Learn about 3 strategies for fighting an IRS audit before losing a tremendous amount of money on taxes! Today on Tax Hacker Tuesday, Matt Theriault and Tim Berry discuss why you don’t want to fight the audit, how showing emotions to the revenue agent is a useful tactic, and why it is important to hire an EA (enrolled agent).
What You Will Learn About 3 Strategies for Fighting an IRS Audit:
- Why it is important to learn the strategies for fighting an IRS audit
- How to use 3 protective strategies for taxpayers in regards to IRS issues and save thousands of dollars
- Why the backup is important
- Find out the key differences between the revenue agent and the appeal officer
- Why you don’t want to fight the audit
- When and how to use the horse trading in the tax court
- Why showing fear to the revenue agent is a convenient approach
- Why it is important to hire an EA (enrolled agent)
- Pros and cons of former IRS people, working as EA
Whenever you’re ready, here are a few ways we can help:
- Would you like to meet in person? Our next live event is right around the corner! Go to EpicIntensive.com for the details.
- Become an Epic community member at The Epic Real Estate Investing Show
One of my favorite things to do is share with investors the latest and greatest tactics and strategic friends I make. I do it every week and you can listen in by subscribing to The Epic Real Estate Investing Show podcast on iTunes – Click Here.
- Grab my book, Epic Freedom ($1)
I frequently hear from people looking into investing in real estate for the first time, “How long is it going to take?” So much so, I wrote a short book about the 2 easiest and fastest strategies to a paycheck in real estate. You can grab a copy for $1 and I’ll pay the shipping – Click Here.
- Join our Badass Investor Program and be a Case Study
I’m putting together a new Badass Investor case study group at Epic Real Estate this month… stay tuned for details. If you’d like to work with me on your real estate investing, go to FreeRealEstateInvestingCourse.com to get started.
- Work with me One-on-One
If you’d like to work directly with me on your business… go to REIAce.com, share a little about your business and what you’d like to work on, and I’ll get you all the details!
- Also, check these out:
Thank you so much for joining us on this episode of The Epic Real Estate Investing Show! Please subscribe to the podcast so that you will get instant access to our new episodes.
If you found this podcast helpful, please take a few minutes to leave us a positive review in iTunes. Your reviews help to improve our search rankings so that we can spread the love. Thank you!
Speaker 1: This is Theriault Media! Did you know that 50% of your lifetime income will be wiped out by taxes? What if you could stop this madness? Isn’t it about time you play on a level playing field with the wealthiest 1%? Now you can! Tim Berry, attorney at law, shares here each and every week current tactics and strategies that anyone can implement to hack the tax code, protect your attests and keep what’s rightfully yours. It’s time for Tax Hacker Tuesday!
Matt Theriault: Welcome, welcome back to the Epic Real Instate Investing Show! It is Tax Hacker Tuesday, one of my seven favorite days of the week with my attorney and friend, Mr. Tim Berry. Hello, Tim.
Tim Berry: Hey, Matt. How are you?
Matt: I’m good. Yeah, Mondays here at Epic we show you new and creative ways, as well as time honored ways, of making money using real-estate. And then on Tuesdays, we show you how to keep it. Well, Tim shows you how to keep it, because we talked about last week you get what you pay for. And so, you’re not paying me anything so you don’t want my advice.
Matt: No, you’re not paying Tim anything, either. What is Tim‘s motive? This is Tim how finds new clients, by providing and proving the type of value that he can offer before you ever give him a dime. He put together a Tax Hacker Blueprint, where he gives a money-back guarantee that if he doesn’t come through enough to pay him anything there, either. So, he’s very much a give, give, give before he ever asks for anything in return, and just is a cool dude. And that’s why he’s on the show with me. So welcome back, Tim.
Tim: Well, thank you, Matt. And thank you for that touching intro, I’m a cool dude and a giver. I’ve got tears in my eyes right now!
Matt: Yeah. I didn’t even write that down before, that came straight from the heart.
Tim: Cool. Well, thank you.
Matt: Yeah. Hey, so last week we talked about the client that you had that owed $80,000. You got to her send actually basically nothing, and we talked about those TV commercials where they’re saying they can cut your taxes down to nothing. There’s one other thing we talked about, something there. Oh, we talked about the offer and compromise, and we talked all about kind of stuff that sparked a new slew of questions about audits. You were actually sharing something with me about that before as well, and you’re like, “Don’t fight the audit. Just kind of go with the flow,” or something to that extent. What did you mean by that?
Tim: Well, what I meant by that is … and this kind of goes back to what we talked about last week is, there are so many protective programs for tax payers whenever it comes to IRS issues. There’s so many safety nets for you. In particular, what happens whenever you get audited, the first level is they send out someone called a revenue agent to look through your books, make sure you have the backup, et cetera, so on and so forth. And if you don’t have the backup, they send you out a letter that’s saying, “Hey, you owe us $50,000 now. Pay up.” And a lot of people, what they’ll do is they’re going to spend their time, energy, and resources on that first meeting with the revenue agent. They’re going to sit down, they’re going to hire an attorney, they’re going to hire a CPA, and they’re going to be fighting that thing tooth and nail. And many times the revenue agents, they’re nice enough people, but they’re not as bright as some of the other people inside the IRS. And they may be fairly new, trying to make a name for themselves. So they really don’t care about the facts, they’re not going to let the facts get in the way.
Tim: And so they’re going to hit you with the taxes … I hate to say no mater what, but they’ve just got their minds made up that they’re going to hit you with the taxes, and you’re going to get a tax bill and you’re going to freak out. That’s the wrong way to do things. The right way to do things is give the revenue agent, give the IRS, whoever it might be, if they’re asking for information give them all the information you have! Give them the backup, give them your books, records, et cetera, so forth. But if based upon that they still hit you with the taxes, no big deal. Because here’s the real fun of dealing with IRS issues: the real fun is, whenever they hit you with the taxes you say, “Okay, cool. Let’s go to tax court.” You file a tax court petition, and by the way, that’s just a template form on the internet that you fill in. It’s really easy. You file the tax court petition, and then automatically your cause gets thrown to the appeal list section of the IRS.
And this is kind of cool, because the Appeals Officers are kind of the best and brightest of the IRS. A, they’re a lot smarter than the rank and file. B, they see a lot of weirdness so they have more of a heart, if you will, than the rank and file. But also see, and this is the most important, whenever you’re dealing with a revenue agent you can’t do any horse trading. By law it’s kind of a black and white thing for them. Either you owe the taxes or you don’t owe the taxes. But whenever you go to appeals, they’re allowed to take into consideration the hazards of litigation, and they’re allowed to do horse trading. If you started off owning $50,000, and you’ve got a pretty strong case but you’re not too sure of it, you can go to the appeals officer, say, “Hey, appeals officer. Let’s settle at it $30,000. Let’s settle at it $10,000.” And they’re allowed to do that, it’s not a black and white yes or no thing for them. They’re allowed to do that horse trading with you.
Tim: So that’s the better way. If you’re faced in an situation, by all means try to give as much information as you can to the revenue agent, to the frontline person. But just know the real battle, the real place you’re really going to make or break, is going to be at the appeals section of the IRS.
Matt: Got it. The real way to fight your audit is to not fight your audit.
Tim: Yeah, exactly. That’s exactly it. Don’t fight it.
Matt: Got it. I’ve heard things before, and I can imagine … I mean, I think of just sitting across the table from an IRS agent, I think I would be trembling to just say the very least.
Tim: Hold up, Matt. Can I jump in real fast?
Tim: Make a note on what you’re going to ask. But I got to tell you a real drama and true life story, an actual war story.
Matt: All right.
Tim: We had this one client. He was a big, husky football coach, macho guy with a side business. So his side business was being audited. A revenue agent comes into our office, and we have a conference room. It had glass, everyone could see in and all of that stuff.
Tim: So we have one of our accountants sit down with the macho guy in front of the agent, and we know a lot of these agents. We’re on a first name basis with them and all that, because we get hit with these audits. We deal with these all the time. And so anyway, the auditor starts to ask some questions, and macho man just breaks down bawling his eyes out. He’s just all flustered, he’s shaking, he just starts bawling his eyes out. It was a real scene, it was a real scene. That went on for about a half hour, literally this guy was just freaking out, crying about everything.
Tim: And so the revenue agent called it into and said, “Hey, I think we’re good for today. Blah, blah, blah, blah, blah, blah, blah.” Football coach goes off home. I don’t know if he made it home, but he did. I’m joking about that, but he drives home. And the revenue agent pulled us aside and says, “Hey, look. I’m done with this, it’s going to be a no-change audit. I’m not going to do anything, I just can’t deal with this grown man crying like this. Let’s just move on real fast.” So if you’re a little bit flustered at the audit, that might be a good thing.
Matt: There’s a strategy there.
Tim: Yeah, there could be a strategy. If you’re willing to pee your pants right in front of the guy, you might get away with it. You know?
Matt: All right. So we’ve got two strategies to fight your audit. One, don’t fight it. Two, pee your pants. We have to come up with a third strategy so we have a good title for this episode. And then maybe this is it, is they say, “An attorney who decides to represent themself has a fool for a client.” Or something along those lines. But I’ve heard that you really don’t want to represent yourself because you say the slightest wrong thing, it can really be held against you. Is that accurate?
Tim: That’s accurate, and this is the crazy part, too. You know I’m Mr. Excitement. Right, Matt.
Tim: Yes, you’re excited. The most exciting day of the week! My idea of a great time is reading the tax court cases. Literally each morning they come out with a new tax court cases and everything, and they say who’s representing the different parties.
Tim: 95% of the time it says someone’s name, pro se. That means they’re representing themselves, and it is mind boggling to me. I want to say cases where there’s a $200,000 tax liability involved, and some genius is trying to represent themselves in front of the tax court. And like you said, they don’t know what to say. They don’t know the rules of evidence who the burden of proof is upon, because many times it’s on the IRS. And the IRS will just kind of try to bulldoze you. They’ll say, “Oh, we’re going to assess you with these taxes.” Even though the burden of proof is upon them, to prove it’s otherwise. That’s the case with 1099’s. Way back when, everybody was getting hit with 1099-C’s, the burden of proof was on the IRS to prove that was accurate.
Tim: But anyway, so don’t represent yourself. You’re right. You got a fool for a client if you’re representing yourself in [00:08:59] an audit, because you’re not going to know what to do, and you’re not going to know all the various programs that you can utilize for your benefit during the audit.
Matt: Got it. All right. So this originally was going to be titled “Don’t Fight Your Audit,” but now we have, “Three Strategies to Fighting Your Audit.” Number one is, don’t. Two is cry, and three is hire help.
Tim: Well, I’m trying to put together don’t cry, and then we got to have a little catchy thing at the end there.
Matt: Well, go ahead, Mr. Marketing [00:09:34].
Tim: “Don’t Cry Yourself.”
Matt: No. If you don’t know anybody, now let’s just pretend that they didn’t know Tim.
Matt: Where should they go first to seek competent help?
Tim: Probably to somebody called a EA, an enrolled agent. A lot of enrolled agents, and in fact if they really want to have fun with it, they should find an enrolled agent who is a former IRS agent, a former revenue agent or a revenue officer. Revenue officers are the ones who do collections. That’s who they should probably try to find.
Matt: Is that a Google search?
Tim: Yeah, that’s a Google search. Just type in the name of your city, and type in EA and then revenue agent. You’ll probably find two or three people advertising that they were former IRS people. Now I got to warn though, and this is a big caveat.
Tim: A lot of IRS people are former IRS people, not ex-IRS people. And what that means is, you can take someone out of the IRS, but you can’t take the IRS out of them.
Tim: So if you’ve done any weirdness or shenanigans, don’t go to a former IRS person. They’re not going to put up with it, they’re going to give you up, and it’s not going to be a positive result. If you’re totally on the side of justice, truthfulness, morality and the American way, use the former IRS person. If you’ve got some sketchiness, go to your local CPA or EA.
Matt: The former IRS person, or the ex-IRS person? Which one’s the better one?
Matt: The ex.
Tim: Well, if you talk to an IRS person, they say, “We’re never ex IRS, we’re former.”
Matt: Oh, they’re like marines.
Tim: Yeah, exactly. There you go, exactly. Same thing.
Matt: Got it. All right. So how do you distinguish between the two again? I’m lost now.
Tim: Oh, I’m sorry.
Matt: Why did you quit? Maybe that’s the big question.
Tim: No, not the big question’s why you quit. Whenever you go to someone who was IRS, if you have something shady … and everybody knows if they’ve got something shady or not, don’t use a former IRS person if you’ve got something shady.
Tim: Don’t do it. They’re not going to like it, they’re not going to like it one bit. Go find somebody who had nothing to do with the IRS and is a CPA, and/or an EA, but no involvement with IRS.
Matt: Got it. Makes sense. Cool. Well, that’s good. “Three Strategies for Fighting an IRS Audit.” It has a good ring to it, yeah?
Matt: Cool. I’m going to go with that. All righty. So whenever you’re ready to have Tim customize a Tax Hacker Blueprint just for you, to minimize the amount of the hard-earned income you send to Uncle Sam, how you keep it, how you protect it, go to taxhacker.com. Download Tim‘s free book to help you navigate the new tax plan, and after you’ve got his book you’ll have the opportunity to schedule some time with Tim, and either he or one of his team members will get on the phone with you for a short five to ten minute call to assess your situation. All you got to do is tell them, “Hey. I want my Tax Hacker Blueprint,” and they’ll take it from there. All righty? Any last words of advice come up for you, Tim?
Tim: No, not really, other than I hope your day goes pretty good, and you don’t have to end up crying in front of an IRS agent. But otherwise, yeah.
Matt: Right? Just by listening … I could’ve just done it. I was going to say, just by listening to this episode you could be jinxing yourself. And now that I said it, I probably just did. Hey, I’m not superstitious, and nor should you be. So if you have any questions for Tim, you can go to taxhacker.com [00:13:10] ask questions and post them there, and then we’ll answer them live here right on the show. All right, so that’s it for Tim and myself. We’ll see you next week for another episode of Tax Hacker Tuesday on the Epic Real Estate Investing Show!
Speaker 1: That’s it for today, as we dream of a tax system that works just for you. But until then, you have Tim Berry. See you next Tuesday for another episode of Tax Hacker Tuesday!