“An (IRS) field revenue officer has more authority than the president…”
“An (IRS) field revenue officer has more authority than the president of this country,” said Rozbruch. “They can freeze your bank account, freeze your retirement accounts. They can repossess your car … I’m talking about hardcore people who owe in excess of $75,000.” The point is, ignoring the IRS isn’t an option. So why do so many people do it? Fines on rise In 2006, the IRS fined 3.7 million taxpayers, up from 2.7 million in 2005, according to IRS data. The government took enforcement action in the form of liens on property against 630,000 taxpayers in the same period, up from 523,000 in 2005. The overwhelming majority of people in trouble with the IRS are in their situation because they have suffered or experienced something traumatic in their life, like an illness or loss of job, said Josh Baker, a spokesman for JK Harris & Co., a large tax representation firm with offices in Glendora, Ontario, Pasadena, Whittier and elsewhere. Barbara Garcia stopped filing taxes after she was laid off from her job as an accounting assistant at a manufacturing company in Torrance. She was jobless for about a year, living on about $30,000 she withdrew from her 401k account. “I just wanted to avoid filing my taxes, but then I was so intimidated I just let it go for five years,” she said. “I knew I would owe because of the penalty from the 401K … it was one of my Scarlett O’Hara moments of just saying, I’ll think about that tomorrow.” Her wakeup call came when she arrived home one day to find the calling card of an IRS agent stuck in her door. Like many taxpayers before her, Garcia had a negative experience in trying to deal directly with the IRS. She said the agents were abrupt and referred all her questions to written correspondence. Like Jennifer Jones, Garcia finally went to a resolution specialist and expects to finalize her ordeal this month. Innocent spouse As frustrating as these experiences are, it’s even worse when people run into problems through no fault of their own. Gib Poiry, a retired GTE executive from Westlake Village, was surprised to learn that his wife had taken half a million dollars out of her separate retirement account without his knowledge. Not only had she not told him about it, she kept the withdrawals secret from the IRS and the couple’s accountant. By the time Poiry received a notice from the IRS announcing an audit based on the failure to report the withdrawal, the tax penalties had ballooned to more than $100,000. “I had a very unpleasant conversation with the IRS. They said they would freeze my bank accounts unless this was resolved, including my Fidelity retirement accounts,” said Poiry. “I developed hypertension.” Eventually, he went to a tax specialist after failing to make headway with the IRS on his own. After he filed an IRS form called Request for Innocent Spouse Relief, Poiry’s debt was cleared. His wife’s estate did have to pay it all back. Get help Theoretically, individuals can resolve some of these tax problems themselves. But if the amount in question is of any size, it’s probably wise to seek professional help. “If it’s a big debt, you’re better off finding someone … who really knows the ins and outs,” said Mark Cook, a certified public accountant who makes his living doing taxes of big corporations, but found himself in over his head after a divorce left him with tax debt from his spouse. “If you had an issue with cancer, you would not go to a general practitioner. These guys are specialists in a very specific area.” Rozbruch of Tax Resolution Services said he charges between $2,000 to $4,000 to negotiate an installment plan, and $5,000 and up to complete an Offer in Compromise, which is an IRS process by which the government and taxpayers make a deal about what they are going to pay back. In looking for help, seek a professional with specific experience in tax resolution, not just in tax preparation. Tax resolution, like credit counseling and debt management, is a target for fraud, since it involves people who are already in a tense financial situation and vulnerable to scams that promise more than they can deliver. One quick way to weed out some of the con artists is to make sure a street address is listed on Web sites. The IRS warns against companies claiming that they can settle back taxes for pennies on the dollar, although a lot of reputable firms are able to do just that. Tax Resolution Services keeps a running total of its taxpayers debt and the settlement amounts, and the average settlement is 13 cents on the dollar. Still, it’s up to individuals to do their homework and check credentials. Advisers that would have the correct experience to resolve complex tax issues would be certified tax resolution specialists, CPAs or lawyers specializing in that area, or enrolled agents, who have to either pass an exam or show that they have qualifying experience as an IRS employee. Indeed, lots of tax cleanup people advertise the fact that they used to work for the IRS and so they have inside information that gives them an edge. Whether or not that’s true, it’s certainly not a requirement for resolving tax problems effectively. People who have been through a process with the IRS universally express how much relief they feel once it’s resolved, and how much they regret ever falling into the situation. “Once you’ve been audited in a case like this … from this point on, I’ll never try to take advantage on my taxes,” said Gib Poiry. “I don’t ever want to go through that again.” [email protected] (818)713-3662 If you can’t pay what you owe: File anyway, it will avoid ‘failure to file’ penalties. If you miss the deadline (April 17 this year since April 16 is Emancipation Day, a legal holiday in the District of Columbia), don’t panic. The late filing penalty is 5% a month up to a max of 25% and after 5 you are capped at 25%. If you are a wage-earner, and have misplaced your W-2 forms and can’t get copies from your employer, IRS can often provide you with the information by August. Sources: IRS, Daily News research. KNOW YOUR RIGHTS Most people are a little bit scared of the IRS. Tax specialists say IRS field revenue officers have been instructed to be in the field three out of five days to make house visits. However, taxpayers do not have to let a field representative enter their home. See more rights at the California State Board of Equalization Web site: http://www.boe.ca.gov/pdf/pub70.pdf 160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set! No taxes, no wedding She held off marrying her longtime boyfriend, because she thought her secret would come out in the process. She didn’t tell family about the predicament. She stopped opening letters from the Internal Revenue Service. Finally, Jones contacted Michael Rozbruch, a tax resolution specialist in Encino, when the IRS said it would begin garnishing her wages to pay her debt. Rozbruch’s firm, Tax Resolution Services, spent three years negotiating with the Feds. In the end, Jones settled her $70,000 debt for $3,200. “It’s like this fairy-tale ending to this completely wacky story,” she said. Tax mistakes don’t have to ruin your life. But they can if you let them, which usually happens to taxpayers who bury their head in the sand instead of seeking help. That’s the worst thing consumers can do, say experts, because there’s no creditor like the IRS. One spring back in the late 1990s, Jennifer Jones decided she wasn’t going to file a tax return. “I had changed my withholding and took the maximum, and I knew I was going to owe,” said Jones, an executive assistant at The Academy of Motion Picture Arts & Sciences. “I thought I would just pay late that year.” But procrastination became a habit for Jones, and by 2002, she owed the government $70,000 in unpaid taxes, penalties and interest.