Don’t let tax worries keep you up at night – tune in now and transform your understanding of IRS challenges!
In this episode of The Agent of Wealth Podcast, host Marc Bautis is joined by Morgan Q. Anderson, EA, CEO, Founder of Golden Lion Tax Solutions and the author of Tax Debt Rule #1: There’s ALWAYS a Solution! With over 24 years of experience navigating the complexities of IRS and state tax agencies, Morgan is a seasoned expert in resolving tax debt issues.
Discover the real stories behind tax debt scenarios – from family-run businesses to unexpected inheritances – and learn about the surprising solutions Morgan has crafted for her clients.
In this episode, you will learn:
- Why some individuals end up with tax debt, and how to avoid it.
- When faced with a tax debt issue, how to determine if it’s necessary to involve a tax debt resolution professional.
- Insights into handling tax debt, from payroll taxes to personal income tax issues.
- Common misconceptions about IRS enforcement and penalties.
- Practical tax debt solutions, such as Offer in Compromise, penalty abatement, and more.
- And more!
Resources:
Golden Lion Tax Solutions | Tax Debt Rule #1: There’s ALWAYS a Solution! | Morgan Anderson – Facebook | Morgan Anderson – LinkedIn | Golden Lion Tax Solutions – Twitter | Bautis Financial: 8 Hillside Ave, Suite LL1 Montclair, New Jersey 07042 (862) 205-5000 | Schedule an Introductory Call
Disclosure: The transcript below has been edited for clarity and content. It is not a direct transcription of the full episode, which can be listened to above.
Welcome back to The Agent of Wealth Podcast, this is your host Marc Bautis. Today, I’m joined by a special guest, Morgan Q. Anderson, EA.
Morgan is the CEO and Founder of Golden Lion Tax Solutions and the author of Tax Debt Rule #1: There’s ALWAYS a Solution! For the last 24+ years, Morgan has represented thousands of clients before the IRS and state tax agencies, successfully identifying the best solution given their unique financial situation and then negotiating their acceptance.
While pursuing resolutions for clients, she has escalated her cases up the various ranks of the IRS, even successfully negotiating solutions for clients with the National Taxpayer Advocate and the Director of the IRS Collection Appeals Division.
Morgan, welcome to the show.
Marc, thank you so much for having me. It’s an honor to be here.
I’m excited to talk about taxes and dealing with the IRS, but it’s a topic that unfortunately some people have to deal with and it’s great that we have you on here to talk about it. How did you become a tax resolution expert?
Oh my gosh. A happy accident. I was in my mid-twenties managing a candle store on Boulder’s Pearl Street Mall bored out of my mind. I’ve always loved numbers, I’ve always loved debate, I’ve always loved finding solutions, being that problem solver, and I love helping people. I answered an ad in the Boulder Daily Camera for an administrative assistant position, and I went and interviewed, and it was with a company that did tax debt resolution and being young and naive, I had no idea that taxes could be due. I thought they just came out of everybody’s paycheck and just had never been exposed to that before. So I did the interview and I called my dad, who was a lieutenant colonel in the military, and I said, “Dad, I had this great interview, but have you ever heard of people not paying their taxes or having a tax debt?”
And I could hear him shaking his head like, oh, 25-year-old daughter, you’re so naive. And he said, yeah, hun, that happens. And I said, well, should I take the job? And he said, sure, why not? Give it a try. And I fell into this unique world that I had never been exposed to before. Again, I was 25, so keep that in mind. But I loved it. It mixed numbers and law and speaking with people and trying to get what you want out of a situation and helping people who are scared, helping people who don’t know what to do, who can’t sleep at night, who have this worry on their mind. And I learned how to successfully handle any type of text in a situation you can throw at me. As long as a client will follow my lead and follow the steps that I tell them I need them to do on their part to let me do my job, we can get there. And just, it inspired me. It lit this fire in me and almost 25 years later here I am still doing it.
Tax Debt Scenarios
What are some of the typical situations that people reach out to you for? I know you mentioned if you’re just not paying your taxes, but are there other ones that people reach out to you with?
The list of situations that I’ve seen would make you lose hope and humanity from the embezzlement and the theft that I’ve had to help clients overcome dealing with that situation. And a lot of it is family. You have extended family all working together, and I’ve seen so many situations where a cousin or a wife or a husband will be involved and somebody’s been pilfering money out of the business and hiding it through the taxes because if you don’t pay the electric bill, the electricity gets shut off. It’s pretty easy to detect when something like that happens.
But if you don’t pay the payroll taxes, nothing happens for a while. It usually takes the IRS a few quarters with payroll taxes to realize something may be wrong and then they’ll send a notice saying, we haven’t gotten a quarterly tax return and we haven’t gotten any payments. Could you please file the return that you haven’t submitted? And it’s easy for one person to intercept that from the mail. They don’t assign a revenue officer to get involved with a case for quarters and quarters so you can really rack up a bill. We’ve seen it happen time and time again. Every business I’ve worked with in this scenario goes like I’m juggling the finances because a big contract is slow with paying or a competitor comes in and it costs for the same service. And we see all kinds of different scenarios. We see it with individuals where they inherited a bunch of money and nobody gave them good sound tax advice, and then before you know it, they ended up with a tax bill from the way they spent the money. There’s various situations, any scenario you can think of, and I’ve seen it. I’ve had sales tax situations where an in-house bookkeeper didn’t understand the responsibility and just didn’t pay attention to it for two years. I mean, we could talk about it for hours.
And when someone does something like that, do you think they think I’m never going to get caught, and then they do and that’s when they say, okay, maybe I should reach out and get some help with this?
I’ve had that situation. Yeah, but in most cases, it’s the business owner who is just doing what they can to keep people employed and to keep the business going day to day so they know what’s happening. And then eventually either they start getting, as we call them, “love notes” from the IRS or the state threatening to take action if they don’t start addressing the issue or they have a turn in their finances and they say, okay, I’ve kind of shoved this under the rug long enough, now I’m ready to start handling it. I need help just figuring out how to unwind this knot with the IRS or the state.
When someone does reach out to you is there a common question that you get when you first speak to them?
Yeah, inevitably it’s asking if they will go to jail. The IRS and the states have done a very good job of creating this big ugly monster. When clients tell me what they envision the IRS or the state to be, when there’s a tax collection situation, they think of some guy showing up and knocking on their door with a fedora and an overcoat and a gun and a badge saying, we’re going to take your vehicles or we’re going to take your firstborn. And that’s not the case. But the tax agencies do nothing to squash that image. They want you to be afraid because if everybody is afraid, then they will voluntarily comply with the tax obligations that all of us have that allow the federal government to make the country continue to operate from day to day.
Solutions to the Tax Debt Issues
So let’s say someone does have some kind of tax debt for whatever the reason, what options do they have or what options do you help them with?
There are about ten different options, but I will give you a few.
A Few Solutions According to the Client’s Financial Condition
- What they can afford to address the debt with on a basis by setting up a monthly payment plan;
- Fighting for the penalties to be lowered through a penalty abatement request;
- There’s the “Offer in Compromise” tax settlement program, which is a big one.
In the commercials, I owed $200,000 and I hired this company and they settled it for $5,000. That is a real situation. It’s not a purple unicorn, I promise. But they’re not easy to negotiate. There is a way to have a taxpayer designated as legally not collectible. They just don’t have the means right now to address the debt. And they may not qualify for one of the other options, but that option they will qualify for. So there’s situations where sometimes you just stay quiet and you monitor it and you keep the client out of accruing more debt and you run the collection statutes.
There’s all kinds of different strategies that you can employ, and every taxpayer’s situation is unique. Their income, their expenses, their assets, and they owe a debt different than everybody else who’s in their financial area. It’s kind of like flipping a Rubik’s cube. So you just take each factor and you kind of put the pieces of the puzzle together and you look at the options available. Every state has different tax debt resolution options. They usually follow the IRS, but some states, for example, don’t have the settlement option. So it’s okay, what’s the next best situation we can get the client to qualify for? It takes time, experience, putting all those pieces of the puzzle together and figuring out, yes, here’s our top one or two options, and figuring out what the client they feel most comfortable with and then throwing the armor on and getting it done.
Instances When the IRS is Wrong
Do you ever get involved in situations where you get those, I guess you call them “love notes” from the IRS and it turns out that the client doesn’t owe that much? Before it gets to the kind of options you were talking about, does it ever get to the point where the IRS either makes a mistake or agrees that the tax that they’re claiming is not really owed?
Absolutely. I had a client come to me. She was being handled by unfortunately one of the big resolution firms and nothing was getting done. She was self-employed going back to 2016, and she used to move every year. Apparently the IRS put her 2016 return under audit and she never even knew because the notices weren’t going to her current address. They disallowed all of her business expenses because she didn’t respond. So 2020, she ends up getting a notice for $140,000 and panics. If you’re a self-employed individual, right? All think about everything that you pay, your insurance, your supplies and materials, any contractors you farm work out to, I mean, the list goes on and on. And for the IRS to say, well, we’re just disallowing all of it because you didn’t respond, it made her have a very large tax bill.
We ended up asking for an audit reconsideration and we sent 200 pages of documentation to the IRS that they’re now going through. So we’ll end up taking that six figure bill, it could end up at zero. And the sad thing is when the IRS does it, then they notify the state that you live in and if you pay state income tax, they’re going to do the same thing. So we ended up with a state tax debt issue as well that we had to also kind of piggyback and send them all the docs as well and sat the IRS made a mistake and thereby you made a mistake, so we need all of this fixed.
Offer and Compromise Program
You mentioned the “Offer in Compromise” tax settlement program. I’m sure every situation is unique, but what goes into whether the IRS accepts the settlement and it’s a settlement simply meaning, you owe $100,000, we’re offering to pay $10K or $20K or some number, and they either come back and say they accept it, or no, they don’t. Can you walk us through how that program works?
With an “Offer in Compromise” tax settlement program, there’s a couple of different ways to go about it. The big one is,you can’t afford to pay this debt. And the way we calculate what our settlement pitch is is based on the equity you have in your assets and your monthly income versus a national standard for allowances. If you go to the IRS website and look up collection financial standards, there are all of these factored allowances for what county you live in and how many people are in your household. They look at average food, clothing, and personal housekeeping supplies. They have averages for most things that we all have as a normal household expense.
If it’s a business, it’s kind of the same principle. How much equity have you built up in assets? And then what is the average monthly income versus expenses for the business? I mean, business offers in compromise are extremely hard to get done because they look at the value of the business on a whole as well as the other factors that they take into consideration. With an individual taxpayer for 1040 debt or any personal assessments from a closed business or an ongoing business, they look at just your equity and assets and your income versus expenses.
Example of “Offer in Compromise”
You’re a family of four in the Midwest. You rent your home and you have two vehicles that each spouse drives to and from work. You have two kids in public school, you don’t have a lot of savings, you don’t have a lot of money in your 401Ks or investments and you are living paycheck to paycheck. Basically, that would be a situation where if you owed $80,000 or a hundred thousand dollars in taxes, you would probably qualify for an offer.
But we have a lot of people who come to us and say, I want an “offer in compromise”. I’ve seen it on TV. But when you start looking into the bank statements, which the IRS or the state will do because they do a full deep dive into your financial picture, they look at bank statements, they look at how you’re spending your money, we see things like $300 a month on streaming services, plus cable TV, plus eating out three times a week. Those kinds of situations throw up red flags for offer specialists.
“Offer in Compromise” for Business Owners
You mentioned it’s tough for the business owner to get an offer and compromise approved because one of the things they’ll do is look at the value of the business. Can you explain this more?
So when you’re asking to settle the debt, yes, they’ll say, you can sell your business for $250,000. I mean, not that it’s a guarantee that it would sell, but the value of it is there based on the financial forecasting of the business and the reputation that you’ve built up. But if the business is in that kind of condition, you’re probably going to end up being an installment agreement. Because with a business with payroll tax, they don’t just look at the business to address the debt, they also look at who was responsible for the debt having been accrued because payroll tax is a trust tax. You as the business owner, or the in-house accountant, or the manager, or whomever oversees payroll, oversaw the money being taken out of your employee’s paychecks to hold in trust to turn over to the federal government or the state government, and that broke down.
When someone makes decisions on behalf of a business, they can be held personally responsible for payroll, allowing creditors to pierce the corporate veil and seek repayment from individuals. This broadens the avenues for debt collection, making business “offers in compromise” particularly challenging to achieve. Over the past 24 years, I’ve handled only seven or eight such cases because they require thorough examination of income and expenses, often revealing excessive spending, such as payroll costs disproportionate to income. By reevaluating business expenses and aligning them with income, we usually uncover significant savings. Working with business clients on tax debt involves deep financial analysis to identify viable solutions, ensuring a thorough understanding of their financials as the IRS and state do.
Declaring Bankruptcy
Does an individual declaring bankruptcy have any impact on whether their tax debt is collectible or not collectible or can be discharged, or is it totally separate? And will the IRS look at the financial condition whether someone declares bankruptcy or not?
Great question. Personal income tax debt can usually be discharged after three filing seasons, but payroll and sales tax debts cannot be discharged in bankruptcy. Each state has different laws, so consult a local bankruptcy attorney for advice. If tax debt is your main issue, consider that filing for bankruptcy will significantly harm your credit score for a long time, so it should be a last resort.
When to Hire a CPA or Get a Tax Debt Resolution Specialist
When should someone reach out to you? Is it the minute they get their first notice?
If you owe less than $20,000 in a single year and it’s a one-time issue, handle it yourself using resources like my book, Tax Debt Rule #1: There’s ALWAYS a Solution! which guides you through installment agreements. However, if you have multiple years of tax debt, expect to owe again, or have business payroll tax issues, it’s best to consult a professional due to the complexity of collection statutes, expiration dates, and personal responsibility assessments. For larger liabilities, ensure your CPA or accountant has experience in tax debt resolution, as handling such cases involves many intricate details and potential pitfalls.
Can You Go to Prison for Tax Debt?
I want to revisit something you mentioned earlier. You said the number one fear or question people have is about going to prison for tax debt. You noted that this isn’t typically how it works, but does the IRS do anything to correct this misconception?
Some people do, but it’s not as many as you would think. I think on average about 500 people per year go to jail over a tax debt and these are the nasty cases. These are cases where there is fraud that the IRS has uncovered where people have refused to address a tax debt or they lie on financial statements they give to the IRS. It does happen, but it’s an extreme situation. If you have a problem, you’re going to be proactive with it. That’s the best thing I can tell people to do. Don’t become an ostrich and bury your head in the sand when you start getting notices from the IRS or the state, because at that point you become reactionary.
Be proactive and open any notices you receive from the IRS or state tax authorities. Ignoring them can lead to severe actions like bank account levies or wage garnishments at the worst possible time, leaving you with no control over the situation.
The Future of The Tax Resolution Industry
Looking ahead, what do you see for the future of the tax resolution industry?
Boy, I don’t see it lightening up at all following COVID. Well, during COVID, a lot of the tax centers shut down. I don’t know if any of you had seen it in the news, but the IRS was literally throwing mail. They got into the back of tractor trailers. There were photos of their cafeterias at their bigger campuses with stacks of boxes, just one after another, piled all the way to the ceiling of correspondence that was received. But they sent everybody home because of the COVID threat, so nobody was working. So all the systems had broken down and it took some time, but the IRS is finally getting back to some type of normal with their collection efforts. Because if you look at everything that’s going on in our world right now, our country is bleeding money. Where is the easiest place for them to start recouping? People who have a tax bill?
Tax notices have become more aggressive and intimidating to prompt action from non-compliant taxpayers. In 2021, the tax gap was $688 billion, and states feel the impact of tax delinquencies more acutely than the federal government. For states, every hundred thousand dollars affects their budgets significantly, making them more aggressive in collections than the IRS. As a result, states often act faster on tax delinquencies than the federal government.
That’s a gap of taxes owed versus what’s actually been collected?
Yes. They’ve gone back and forth on the number when the first bill came through. Every politician on both sides. Oh, defund the IRS, right? You had extremists on both sides, which makes me laugh because politicians at our national level know that you have to collect taxes for our government to be able to operate. Where do you think all of the money to support our military comes from, right? They don’t just, well, they do kind of print it, but there has to be money in the coffers to spend on these things to send out the monthly social security benefits. This is where all this money gets funneled into. So when you hear a politician saying, defund the IRS, please know that it is just a grab for your vote. That’s all it is, because not one of them or their donors want to defund the IRS.
Tax policy discussions are commonplace among politicians, yet significant reforms are rare due to the complexity of the tax code and the influence of special interests. Although some propose sweeping changes, such as a flat tax system, the likelihood of implementation is minimal given the current political landscape. The intricacies of the tax code and the allure of tax credits and deductions ensure that major tax policy changes remain elusive.
Recent bills aimed at improving IRS operations highlight the agency’s outdated technology and inefficient procedures, exacerbated by the pandemic. Delays in processing tax returns and inadequate customer service underscore the need for modernization and investment in IT infrastructure. While funding for such improvements has faced opposition, the necessity of a functional IRS is evident, especially as more taxpayers face tax debt and compliance issues. Despite challenges, the resilience of the tax system suggests that reforms and improvements are on the horizon, ensuring continued revenue collection and government operations.
Yeah, I guess it’s just probably more nimble than the IRS, but I think, and this was a couple years ago, it started where I think there was some funding that the IRS was going to be given to the IRS to enforce some of that tax gap. And I don’t know if it got passed or at one point I guess it didn’t, and maybe now it did get passed. So maybe that I guess is going to ramp up.
Alright, Morgan, that’s all the questions I have for you today. I want to thank you for joining me on today’s episode. You offered some great advice for people with tax debt. How best can someone reach out to you, find out more about what you do?
Go to our website, goldenliontaxsolutions.com. You can find me on LinkedIn and on Facebook. We have a Twitter or X that we post things through and just reach out to us. I will always talk to somebody about their situation and give them an honest assessment.
Great, we’ll link to those in the resources section of the show notes. Thanks again, Morgan. And thank you to everyone who tuned into today’s episode. Don’t forget to follow The Agent of Wealth on the platform you listen from and leave us a review of the show. We are currently accepting new clients, if you’d like to schedule a 1-on-1 consultation with our advisors, please do so below.