how to do that, we just need to find somebody that knows how to do that. So I applaud you for doing a podcast like this and also educating and forming people on an ongoing basis, because it's very important that we help as many people as possible, and I think all your clients, for example, who dealt with you over the years, mark, I'm sure they've been bringing their friends, their relatives, family members, coworkers and everyone else at their meeting and say, hey, come on over to this guy, mark, and help improve your situation.
Michael Raanan:I think a lot of the world's problems, by the way, could be resolved if our financial problems are resolved. So that's how I see it, and it's very important. I've seen that over the last 19 years when I was at the IRS and in private practice, that a vast majority of these problems like marriages, divorces, child custody issues, a whole bunch of other issues, health issues, a lot of them when you actually do a deep dive, it all ends up stemming from a lot of financial problems. So I think it's very, very critical that we all take responsibility for our finances, and that doesn't mean we need to know everything. We just need to find someone who knows. So I think it's extremely valuable having this kind of chat.
Mark Perlberg:Yeah, you know, in the book who, not how, one of my favorite business books. They say if you have the money to solve the problem, you don't have a problem.
Michael Raanan:Yeah, I love that.
Mark Perlberg:Well, I would like you to do is do you have it? Can you tell everyone where they can reach you and learn more about what you do and connect with you? And also, if you have a call to action to the recorded and live audience? I want you to any call to action you can provide, or anything else you want to leave as parting messages. Here's your chance.
Michael Raanan:Yeah, yeah, I would say number one. So if anyone listening to this has any back taxes or anticipates having one, I would grab a free book that I have. It's actually a booklet, very easy to read and that's at irsvideoscom forward slash book. So irsvideoscom forward slash book 100% free. It's $25 on Amazon, but just grab it free at the link. And if anyone has any questions for me on anything tax related, whether it's back taxes or anything else, if I don't know it or I don't have the answer, I know people who can help, so they can email me at help at irsvideoscom. So help at irsvideoscom. And you can reach me 24 seven, happy to help in whatever way I can.
Mark Perlberg:Awesome, wonderful Mike. Thank you so much for your time and thanks. You hope you guys got a lot out of this. If you want to reach out to Mike for anything, you have his info and if you want to hear from us, just email info at markproberchpacom If you're interested in being a client or you know someone who may be interested in being a client or joining the team. Thanks again.