[00:00:00] Speaker A: Welcome to Legal Talk. I'm John Mitchell, and today we're uncovering the legal insights and strategies that help you protect what matters most. You're watching now Media Television.
[00:00:10] Speaker B: Well, hello there, everybody. Welcome, welcome. Welcome to Legal Talk. I'm your host, John Mitchell. Oh, my God, I'm excited. I am overflowing with joy to be here with everybody today. The big audience. Oh, my God, I appreciate so much the fact that everybody tuned in and is going to be with us. Buckle up, right? Put on you, Fasten your seat belts. Put your trays in the upright position. We are about to take off. We're going to have a wonderful show today. I do not have a guest, so I'm going to have to do all, basically all the talking myself. So don't get tired of, you know, listening to me. I'm going to do my very best to keep high energy and keep everything on track for you guys. You're going to have a great show because today, today, today, oh, my goodness, we're going to be talking about some taxes.
Yay. See, if I had a button here, push like Jim Cramer or something, I'd press a big applause button, right?
But we don't do that around here. But if I did, you just know that I would have a big applause button that I'd push so we can talk, you know, have a big applause for some taxes because people might think to themselves, okay, well, taxes, so, so, you know, maybe not too exciting, but man, oh, man, if you could see taxes the way I see taxes, because here's what I'm going to tell you. Taxes touch every part of our lives.
Wake up in the morning and breathe air, you know, practically. They're almost taxing the air you breathe, right? So, you know, taxes touch everything from sales tax, property tax, you get in your car, drive somewhere, boom, excise tax, right? You got your license plates, you know that you renew every year, your registration.
That's a kind of tax.
You know, you go to work and make money. That's taxes, right? So every. Taxes touches every aspect of our lives. And sometimes, you know, people don't know that, but there is an average of. Let me say this correctly, I don't want to get it backwards because I am, you know, full disclosure here. I'm kind of dyslexic sometimes I get things backwards. But there's an average of two changes to federal tax law every three days. So three days, two changes, another three days, another two changes, right? And, you know, life is already complicated. Taxes are complicated. Life is complicated. But that's what here we're here for here in legal talk. We're going to help you hack your way through that jungle. We're going to help you, you know, simplify complicated things, right? That's what we're trying to do here.
So right now we're talking about taxes and we're talking about some changes that have come about the most, you know, the most recent set of changes that Congress and this current administration has brought about.
And that was signed in July 4th of 2025. So last year, July 4th. This is barely, you know, seven, eight months old, right? The big beautiful bill. The one big beautiful bill. Because it can't be two. It's got to be one. One big beautiful bill. Or like we sometimes call it in the tax business, OB3, right? One big beautiful bill.
Now, the one big beautiful bill does have some interesting provisions that's going to be really kind, interesting to folks out there in the audience, right?
And, and so one of the things that, that we have in our one big beautiful bill that's going to be kind of interesting, no tax on tips, right? Now, I'm not going to go into the whole, the whole thing. There's terms and conditions apply. Like the, the lawyer types like to say, right? So the no tax on tips. The big important couple of things that you've. True. I'm going to say probably three things, important things that you're going to want. Remember about the no tax on tips. The tips have to be reported to your employer and your employer has to include those tips on your W2 form, right?
So you can't take money, put it in your pocket, thousands of dollars, you never wrote it down, never reported it on anything. And then you get audited and the IRS looks at your bank account and says, hey, you got an awful lot of deposits there, right?
And you say, oh, don't worry about it. Those are my tips. Those don't pay taxes. Can't do that. They got to have been reported because the small print, right, the small print that us lawyer types like. Small print says that it has to be qualified tips. And a tip that has not been reported on your W2 form through your employer is not a qualified tip and is therefore not eligible to be no tax on tips, right? Secondly, you got to remember there's a numerical limit, right? Per person, it's $25,000, right? So you can't, you know, say, oh, I got a look, look, I got this Lamborghini, right? But it was a tip, you know, good service. I got a Lamborghini it's tax free, right? Nope, can't do that. You got it. It's got to be under $25,000 in a calendar year. And the other thing to remember about this no tax on, when they say no tax, they're talking about no federal tax. No federal income tax, to be specific in particular, right? So you still, that's the reason why it has to be on your W2 because they are still going to take out Social Security and Medicare taxes from your, from your tips, right? So you have $10,000 worth of tips. It's not going to pay maybe federal, you know, federal income tax, but it is going to pay Social Security and Medicare tax on that. So beware when they say no tax. Well, it's kind of like everything in this life and in this world, right? Depends. It depends. And subject to terms and conditions. Read the small print, right? So that's the thing about tax. No tax on tips. Another one deduction for overtime pay. Some people say no tax on overtime. Well, guess what? Maybe, maybe not, right?
Again, the devil is in the details, right?
And so that is a maximum amount of $12,500 of income. Of income that you're not going to pay federal income tax on. Again, just like the tip thing, it's going to be Social Security tax is going to be taken out. Medicare tax is going to be taken out. But also the other thing to remember about over at no tax, quote, unquote, no tax on overtime. That is just talking about, you know, when you have overtime. Let's use simple numbers, right? Let's say you make $20 an hour and you work 40 hours in a week. So it's 20 times 4800, right? 20 bucks an hour. When you work over 40 hours in a week, you have to pay, they have to pay you. Your boss has to pay you overtime, right?
Overtime under the federal regulations is time and a half. All right, so that overtime, let's see you work a Saturday, right? You come in on Saturday and you get that special project done for your boss. Well, guess what? It took you five hours, right? Those five hours are in excess of 40 hours. So those five hours don't get paid at your regular twenty dollar rate. They are going to get paid at $30 because it's time and a half.
So 20 and then half again, extra 10 bucks. So now you're making 30. So the no tax on overtime is on the premium. So it's on the $10 differential, right? So your regular pay that you would have gotten if that were straight Time you still pay tax on that. So you don't get out of any and all taxes on overtime just for it being overtime. Right. It's very narrowly construed. This no tax on overtime. It's overtime premium, the thing that you're looking out for.
So another big change that people are happy about, increased child tax credit. So used to be it started off originally $1000 and most recently it was 2000 and they bumped it up $2200 per child. So I just did a tax return a couple of days ago. Three kids, three tax credits, $6,600 off your taxes. Right. And they've made it all refundable. So, you know, before you could run into a case where let's say you got three kids, but let's say you had $10,000 worth of federal taxes, that $6,600 would have gone against that 10,000. But let's say you only owed the $4,000 in taxes and you got $6,600 worth of child tax credit. Well, too bad, so sad that $6,600 is going to wipe out your $4,000 that you owed, but it's not going to give you money back. So that is what we call in the tax business a non refundable credit. And so child tax credit used to be partially refundable, half of it was refundable. Now they've gone ahead and said refundable, the whole thing. And that's, that's a good thing, I guess, for most people. And finally, the last thing that I would mention about the one big beautiful bill, larger tax refunds are expected this year.
So that, you know, that's a good thing.
I don't have a big enough sample size in my office to really say how much tax refunds have gone up. I heard a statistic the other day that they were up anywhere from 8 to 10% higher. So if you got, let's say, you know, $2,000 back last year, well, you might get $2,200 back this year. Right. So it might be on average about 10% larger. Make sure that you have good up to date direct deposit information. Because they're kind of squeezed, putting the squeeze on us, man. They're going to stop sending out those paper checks, those good old, those good old yellow checks. Right. So no more, no more U.S. treasury checks. Eventually they're still sending out a few, but they are certainly tightening up the spigot. And so they don't want to be sending out yellow checks because too much potential for fraud out there with those yellow checks going through the United States Postal Service, they get intercepted and they get cashed and it's just a big headache for everybody and a big loss for the government, right?
So now you have to have a direct deposit information, have to get your taxes direct deposited to your bank account, right?
So that's some of the biggest changes that we are seeing on the tax front.
Again, my name is John Mitchell. I'm the host of Legal Talk. And we're cutting through all the complicated stuff and trying, you know, cutting through that jungle making complicated stuff easy for you.
So if you want more Legal Talk, hang on tight, you know, give yourself the hot or cold beverage of your choice and then take a seat, strap back weekend because I'm going to be right back after this commercial break and we're going to have more Legal Talk and more. We're going to talk more about taxes soon as I'm back. Don't go away.
[00:12:00] Speaker A: We'll be right back. We'll be right back with more practical, real world legal guidance. This is Legal Talk on NOW Media Television. And we're back. I'm John Mitchell and you're watching Legal Talk on NOW Media Television. Let's continue the conversation.
[00:12:14] Speaker B: Well, welcome back, everybody. Oh, my goodness. Tempest Fugitive, Time flies. I hope you all had a chance to, you know, make a visit to the good old restroom, get your hot or cold beverage, get strapped back in because we are ready to continue with Legal Talk today.
And that's my privilege and my pleasure to do so. And I'm so happy, so thankful that everybody out there is with us in the audience. Right? Okay, so number two, big, big topic, right? We're going to talk about some top tax mistakes that trigger IRS problems. Man, oh man, nobody wants problems with the irs. This I know personally.
You know, one time a guy, I heard a guy say, if you owe money to the irs, go out, borrow money from the local mafia loan shark so you can pay off the IRS man, because you rather, you rather owe that loan shark the money than the irs, man. I don't know about all that. I'm not saying borrow money from the mafia, but, you know, I have heard that phrase said before. So no one wants problems with the irs. Now, the thing about it, most problems come from really simple oversights or really simple mistakes. That's the first thing to know. Bad things really do happen to good people. You can be one of those guys out there, you know, working hard, punching that clock and giving it your all. You're, you know, you live honest Honest life. And you, you know, you respect your elders and you take your vitamins, right?
And all of a sudden one day, boom, here you got a letter from the irs. Thing tends to snowball, especially if you don't, you know, take care of that litter right away. And so that is what I specialize in, by the way. So I'm going to try and help you today on the big show. We're going to talk about ways that you can, you know, kind of stay out of trouble, ways that you can avoid hiring me to take care of your IRS problems. How about that? Right? That's good. So one of the things that comes about is misreporting 1099 income, right?
There's basically two different ways that you can go work for another person right there. And so that's called worker classification. And that's a whole other show. One of these days, maybe I'll do a worker classification show, right? But worker classification. So when you go to work somewhere, are they going to take taxes out or not, Right? Are they going to pay you your gross pay? So you get 20 bucks an hour. You work 40 hours. Here's your check for 800 bucks. See you next week, right?
So then you get your entire check, you get all of your earnings. They don't. Your boss doesn't take any money out. And that is commonly referred to as an independent contractor status.
And so that is, you know, the thing about it, since they don't take taxes out, you are now responsible for 100% of your paying your taxes in, right? Social Security, Medicare, federal tax. So your life, you got a bigger check every week, but your life also just got more complicated, right? Because now all that stuff that the boss man used to do in the background, taking, you know, making all those calculations, taking that money out of your check, sending it every two weeks to the IRS, all of that stuff now lands on you. So 1099 problems are one of the big things that gets people in trouble with the irs. So if you are going to work as an independent contractor, you're going to get paid, no taxes taken out.
It's worth it to you usually to come spend a couple hundred bucks on, on a guy like me. Sit down, make an appointment, and I will help you map out. Maybe I can even make you one of those fancy spreadsheets, right? I can make you a spreadsheet so that when you, every time you get paid, you plug that in and you know how much money you should take out of that and set aside in a savings account. Don't Touch it. Set aside in that bank account and wait every three months usually is the standard.
So you can send that in partial payments to the irs. They are called estimated tax payments. And boy, oh, boy, I could do a whole nother show on estimated tax payments if I wanted to, right?
So that's one of the big things that gets people in trouble.
Incorrect child tax credit claims.
And I'm going to go ahead and expand on that, because not only child tax credit claims, but also just claiming dependents in general that may or may not be, you know, your. Your lawful dependents, right? You want to make sure that the I's are dotted and the T's are crossed. Make sure that you really have the right to claim those dependents on your tax return, right? It reminds me of an old joke, man. Lady walks into the kitchen. Husband's all got a kitchen table all spread out with papers, right? Very serious look on his face. The brow is duly furrowed. He's got himself a calculator there. He's calculating stuff. Wife says to the husband, hey, what are you doing? And he says, well, look, I'm doing our taxes. Oh, okay. That's great. She looks over his shoulder, right? Sees a piece of paper, he's filling out the tax return and says, yeah, I don't know about all that. Hey, are you sure that we can claim our dog and our cat as dependents?
And the man says, oh, yeah, yeah, yeah, man. Look, our CPA does that all the time, right? Okay, okay, okay. Hey, are you sure that this trip we took, you know, our second honeymoon, we went to. We went to Paris, ate dinner, you know, had some coffee, you know, beside the Eiffel Tower. It was a good time, right? You sure? We can write that off as a business, but, yep, no problem. No problem at all. Our CPA does that all the time.
So wife thought about it for a second. She said, hey, wait a minute. Let me ask you this, you know, husband of mine. Why is our CPA not doing our taxes? Why are you doing it? Where's our cpa? Why is he not doing it? Oh, he's in jail for tax fraud.
So don't be that guy, right? So make sure that you are actually able to claim the dependents that you're claiming, right? IRS kind of cracking down on that a bit in the last few years. So you want to make sure that when you have a child, and so you. That's when you talk to a reputable tax professional.
By the way, if you go to a tax person that is working, I don't know, let's say out of a booth at Starbucks or something, you know, maybe rethink your choice of tax professional. Right?
If he refuses to sign his name to your tax return, do not walk away.
Run away. Run, baby, run. Because that is a big red flag, bad problem. You know, if I were doing some kind of hinky fraudulent tax returns, I wouldn't want to file them either. So sometimes those guys at the booth at Starbucks, they don't want to sign their name to your tax return, but they promise you, your cousin's brother's neighbor says that you get the biggest refund back. Right? Well, yeah, let me, you know, let me, let me tell you this. You don't want a big refund that you're going to later have to go ahead and pay back to the irs. So, you know, make sure that your I's are dotted, your T's are crossed. Make sure that if you're claiming dependents, you really do qualify to claim those dependents. And if you're unsure, you can get a second opinion on that, by the way. Right?
So another thing that causes some people trouble, not reporting the income from their side hustle, right? So maybe, I don't know, God knows, maybe you sell stuff on Etsy, maybe you make little bead bracelets and sell them and you say, oh, that's just, you know, it's just my hobby. I do that on the side. And some people have the misconception, the incorrect idea that if you don't get a form from somebody that that money is not reportable on your tax return.
Ain't actually wrong, right? So if you make artisan type stuff, you paint pictures, you make little jewelry or whatever it is, you sell that online on Etsy or maybe you do old school, man, I don't know, I don't know. You, maybe you're out there at the, that, the flea market every weekend, you know, setting up a little booth, selling some stuff. Yeah, all that is income and all that is subject to being reported on your tax return. So if the IRS ever does start looking at you and they ask you, hey, Bob, you know, tell you what, why don't you send me your last 12 months bank statements, right? They're going to go through that bank statement. Oh, by the way, you can refuse to give them that bank statement, but if you do not going to make a difference in the end because they're going to fill out a little paper, you know, called an administrative summons, and they're going to get that bank statement straight from the bank. So, you know, resist all you want, but it's, you know, it's not going to end up. Well, they're going to end up getting that bank statement anyway, right? So you're going to go through the bank statement, they're going to go through your. The first thing they do, first thing IRS folks do. And this I know, by the way, I used to work for the IRS for some time. I was an appeals officer.
But yeah, I do know that the first thing they do is add up all of the bank deposits and call that income. Unless you can justify that it wasn't taxable income somehow, right? Was it a gift, was it an inheritance, was it a loan, whatever? So yeah, but now you're on the defensive. Are you going to be justifying that that money that they think is a, you know, is taxable income, that it's not. Right.
So that's not reporting all your income. That'll get you in trouble. And filing with identity theft risk. Right. Sometimes people run into trouble because their information is out there and somebody has committed some kind of identity theft, some kind of fraud in your name. And when they do that, that puts you on the back foot, right? Now IRS thinks that you made more money than you really did. And so that's a big cause of problems nowadays. So those are some of the biggest things that people run into tax wise. And again, I'm John Mitchell and host of Legal Talk. We're making the complicated things simple, cutting through that jungle out there. And if you, by the way, I've been told by the powers that be, right to give you this little promo ride, this little plug if you know, if you like what you're seeing, you can find more Legal Talk episodes, man. You can find it on YouTube, Eclipse, they post it on the Now Media YouTube channel. You can get us on Roku, you can get us through Spotify in podcast form. Spotify, Apple Podcast, any way that you would normally get podcasts. You can look up NOW Media and you can find Legal Talk. So you can get it on the go or you can get it live on TV or on the Roku app. I know they've got now. So that's a big deal.
So check us out if you like what you see. There's plenty of ways that you can get your fill of Legal Talk. So again, I'm John Mitchell. We are going to go to another quick break and we will be right back right after this.
[00:24:24] Speaker A: We'll be right back. We'll be right back with more practical real world legal guidance. This Is Legal Talk on NOW Media Television. And we're back. I'm John Mitchell and you're watching Legal Talk on NOW Media Television. Let's continue the conversation.
[00:24:38] Speaker B: Well, hello there, everybody. Welcome back to Legal Talk. Oh my goodness, we are half, we're past the halfway mark.
So, you know, hope that everybody's comfortable, strapped in, you know, waiting for some more good tax information, right?
And I'm just a guy to help give it to you, right? Tax attorney, enrolled agent, former IRS appeals officer. All the good, all the good credentials. You know, my, my smart alec oldest son one day looked at some, some paperwork while I was, you know, getting ready to go present at some kind of, you know, muckety muck tax conference. And he looks at my slides, he says, dad, do you know that you got more letters after your name than there are letters in your name? And I said, well, no, son, I have not sat down and counted that out. But now that I look at it, yeah, I guess that is a whole frickin Alphabet soup there. So, you know, the tax business has been good to me. This is a great career. Been at it for, you know, 30 some years now. And you know, as long as the ticker keeps ticking like it should, like the old country song says, right? Long as long as God keeps letting me wake up vertical, not horizontal, another day we're going to keep on, keep on keeping on giving people good tax information and good assistance with anything tax related. So question, right?
Sometimes now as I record this, I don't know when you're watching it, but as I record this, just for context, right, this is March, March of 2026, right.
So you know, taxes for individuals are due April 15th. Yes, you can get extensions and all that good stuff. But the normal deadline is April 15th. And so sometimes people come to me, you know, last minute and they asked me, john, how can I get my tax bill down? Right? Like how can I write a smaller check to Uncle Sam? Or maybe how can I have Uncle Sam write me a bigger check for myself, right? As the case may be, right? And what I'll tell you is this, like if somebody came to me today and said, john, how can I lower my taxes? I'm going to be like, yeah, you are. You know, you're mostly out of luck, right? Because the tax stuff, that is going to really help you with your tax planning, most of it has to be done by December 31, right? So here we sit in March. I can't go back, you know, I don't have a DeLorean. I'm not friends with Michael J. Fox. Can't. No, no. Doctor. What's that crazy doctor in that movie that he was, you know, that he was a doctor or whatever. I forget his name. But, but no time machines here, right? That's the point. We can't get in that DeLorean and go 88 miles an hour and go back in time. So what we got to do is just work with what we've got in our hands right now. Luckily, we're not completely, we're not completely out of luck. So if you're sitting here in March thinking, how can I lower my tax bill? How can I reduce my taxes? Well, one of the things that you can do is to max out your retirement contributions. Now, the rules on this. I'd spend another two hours talking about this if I went into all the rules. But you know, usually as I sit here today, an IRA can have a $7,000. If you qualify to make IRA contributions, they start off with that. If you qualify, then your contribution for 2025, maximum contribution is $7,000.
Unless you're over, God, what is it, 55.
Then you got a catch up contribution you can make, that's an extra thousand. And so now you're talking about $8,000. And you say, okay, so I can put $8,000. But wait a minute, you can put $8,000 into an IRA and you can actually deduct that from your taxable income, assuming you qualify. Right. And whatever tax bracket you're at, let's say you're in a 25% blended tax bracket and you put $8,000 in, you know, in an IRA. Well, now you've just saved yourself $2,000, my friend. That 8,000, you immediate, that's an immediate return on that money.
So that's a very, very powerful thing that you can do. And that is not Roth, that is traditional IRAs. So you can, you can do that. Word to the wise, right? As long as you meet all the qualifications. And again, find out if you meet all the qualifications, you go to a competent, regulated, licensed tax professional. Doesn't have to be me. It can be me or it can be somebody like me, but somebody that's on the up and up is going to tell you the straight story, right?
So you can still make IRA contributions. Now that's one, right? Number two, if you're an individual, even if you have a W2, if you qualify for HSA Health Savings Account, you can make those HSA contributions also.
Also up through April 15, right? So you, you, if you're sitting here in March and wondering what can I do? Check and see if you qualify. If you have an hsa, you know, kind of look up how much money you can put away in that HSA and of course that'll be tax free if you later spend it on medical care.
But you know, you, you can do that, right? You can put that money, it's still your money. It's going to sit there if you spend it on a vacation to Disney World or something. Yeah. Get ready to pay taxes on that when you spend it. Right. But at least for today you can put it away in that good old savings account and you can get some, you know, put some money away and save money and also save on your taxes.
And finally the other thing that I would say, if you're sitting here in March wondering how can I get my tax bill down a little bit?
Well, I'm going to say self employment retirement contributions and that would be either a SEP, IRA or a 401K. Right.
So if you're self employed, you're going to want to talk to a tax pro and kind of figure that out. See if you can do anything either with an Iraq or if you're self employed, the SEP or the other or the 401k.
And also if you qualify a health savings account. So that is, those are a few of the things that you can do right now in these months of March, you know, to get your tax bill down. I'm sorry, I wish I had more, you know, but that's, but that's what's in our hands right now. Now if you do want to get an early start on things. Oh my God. See, that's a good idea. Now you can wait until after tax season. You can call up me or another tax professional, you can make an appointment and you know, we'll help you plan things out so that you can get an early start and make your moves before December 31st so that now you can go ahead and have, you know, a little bit better planning in place. And you're going to have some other ways, other ways, charitable donations, you know, for example.
So other things that you can do to get your, your tax bill down. But a lot of those have to be done by December 31st. And so that's the big thing, that's the big takeaway today. Right? There's still a couple, two or three things you can do maybe, but most of it, you know, the opportunity is already passed.
So that's it for this segment. I know it's a, you know, we cut, we're cutting it a little, a little bit short. But, but that's all right. That gives us a little bit more, a couple more minutes.
Next, next go around. We're gonna have a really, a really good thing to talk about next time.
So again, I am John Mitchell and let me go ahead now, we've got a few, couple extra minutes. I'll go ahead and give you my contact info, right. So you can contact me through my website.
That would be www.99-taxhelp.com.
so you can find me through my website, www.99-taxhelp.Com.
so you can always find me there.
You can write to me. Attorney Mitchell. A T T O R N E Y M I T C H e l
[email protected] you know, you can call me on the telephone.
899 tax help. So that's 800-998-2974. And you can leave the rest of it off. But that's, but that's my phone number, right? 800 number.
So happy to have you here in the audience with us. Thanks for joining. And we will be right back after this break to wrap it up and call it a day. So thanks very much. And we will be right back.
[00:34:05] Speaker A: We'll be right back. We'll be right back with more practical, real world legal guidance. This is Legal Talk on NOW Media Television. And we're back. I'm John Mitchell and you're watching Legal Talk on NOW Media Television. Let's continue the conversation.
[00:34:23] Speaker B: Alrighty, folks, this is it. You know, wrapping up the big Legal Talk for today.
This is where we make complicated stuff. Simple. We help you. I got a, I got a giant machete right now. They don't let me actually carry around an actual machete, right, because, you know, liability and such as that. You know, people get alarmed and call the police and stuff. So I'm talking about a metaphorical machete, right? So we take our big metaphorical machete and we chop through that jungle of life. You know, taxes are complicated. Legal stuff is complicated. And that's what we do here on Legal Talk. We help you to cut through that jungle with our big metaphorical machete. And you know, we help you make complicated things. Simple, right? So that's what I do here. I'm the host of your show, John Mitchell. And thank you, thank you, thank you for being with us on another episode of Legal Talk. Now, segment number four, bringing it down like we're, we got our flaps in the right position, we got the, the Landing gear is down and we're ready to come in for that big landing, right? And so what happens, okay? What happens if you end up. So you file your tax return and, oh, holy crap. Oh, my God, I owe money to the irs. Now what am I going to do, right? What do I have to do about that? Well, I'm glad you asked. I'm here to. I'm here to help, right?
First of all, let me go ahead and say something. I'm going to give everybody out there this piece of advice that I give all the time, right?
Sometimes what people want to do, right? Sometimes people say, well, you know, I'm broke. I don't have any money.
You know, taxes are due April 15th.
Let me just, you know, just not do anything, right? I'm gonna. I'm going to take that ostrich approach. I'm going to just bury my head in the sand, right? How about that? Well, you don't want to do that. And I'll tell you why. Because the penalty for not filing a tax return is literally 10 times more than the penalty for not paying your taxes.
Let me say that again. Ten times more. So the penalty for not paying Your taxes is 0.5%, and the penalty for not filing your tax is 5%.
And, you know, there's calculations on that and stuff, but it's 10 times worse to not file than it is to not pay. So I always tell people, even if you don't have money to pay everything that's owed when you file your tax return, go ahead and file that tax return on time before April 15th, and you'll be in the catbird seat even if you can't pay, right?
File the thing, pay what you can ask for, a payment plan, all that good stuff, but don't not file your tax return just with the excuse of, well, I don't have any money right now. What happens if you do get a letter from the irs? The very worst thing you can do is ignore that letter, right? Now, I'm not telling you to ignore any letters in the irs, but I'll give you a little pro tip, right? If you get a letter from the IRS and it came certified mail, that's. That's a sign for you, right?
The universe is telling you, open that letter and do something about it. Because certified means that they want to have proof that you received that letter. Why would they want proof? Because the clock is ticking. Tick, tock, tick, tock. And I'm not talking about the thing you scroll on your phone, right?
Your time is Ticking, right? You might have appeal rights that are running out, for example, right? So you want to make sure if you get a certified letter from the IRS, that jumps to the top of the pile right away, right? FYI, word to the wise, right? But the other word to the wise, the backup to that is I'm definitely not telling you to ignore any letter from the irs.
So if it didn't come certified, I mean, still probably open it and read it, try to understand it. You know, I give you this, this pro tip. If you get a letter that you don't understand in the top right, usually it's in the top right or lower right corner of the letter is going to have a letter number, right? And It'll say notice CP 2000, for example, or notice, you know, letter LT11.
Right? So when you get something from the IRS and you don't quite understand it, obviously the first thing you do is to reach out to somebody, right? You can even call me. I like to help people out. So you can send a, shoot an email or call me up. John, it is a really scary letter from the irs. I'm going to say, okay, well, in the top or right hand or bottom right hand corner, it says a letter number. What does that say? And you read it off to me.
Now I kind of know which direction things are headed right away as soon as you told me the letter number, right? So that's a kind of a pro tip.
So I'm not saying ignore anything.
So any correspondence that comes from the irs, it's a good idea to open it up expeditiously.
That means quickly, right? For those of us that have studied school, back when I studied school.
So, you know, open it up, read it, try and understand it, try and do something about it. Take action early rather than late, because the earlier you, if you have a problem with the irs, the earlier you tackle it, the easier it's going to be to resolve. And easy to resolve means less moolah, less money. The smaller check that you're going to have to write me to fix it for you, right?
So word to the wise, right?
If you do your tax return and you end up owing money to the irs, I have a good friend of mine who recently I posed the question rhetorically. What if you owe money to the irs is pay it. Yes, that's absolutely. Yep, Absolutely. Right now, if you have money sitting in your checking account, you can just write a check and pay it.
Heck yeah, man. Just write that check, put in the envelope, you know, send it off, pay your taxes Right? You'll be done with it. You won't have to hire a professional. You know, that's the way that you can take care of it. The easiest, simplest, most efficient, most direct way possible, right? But let's say you can't just write a check, you know, to pay it, right? Well, I can help you out to get you an installment agreement. Now, what is an installment agreement? That's where the IRS will set you up on a payment plan, right? And you can set yourself up with the IRS with a formal payment plan.
You know, fill out the form, provide maybe some financial documents, and they'll approve the plan. And you can start paying every month, you know, comfortable monthly payments for your taxes, right?
So that's one thing you can do. Installment agreement. Now, here's a pro tip for you. If you think that you can pay that tax balance before six months, you might not even want to go through the trouble of setting up a formal payment plan. Because I'll tell you this, it takes the irs, you know, more, six months or more to even start coming after you when you owe them money, right? So if I file my tax return today in March, and I owe money to the IRS, I owe, let's say, $3,000 just to say something, right?
If I know that I can afford six months at $500 a month, I don't even have to ask the IRS for a payment plan. What I can do then is I can just send my tax return in to the IRS with a check and I can pay $500 and then I can, you know, and then they're going to send you a letter. Hey, you owe us money. When you, when you get that letter, write another check for 500, send it out, right?
And I can pay 500 in March, 500 in April, at 500 in June, July, August, and by the time September rolls around and they were actually going to do something to me about it, I've already now paid, right? So if you, if you know that you can pay in six months or less, just go ahead and start sending payments in. And again, if you have trouble with that, you can give me a call. I like to help people out. Probably most likely won't even charge you. So. So, you know, I'll just help you to figure out how to get those payments sent in and stuff so that you get credit for it, right? So that's one thing you can do, an installment agreement. Now, we've all heard the commercials on the radio, right? Pennies on the dollar, right? You hear that, right? Pennies on the dollar. Oh, I owe $10,000 and you know, and the IRS settled with me for, you know, a buck 50 and a stick a bubble gum, right? That's, you know, if you hear those folks on the radio and practically they almost give you that idea, right? Why would anybody pay their full amount due? IRS is making deals, man, left and right.
So that's not exactly true. There's three kinds of offers in compromise. So there's doubt as to collectability.
So you're telling the irs, yes, I really owe you money, but I don't have it. Right. I can't afford to pay doubt as to liability. Hey, hey, hey irs, you're off the deep end. I don't really owe the money. You said I owe and here's why. Right? So doubt as to collectability, doubt as to liability and effective tax administration. ETA the example I always give. You know, you're a homeless veteran that lost both legs and the only thing you have in this world is your house. House. And now the IRS is knocking on the door wanting to come take your house. Right?
So effective tax administration means that the irs, what they really want is they want what is called voluntary compliance. Right? What is that? They don't have IRS doesn't have a lot of people. When I worked for irs, there was over a hundred thousand people, you know, employees working there.
Now I'm understanding It's in the 60s, the low 60s at that. Right.
So they are trying to do more with less. And so the more you do voluntarily and self report and self pay, all that good stuff for them, the more people like that, the better. Right. So that's, you know, word to the wise. So effective tax administration is yes, I owe you money, yes, I could probably afford to pay you, but ding, ding, ding. Now I'm going to tell you irs, there is a good reason why you should let me slide on that. Right.
You know, maybe it will be just the IRS going to look bad in the press, right? Could be that. Right.
So that's one thing. Let's see. Currently not collectible status. Hey, irs, you know, we use this a lot during COVID Hey, I got Covid. I'm in the hospital.
I'm recuperating for six months. Once I get out, I'll be able to go back to work and I'll be productive and beautiful and everything will be fine. Right. But so irs, I just need you to hang on and wait for me a little bit. Right? So that is what they do when they put you in CNC or currently not collectible status, right.
So a good person that otherwise could afford to pay, it's not, I don't want to say convenient, but it's not convenient to pay right now. You can't, you don't have the money just laying around. It's going to cause a hardship. Hey IRS, give me CNC status. I'm fighting for CNC status for a client right now, right? Then I go back to my office and you know, harass the IRS and try and get them to approve a CNC case for me. So that's one thing you could do.
And so that's non collectible offer and compromise, doubtless. And collectability doubtless liability, effective tax administration and installment agreements. There's different kinds of installment agreements so your mileage may vary. And that's I think it, I think that's it for today. So again My number is 899 tax help. My website is 99 tax help.
My name is John Mitchell. You can reach me also through my email attorney mitchellm me. Thanks everybody for being with us and we will be back next time with more legal talk.
