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How to Deal With Collections Issues for High Net Worth Clients

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So high net worth clients present several challenges. From dealing with things from an IRS perspective, the first challenge that you’re going to have is that high net worth clients don’t fall within the IRS’ unusual guidelines for ordinary and necessary expenses. So take for example San Diego. For a single person living in San Diego, the local housing and utilities standard is about $2,500 a month, so the IRS allows you $2,500 a month as a single person for your housing and utilities. I always play a fun exercise to see where you can get housing for a single one-bedroom apartment for $2,500 a month in San Diego including your utilities and the reality of the situation is you can go to Oceanside which is 45 minutes north of here or you can go to Tijuana which is 45 minutes south. And those are about the only places where you’re going to find $2,500 a month rate including housing and utilities but for high net worth clients this presents a big problem because number one you’re dealing with income levels that are way above the IRS as ordinary standards so the fact of the matter is you may have somebody with an $8,000 mortgage or $10,000 mortgage or $25,000. Just because

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Should I Represent Myself in an IRS Audit?

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Well it depends, but not usually. First of all, the mistake that a lot of taxpayers make is they think that they can handle the audit because they think either a they’re smarter than the auditor or the errors on the return aren’t really that severe. The problem with that is a taxpayer who goes into a situation with an auditor, unless that taxpayer is a tax attorney or a CPA, is probably not going to have the same level of knowledge about how audits work as the auditor. So even if the taxpayer is familiar with the law, the taxpayer is generally not familiar with the way that audits work and the procedure with that and so the risk is that even if the tax loss is minimal, the taxpayer could potentially put themselves into a damaging situation. So for example, if you’re not really used to changing tires and you get a flat tire on the road, yes you could change the tire yourself. There is the possibility that you’ll do a reasonably good job and change the tire and then everything will be okay, but there’s also the possibility that you might make a mistake. If you believe that there is a mistake on your return and if that mistake is significant, meaning it’s over five thousand dollars in tax back to the government, then you may want to consider hiring a representative to help you because once you get into a situation where there’s an audit and their adjustments are being made, then the penalty conversation comes into play and so the more adjustments that are made on the return, the more it increases

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Should I Hire the CPA Who Prepared My Tax Return to Represent Me in an Audit?

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So your CPA maybe the best CPA in the world and this conversation is not to suggest it anything negative about CPAs whom we work with all the time, who are a huge asset to our practice and I don’t think any of the CPAs that we work with would have any problem with me saying this. The CPAs generally are not good in audits and they’re not good because they don’t do a lot of audits. From a CPA perspective, a CPA is compliance based. CPAs are focused most of the time on preparing returns and preparing them accurately. They have a whole living based on being a CPA which is a certified public accountant. A certified public accountant is an individual who is certified to prepare financial statements so the reality of the situation is when a CPA is charged with compliance, and if there is any doubt as to that compliance meaning, there are errors on the tax return the CPA prepared, then there’s a natural conflict of interest because either

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Will I Go to Jail As the Result of Getting Audited by the IRS?

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If you make a mistake on your tax return, the government isn’t going to put you in jail, but if you make a big mistake on your tax return and it was accompanied by the willful knowledge that you intended to make that mistake, the situation is different. For instance, if you said I’m just not going to report any income or I’m going to try and conceal income so I don’t have to pay taxes ie. I’m going to evade taxes or if you deliberately file a tax return that’s false or engage in any of the tax penalties, yes you can go to jail for that. The auditor is not going to be the one that puts you in jail but what happens is with civil audits, which are a great referral source for the criminal division of the IRS, a lot of times what will happen is the government will engage them and they call it a parallel investigation. They’ll have a civil auditor who’s conducting a civil audit, the auditor will find something, and they will report it to the criminal division.

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What Advice Can You Give Me About Setting Up a Payment Plan With the State of California?

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So the first thing that I would tell you about setting up a payment plan for delinquent tax liability is California is going to be much more aggressive in payment of that liability than the IRS. One, California is pretty cash-strapped so the thresholds for the seriousness of a certain liability are a lot lower than they are at the IRS level. So for example if you owed $20,000 to the IRS it’s not really that huge of a deal. The IRS has hundreds of thousands of people that owe only $20,000. With California, $20,000 liability will get you into what’s called the complex account recovery unit. So California takes smaller liabilities much more seriously than the feds do. They’re a lot quicker to assess them, they’re a lot quicker to take collections actions, and they’re a lot more aggressive in their collections actions. One of the problems with dealing with the state of California is everything with the IRS is usually pretty formulaic and it’s regulated by the Internal Revenue manual. California, we will take

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What Is a Tax Lien?

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A Tax lien is a security interest that the government has in any real or personal property that the taxpayer owns. So what does that mean? In reality if you owe an obligation to the IRS or to the state, then a lien is the government’s way of protecting its interest in case you were to liquidate any property. So let’s take a house because that is the example that we run into most commonly for taxes. If you own a house and if the house has equity and the government puts a lien against it then when you go to sell that house the government is going to take its share of what you owe before you get any proceeds. So a lien is just simply protecting the government’s interest saying “hey we’re the IRS, we’re the state of California, we have a right to the equity in this property prior to it being sold.” So what a lien does those two things: number one it protects the government’s interest and number two liens are a matter of public record so when a lien shows up, it has the tendency to either damage the taxpayer’s credit or it could be discoverable.

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Help Me! I Have a Government Agent at My Door, What Do I Do?

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So the first thing is don’t talk to the agent. Get the agent’s card, get their contact information, figure out who that person is and then pause and take a deep breath. Agents show up at your door for a couple of reasons. Number one, you owe them money and they’re trying to collect. Number two they’re auditing you but usually when they’re auditing you they’ll be sending you a letter and say “Hey I’d like to set up an appointment” so that you can be audited. It’s not like people go through surprise audits. Number three are Criminal Investigation people and obviously if the criminal investigative agent shows up to your door, you want to be very careful what you tell them but even with a civil collection agent, somebody paying a surprise visit to you is not really a welcome thing and you’re probably not prepared for it. So the easiest thing to do is to say “hey I can’t talk to you, I need to run this by an attorney.

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