This week on Tax Hacker Tuesday, Matt Theriault and Tim Berry share how the phrase, “you get what you pay for” applies to the tax world. Learn how to avoid getting scammed by tax “experts,” the harsh truth behind most tax return preparers and tax “savings” commercials, and how to save yourself if you’re already knee-deep in a tax mess.
What You Will Learn About You Get What You Pay For:
- The harsh reality of tax return preparers
- How to avoid getting scammed (and eventually owing tens of thousands in taxes due to someone else’s mistakes)
- How Tim responded to a caller who fell into this trap
- Why “you get what you pay for” is true in the tax world
- The truth behind the “slashing your tax dollars” TV commercials
- How many OIC’s are rejected
- How to save yourself from literally millions owed in taxes
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Speaker 1: This is Theriault Media. Did you know that up to 50% of your lifetime income will be wiped out by taxes? What if you could stop this madness? Isn’t it about time you play on a level playing field with the wealthiest 1%? Now you can.
Tim Berry, attorney-at-law shares here each and every week current tactics and strategies that anyone can implement to hack the tax code, protect your assets and keep what’s rightfully yours. It’s time for Tax Hacker Tuesday.
Matt Theriault: Welcome to the Epic Real Estate Investing Show. It is Tax Hacker Tuesday. Once again, feels like we just did this last week, with my attorney and friend Mr. Tim Berry. On Mondays here at Epic, we show you new and creative ways, as well as time-honored ways of making money using real estate. On Tuesdays, Tim shows you how to keep it. So, if you have a question for Tim, you can go to taxhacker.com/questions, and you can post it there. Hey, Tim.
Tim Berry: Hey, Matt. How are you doing, sir?
Matt: Doing very well. Good to hear you again.
Tim: Yeah, it’s been a while.
Matt: It has been. I think like, seven whole days. You just got back from vacation, though.
Tim: I did, lovely Costa Rica.
Matt: Wow, what is it like there? I have no clue. Is it a Third World country or a First World? Is it all surfing, is it all partying? What is it?
Tim: Yes to all of that.
Matt: I thought of all of those things when I hear the name, but I don’t know which one is accurate.
Tim: Well, they’re pretty much all accurate. There’s a lot of partying, there’s a lot of surfing. A lot of areas are First World, a lot of areas are Third World. So, it’s just a very interesting place. And I guess I shouldn’t say Third World, because that’s kind of me putting my judgments, they don’t have my Maseratis, and all that other stuff. But it’s a nice place, very nice place.
Matt: They got plumbing indoors.
Tim: They do, but I’ll tell you, I stayed at one place that the plumbing was outdoors. It was very interesting. But it was unique, in that you had to go outdoors and do what you had to do.
Matt: It was like an experience.
Tim: It was, it was an experience.
Matt: An adventure.
Tim: It was, it was. And it’s right on the side of a cliff, so I’m not going to go on with the rest of the details.
Matt: That’s great. Let’s see, we are talking about, you were just sharing with me before we started recording that you just got a phone call from somebody who got a nasty letter from the IRS?
Tim: Yeah, she got a little love letter from the IRS saying that she owed $80,000. And this kind of goes to, you get what you pay for. And so, I was asking her some questions, finding out what the situation was. And she said, “Yeah, I talked to my current tax preparer, and my current tax preparer says, ‘You’re either gonna pay it now, or you’re gonna pay it later and you’re going to have interest and penalties on it. So why don’t you just pay it.'” Now, the thing is, as I was talking to her, I thought, “Well, gosh, this is something really easy to get away from.” And I said, “Well, who’s your tax preparer?” And, am I allowed to use names? Are we going to get thrown in jail if we use names for things?
Matt: Not if it’s actually their name.
Tim: Okay. Well, this was a nationwide tax-preparation group. Let’s just keep it really simple and say that, a nationwide tax-preparation group.
Matt: All right.
Tim: And these people, who, they blow billions of dollars, probably, doing advertisements on TV and people go to them, what most people don’t realize is the way they get these tax return preparers is, they offer courses during the summer and they teach retirees and other people how to do taxes, without tax knowledge. And now these retirees who don’t know what’s happening, they just think they’re gonna learn about taxes, for some reason, they’re turned on by learning about taxes, think it’s gonna help with their portfolio. And so now, this organization trains people, where they have six weeks of courses or something like that.
And at the end of it, they say, “Oh, by the way, now that you know about taxes, would you like to be a tax preparer?” And in short, they have no knowledge, no background. They get sucked into this thing. They think this would be kinda cool. And unfortunately, regular people go to these people to have taxes done and to have tax advice given, and it’s going to end up costing them a fortune. And really, the point I wanted to make on this is, you get what you pay for. If you’re going to go to these national organizations, you gotta ask the person, “Hey, do you have any fancy initials behind your name? How long have you been doing this? Are you aware of basic tax stuff?”
Because if you got somebody who just started last month, they’re gonna end up costing you a fortune. They might have saved you on the front end if you only paid 99 bucks for your tax return getting done. But on the back end, if you have a tax issue, you’re gonna end up owing tens of thousands, if not hundreds of thousands of dollars in taxes due to their incompetence.
Matt: Got it. So, this person, this lady that called you, went for a second opinion after getting this initial advice.
Tim: She called me, yeah.
Matt: Okay. Can you share, what are the actions you advised her to take to not pay this $80,000?
Tim: Well, yeah. Write a letter to the IRS and attach her bank statement to it.
Matt: And what does that do?
Tim: Oh, it showed that she did nothing wrong. It was just backing up and giving proof of what she put on her tax return. But once again, the genius at the national tax prep firm didn’t understand that, didn’t know that. They probably didn’t know anything about audits, whatsoever. And so, since they didn’t have that knowledge base to go to, they couldn’t tell her it’s as easy as writing a letter to the IRS and giving them the bank statement showing proof of backing up what she put on her tax return.
Matt: Got it. So, it was really just more of a, she called someone who actually knew what they were looking at. Because you’ve done this before.
Matt: Once or twice.
Tim: Once or twice.
Matt: You know, that made me think of something, because you just shared with us a little bit behind the secrets of these tax preparers and what they go, and what happens behind the curtains is, there’s a six-week crash course and then they’re put in front of a computer and a customer.
Matt: Something else I was always curious about, maybe you could shed some light on it. On TV a lot, people that, or companies that promote their ability to minimize your tax obligation, like the debt that you owe, like, “We can slash it, pennies on the dollar.” What is the strategy, what do they do, what’s going on there in those TV commercials?
Tim: Whoo, where do I begin on that? And you know, this is a perfect segue.
Matt: Do you know I’m talking about?
Tim: Oh, yeah. I know exactly what you’re talking about.
Matt: All right.
Tim: The fancy legal phrases OIC, offer in compromise, where you make an offer to the IRS to mitigate your taxes, and you guys work out some sort of compromise. That’s the fancy name. And that’s a perfect segue, because, and let’s kind of parse the phrase you use. You get these people advertising on TV. So, you have all these people who are now self-proclaimed experts, and most of these people don’t have a clue what they’re doing. They’re just following a flowchart. And if your situation gets a little bit off the flowchart, they are lost.
But they really don’t care, because with those organizations do is, whenever you call and say, “Hey, I ow the IRS $100,000,” they say, “Cool. Give us $8,000. We are gonna submit this offer in compromise to the IRS. We are going to settle for pennies on the dollar. And your life’s gonna be perfect, and you’re gonna live happily ever after.” What they don’t tell you is, a lot of these OIC’s are rejected and kicked out. And so, now you’ve paid them the 8,000 bucks. They do their work. And they may not test it to see if it’s gonna work out.
The IRS even has a website for you to test it. But these people typically, don’t do that. They just do the work. They submit it to the IRS. It takes about a year for the IRS to get back. And whenever the IRS rejects their offer, they say, “Whoops, sorry. We did the best we could. We earned our $8,000. You’re just out of luck.” And what they don’t tell people, what a lot of these organizations don’t tell people, some might be good, but most of them don’t, is that 90% of the OIC’s are rejected. And the real fun, the real reason why you’re paying someone, is to overcome the objection, stick with it, and then get the ultimate offer in compromise.
Matt: Got it.
Tim: And let me follow that up a little bit. These things can be super duper effective. I’ve had a lot of clients who’ve owned a lot of money. I literally, had one guy who owed over $1 million. We were able to get the IRS to agree to $2,000 to settle his tax bill.
Tim: So, these things can be effective if you fit the right fact pattern. Quick side note, the guy who could have settled for 2,000, he was complaining because he didn’t know where he was gonna get the 2,000 from. You just can’t make people happy. You just can’t make them happy.
Matt: That’s funny. So, these companies, they don’t have any more leverage over that situation than a person would, acting on their own behalf, then.
Tim: They don’t have more leverage. What they hopefully do, is have a lot more knowledge. Because the OIC, it’s almost a piece of art what you submit to the IRS and the way that you fill it in and do the proper stuff.
Matt: Got it, got it.
Tim: And then a quick side note, too, since we are on the subject. If you’re somebody who hasn’t filed taxes in years and you’re terrified of the IRS coming in and kicking down the door and hauling you away to jail, because either A, you haven’t filed, or B, you owe a ton in taxes, there was a court case the other day, it was somebody who owed 2 million to the IRS, and they’re still squabbling about collecting. No talk about throwing the guy in jail or anything like that, but they’re just squabbling about collecting.
And even now, this guy who owes the 2 million, if he does things right, more than likely, you just file. If you haven’t filed in a few years, you file everything right now, today, as fast as possible, get back in the system. You raise your hand, tell the IRS you owe 5 million bucks. And then you file one of these offer in compromises, and say, “Hey, I owe this 5 million, but I can only afford to pay you $50,000. Will you accept it?” And there’s a very high likelihood it will be accepted.
Matt: So, you’re saying people like Nicholas Cage has options?
Tim: Well, I don’t know, does he owe back taxes?
Matt: He’s kind of notorious for that. That’s why he’s come up with so many crummy movies because he’s working to pay off the IRS. And then, Wesley Snipes actually went to jail.
Tim: Yeah, well, he did fraudulent stuff. He followed the wrong type of advice.
Matt: Oh, okay.
Tim: Yeah, he done wrong.
Matt: He went to the Al Capone school of tax evasion?
Tim: That’s exactly it. That’s exactly it. But, yeah, these people, Nicholas Cage or whoever, if they owe taxes, and that’s the mindblower to me. If they only knew and/or went to somebody who knew how to do things correctly, a lot of these taxes can be just wiped out. If people only knew how easy it was to get away from the IRS collection activity, a lot of people wouldn’t be paying taxes. It’s insane.
Matt: All right. So, we can end it with that. You get what you pay for.
Tim: You get what you pay for.
Matt: All righty. That’s awesome. So, whenever you’re ready to have Tim customize a Tax Hacker Blueprint for you, we talked about that a few episodes ago, and we’ve led off each episode with sharing what that’s all about. Whenever you’re ready for that, so you can minimize the amount of the hard-earned money you sent to Uncle Sam, and how to protect and keep what you got, go to taxhacker.com. Download Tim’s free book to help you navigate the new tax plan. And then after you’ve done that, you’ll have the opportunity to schedule some time with Tim. And either one or many, no, either he or one of his team members will get on the phone with you for a short five- to 10-minute call to assess your situation. And tell them that you want your Tax Hacker blueprint, and then they’ll just take it from there. All righty? Boy, it’s been a while since I read that closing. I stumbled all over it. Any last bits of advice there, Tim?
Tim: Nothing, other than you get what you pay for. And by the way, you don’t have to overpay for things either. But if you go to the cheapest source, you’re probably going to end up paying in the long run.
Matt: Get the cheapest service, right?
Matt: Sweet. All righty. So, that’s it for Tim and myself. And, 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 Bery. See you next Tuesday for another episode of Tax Hacker Tuesday.