Episode 133 - Dealing with Tax Problems Aren't as Scary as You Might Think
In many of our divorce cases, we encounter tax liabilities that can complicate the division of marital assets and debts. And, if bank accounts or paychecks are being garnished, they can even complicate the payment of support. It is in those situations where we recommend bringing in an attorney who specializes in taxes and tax litigation. Of course, most people are afraid to deal with the IRS, but, as you will learn in this show, with the right lawyer at your side, it is not as scary as you might think. Join us as we interview Jason Wiggam, founding attorney at Wiggam and Geer, and learn the best practices for dealing with the IRS.
Leh Meriwether: Welcome everyone. I'm Leh Meriwether and with me is Todd Orston. Todd and I are partners at the law firm of Meriwether & Tharp, and you're listening to The Meriwether & Tharp Show. Here you'll learn about family law, divorce, tips on how to save your marriage if it's in the middle of a crisis, and from time to time even tips on how to take your marriage to the next level. If you want to read more about us, you can always check us out online, atlantadivorceteam.com.
Leh Meriwether: Well, today we're actually going to go a little bit beyond family law. Although what's really interesting about family law is that we touch so many different areas of the law. We touch bankruptcy law. We touch tax law. We touch criminal law, juvenile law. It's not just limited to divorce world. It's because it deals with the lives of human beings.
Todd Orston: Right. There's so many other things that impact families. We call what we do family law often. There are so many other issues that can impact a family, and so it's not always just about divorce. Families are dealing with all sorts of other legal issues. Sometimes we like to touch on those other issues so we can educate listeners, make sure that they understand where to go, and what questions to ask if they have a problem.
Leh Meriwether: Last week, I had realized that there was a couple other areas of the law we really have never taken a deep dive on. What's crazy, we've done, what, 133 shows by this point, or 131, I'm losing track there's so many.
Todd Orston: Realize-
Leh Meriwether: Maritime law, we've never touched on it. Circus law, I don't know if that's actually-
Todd Orston: There's circus law?
Leh Meriwether: I don't know. I'm sure there's animal rights law.
Todd Orston: Oh, definitely, definitely. That's not a joking matter.
Leh Meriwether: No. Today, thankfully, we have someone in studio with us to talk about tax law and particular situations where you might find yourself in tax court or dealing with the IRS. Well, with us today is Jason Wiggam. He's the founding partner of Wiggam and Geer located in Atlanta, Georgia. His practice focuses on representing individuals, businesses, officers, directors, shareholders, and partners in matters before the Internal Revenue Service and the Georgia Department of Revenue as well as other state tax departments. He earned his Juris Doctorate from Georgia State University College of Law. Actually graduated magna cum laude. He was named Georgia's Legal Elite by Georgia Trend Magazine 2015, '16, '17, '18, and '19. He was also named a 2018 and '19 Rising Star by Super Lawyers. Jason, thanks so much for coming on the show.
Jason Wiggam: Thanks for having me.
Leh Meriwether: Jason, actually we talked about you coming on the show several weeks ago, and then I asked you, what, two days ago, three days ago? Was it-
Jason Wiggam: Yeah, yeah.
Leh Meriwether: I am so-
Todd Orston: We wouldn't want to give you a lot of time to prepare.
Jason Wiggam: I really appreciated that.
Leh Meriwether: I'm glad you were able to come on because we have situations... The funny thing is somebody else introduced me to Jason, but what I didn't realize, he was already working with another lawyer inside our firm, helping a mutual client dealing with a difficult tax situation where there was a joint tax liability that rose out of the divorce. The husband had agreed to be responsible for it, but he wasn't paying it. The IRS was coming after our client, and so he was working or she was working with you, Jason, on an innocent spouse statute.
Jason Wiggam: With the joint tax liability, the IRS can go after both parties who filed even if there's an agreement otherwise through the divorce. In this situation, I believe, the ex-spouse who didn't pay the taxes, when they filed, your client, our client, was an employee. She had paid in taxes from her paycheck. She did everything by the book. The other party was self-employed and was supposed to pay quarterly tax payments or pay monthly, however he should have done it, and chose not to do so.
Todd Orston: He was using a different book.
Jason Wiggam: Yeah, he had the wrong book.
Todd Orston: The wrong book.
Jason Wiggam: Her perspective, which I think is correct, is, "Hey, he didn't pay his taxes. Why should I be responsible for these?" So the IRS has a program called innocent spouse relief that you can apply for to remove yourself from the liability potentially. It's sort of the situation we just laid out there is the stereotypical situation they look at. Another one you'll see is if there was an audit. Let's say when the return was filed, one party didn't know that the other maybe was inflating some expenses or doing something improper on the tax return, the Internal Revenue Service audits the couple and makes some adjustments to the tax return related to the business, and they were wholly unaware. That's another situation that arises then.
Leh Meriwether: What is it that they need to do? Let's say a listener has suddenly gotten that letter from the IRS saying, "You owe 40, 50,000 in taxes, and we're coming after you." I've seen some of the letters, like, "We're going to start garnishing your paycheck," or something like... What do they do when they get that letter besides call you?
Jason Wiggam: First, if you don't call us, I think I would contact the IRS and ask to put their account on hold. You wouldn't want them to garnish or take any other nasty enforcement action. For innocent spouse relief, there's actually a form they would file. It's Form 8857. They have a publication online. I don't know the number off the top of my head, but I think if they just googled "IRS innocent spouse relief publication" it would come up, that lays out the requirements and what you have to do. It is quite complicated, but I've seen people navigate it themselves. Many times they will start the process, and then once they're in it, they decide, "Hey, maybe I'd be better served that with a professional help me." That would be the process. Once you submit the request and the IRS receives it and acknowledges receipt, by law they cannot take any enforcement action against the taxpayer, so they're protected from seizures, garnishments, levies-
Todd Orston: Levies a stay, if you will.
Jason Wiggam: Yeah, yeah, yeah.
Leh Meriwether: What I'm hearing is the worst thing you could do is put your head in the sand and not respond to the letter from the IRS saying we're going to garnish your wages.
Jason Wiggam: That is definitely accurate. That never ends well. Maybe if something bad doesn't happen right away, but at some point it will, and it is much harder to solve a problem once they have their hands on you. Once they've already started garnishing your paycheck or once they levy your bank account, once they seize your bank account, it is much more difficult to work with them. I mean we deal with those situations. But if I had a crystal ball or if I could plan it out, I would tell them they'd be much better served to do it before these things happen instead of waiting.
Todd Orston: We tell clients similar things. There are issues where not doing something immediately, let's say non-payment of child support or alimony or whatever, and then wait a year, two years, five years, 10 years, and then they're coming to us and they're saying, "Oops, I have a problem." Well, yeah. Well, now your problem is a whole bunch worse as opposed to had you just acted immediately, we could have resolved it. We could have figured something out that wouldn't put you very deeply into a hole. One other thing I do say before we move forward is to listeners just be careful, because tell me if I'm wrong, there are a lot of IRS scams out there. When you get some of these letters, emails, whatever, just make sure you're dealing truly with the IRS.
Jason Wiggam: There are a lot of fake phone calls where it's pretend IRS agents. In very limited situations that the IRS call you directly, so if you receive a call from someone claiming to be an IRS agent, 99% chance it's not one. Usually the tell is there's an accent or at some point in the conversation will end up with them wanting your bank account information. The IRS does not take your bank account information over the phone. Yes, I would ignore those calls.
Todd Orston: You gave a great tip to all those scammers. You just said, "with an accent." So now they're just going to have somebody without an accent call.
Jason Wiggam: When he's like, "My name is John," but it's clearly-
Todd Orston: Not John.
Jason Wiggam: ... that's usually a good tell.
Todd Orston: I just wanted that because a lot of what we're talking about and going to talk about is how to interact with the IRS, when to interact with the IRS, and sometimes it's not the IRS. So I just wanted to make sure that it was clear that if you have received a call or more accurately, if you receive something in writing, then just make sure that you're dealing with the right people.
Jason Wiggam: I agree with that wholeheartedly.
Leh Meriwether: When it comes to the IRS, when they seize a bank account, they can seize it without giving you notice.
Jason Wiggam: Well-
Leh Meriwether: They'll send you a letter saying they're going to do it but can-
Jason Wiggam: Sort of. They have to give you notice, but it could have been years before. You're right. It's not like they have to give you notice and then seize the bank account. By law, they have to issue what's called a final notice of intent to levy, and they have to wait 31 days. After 31 days, you are potentially exposed, so it could be years after this letter that they do it. Once they seize your bank account, the bank, by law, holds the funds for 21 days. You have 21 days to contact the IRS and work that out. That is a tight time frame. That's why it's much better to deal with it proactively.
Leh Meriwether: Yeah, because at least they put a hold on those collection efforts. That's big. Jason, real quick, so the website, if someone who wants to read more about you or they have a tax problem, it's wiggamgeer.com.
Jason Wiggam: That's true, W-I-G-G-A-M-G-E-E-R.com.
Leh Meriwether: Good, I just want to make sure. I normally say that in the very beginning. I realize I didn't, so I definitely want people to find you to help them. But don't go away because up next we're going to talk about when you can't pay a tax liability, what options do you have to help work with the IRS to meet that obligation or see if you can get out of even some of that obligation.
Leh Meriwether: Welcome everyone. I'm Leh Meriwether and with me is Todd Orston. Todd and I are partners at the law firm of Meriwether & Tharp, and you're listening to the Meriwether & Tharp Show. If you want to read more about us, you can always check us out online at atlantadivorceteam.com. Well, today we're going beyond the family law. I mean we're not going completely beyond family law because families have to pay taxes, but we are talking about tax law and how it can impact families especially ones going through a divorce because a lot of times tax situations arise during a divorce. Sometimes they can be a cause of the divorce, a discovery of someone playing some kind of fraud with their business and perhaps, we've talked about this, using their business to hide an extramarital affair, and but they try to write it off. That gets them in trouble, and it starts the whole process. But we're not going to talk about taxes because we know just enough when to call Jason Wiggam and bring him in to help. Jason, all you do is focus on tax law and tax litigation in particular.
Jason Wiggam: Yeah, that's 100% of my practice representing taxpayers and resolving their tax liabilities with the IRS or state agencies.
Leh Meriwether: Let's talk about a tax liability has arisen. We see this in divorces. We'll see couples that are just struggling. They're starting a business. They're struggling just to pay their taxes. They don't withhold along the way, and then at the end of the year, "Oh my gosh, I owe $20,000." Well, yeah, if you had been paying all along and all this, but now they're in a situation. They're going through a divorce, and literally their expenses have doubled because they're now living in two households. What do they do? What can you do with that $20,000 debt? Is the IRS just going to come in and levy on the house? What should you do?
Jason Wiggam: Well, I would say first and foremost, deal with it. Don't put your head in the sand because if you don't deal with it, eventually it could get elevated to something bad happening. The IRS has a lot of programs to deal with a tax liability that's unpaid. At $20,000, they would be willing to give you a six to seven-year installment agreement no questions asked-
Leh Meriwether: Oh wow.
Jason Wiggam: ... without disclosing your financial information to the IRS.
Todd Orston: Six to seven years?
Leh Meriwether: Is there a threshold for that? Like, if you go above 50, you can't get that deal?
Jason Wiggam: It's actually 100 now. It used to be 50. Recently the program was working so well the government decided to up it to 100. The problem with that one is you pay in full, so they're going to charge late payment penalties, interest, which combined can be 10% a year.
Leh Meriwether: Really?
Jason Wiggam: Many times I talk to people that are looking to pay less than the legal amount owed, and they do have those programs too. Or even if the person couldn't afford to pay it out in six or seven years, they have programs. They have this thing called uncollectible status. Basically, you go to the IRS and you show them that, due to your expenses being very close to your income, you can't afford to pay them anything at all, and they just leave you alone. So there, they're looking at, do you have assets that they would be interested in taking? In many cases if you have a home, 401(k), that's not a problem.
Leh Meriwether: Meaning, they won't look to seize it?
Jason Wiggam: Correct, correct.
Todd Orston: But I assume you can't say, "Look, between my mansion and the yacht..." which we all know yachts are expensive to maintain and the Lambo, that Lamborghini, I got to tell you, that's expensive, that's not going to fly with the IRS.
Jason Wiggam: That's true. So that person needs to do the six to seven-year agreement. Better yet, they'd probably be well served just selling the Lambo and just paying them because they're-
Todd Orston: It's a Lambo.
Jason Wiggam: I mean sure, or whatever they want to do.
Todd Orston: That's ridiculous. It's crazy.
Jason Wiggam: I don't tell anyone what to do with their money.
Todd Orston: By the way, I don't really refer to it as a Lambo. That's-
Leh Meriwether: What do you refer to your Lamborghini?
Todd Orston: Oh, I wish. A Toyota? It's a lesser known model of Lamborghini.
Jason Wiggam: They have a settlement program too. It's called an offer in compromise. If they don't have a Lamborghini, approach the IRS and try to pay a lump sum that's less than they owe. You can file bankruptcy to get rid of income taxes. I won't dive into that very deep. I think you might be doing that at a later date. You can also request that they abate your penalties, and they'll do that in some instances. So there are ways that you can pay less than the full amount. Typically, the penalty abatement request, you would tie it with the installment agreement.
Todd Orston: So all of this, what I'm hearing is that the IRS... I'm not trying to pat them on the back. They do a necessary job for us. I mean they collect the taxes. But the bottom line is they would much prefer to work something out then to have to pursue you through courts and basically come after you that way.
Jason Wiggam: For sure.
Todd Orston: So the bottom line is is as long as you don't stick your head in that proverbial sand, there are options out there for you to try and work something out and avoid big problems.
Jason Wiggam: They have a lot of incentive beyond just taking your property and garnishing your wages too. They instituted a new program a few years ago where they can actually deny your passport application, deny your renewal of a passport, or even revoke your passport. Now, they hadn't been revoking passports at all, but they are going to start doing so soon.
Todd Orston: Did I hear correctly that they started doing it a little bit, and it was a very popular method of getting people to pay attention to their taxes?
Jason Wiggam: They dipped their toe in the water on just let's deny the applications and deny renewals or just certify that you couldn't get a passport, like send a letter to the delinquent taxpayer. By the way, it only applies if you owe more than $50,000. If you owe less than $50,000, this wouldn't happen. They send you a letter that-
Leh Meriwether: At least not yet.
Todd Orston: Exactly.
Jason Wiggam: Right.
Todd Orston: Let's see how much above 50,000-
Jason Wiggam: How well that works.
Todd Orston: ... how well that works out.
Jason Wiggam: First of all, they collected over a billion dollars in a one, two-year time frame.
Todd Orston: Wow.
Jason Wiggam: They looked at the data and the majority of the cases, the taxpayers were just paying in full.
Leh Meriwether: Not even negotiating?
Jason Wiggam: Correct.
Leh Meriwether: Wow.
Jason Wiggam: So they love this program and that's why they are-
Leh Meriwether: Clearly.
Jason Wiggam: ... expanding it. If you receive a notice saying that you're certified, that they're certifying your passport is delinquent, you definitely need to address it then. Once it's already happened, it can be reversed. It's just much harder. Better yet, before you even get the letter, the sooner the better, I think, is the theme there.
Leh Meriwether: But if you're talking to the IRS, they're probably not going to do that to your passport.
Jason Wiggam: Correct, yeah. If enter into a payment plan, installment agreement, you file for innocent spouse relief that we talked about earlier, you enter into uncollectible status, you file an offer in compromise, you file for bankruptcy, there's a number of exceptions. So, yes, engaging with them and trying to resolve your liability is the ticket there to preventing that from happening.
Leh Meriwether: Let me ask you this. IRS enforcement, what can they realistically do to a taxpayer if there's an unpaid liability?
Jason Wiggam: I mean legally they can do a lot of different things, but practically speaking, they typically garnish wages or seize bank accounts. Those are the two easiest, simplest things for them to do. Or seize financial accounts, so it's not just your bank account. It could be your brokerage account, your Bitcoin account, whatever. They are one of two creditors that can seize a retirement account.
Leh Meriwether: Really? I didn't know that.
Jason Wiggam: An ex-spouse with a QDRO, which I'm sure you guys deal with all the time or the IRS. Now, they choose not to do so. In extreme circumstances, people that have really thumbed their nose at them who owe really large liabilities and who they've attempted multiple times to resolve the debt or choose not to do so, that's going to happen to. If you're engaged with them, you've hired a professional to engage with them, that's unlikely to happen.
Jason Wiggam: With a primary residence, they can seize properties. They tend not to seize your primary residence. If you have equity in a property, what they want you to do is take out a home equity line of credit or try to refinance. But they shoot themselves in the foot. In many cases when you have a tax liability, lenders won't work with you, so as long as you have a denial letter stating that you tried to get the loan, you did everything you could and you were unable to do so, they will move along and leave the home alone. Second properties, like rental properties, if they were paid off, that's definitely in the danger zone. If you owe over a certain dollar amount, they will definitely try to take them. They'll give you an opportunity to do a payment plan instead, but they are going to assume that that property is theirs if they want it.
Leh Meriwether: Years ago I went to do a home equity line of credit, and they denied me. I was like, "Why are you denying me?" "Well, there's a tax lien on your house." I had no clue. I didn't owe any taxes, but the Georgia Department of Revenue had put... it was like $5,000. I had tons of equity in the house, but it wasn't mine. So I had to get on the horn and talk to them. Of course, you wait on hold forever. Finally I got a hold of them and said, "I just found a lien on my house, and I don't owe y'all any taxes." It turned out to be a big mistake. They withdrew it and everything. But oh my gosh, it delayed the home equity line by, I want to say, four months or three months. One thing I can't delay is going to a break. But we're going to come right back. We're going to continue to talk about what you can do to reduce your tax liabilities, and we're going to learn about statutes of limitations when it comes to recovering taxes.
Leh Meriwether: Welcome everyone. I'm Leh Meriwether and with me is Todd Orston. Todd and I are partners at the law firm of Meriwether & Tharp, and you're listening to the Meriwether & Tharp Show. If you want to read more about us, you can always check us out online at atlantadivorceteam.com. Well, today we're talking about taxes, tax liability. Is it directly family law? Not directly but indirectly because so many of our clients have been impacted by a tax liability in one form or another that has had to have been dealt with in the divorce and the context of divorce. We know just enough of when to tell our client to call Jason Wiggam because that's all he does. He focuses on representing clients before the Internal Revenue Service, the Georgia Department of Revenue. The person doesn't have to be a Georgia resident for you to represent them on an IRS debt, right?
Jason Wiggam: That's correct. I represent taxpayers nationwide.
Leh Meriwether: Because it's federal law, you just need to be licensed in one state-
Jason Wiggam: That's correct.
Leh Meriwether: ... which is nice. Even if you're not in Atlanta and you need help, contact Jason. That's, what, williamgeer.com, right?
Jason Wiggam: Wiggam-
Leh Meriwether: Did I say William? It's wiggamgeer.com.
Jason Wiggam: No worries.
Todd Orston: You're doing so well. He just went off the rails.
Jason Wiggam: Why don't I just give them the phone number?
Leh Meriwether: Okay.
Jason Wiggam: Was that okay?
Leh Meriwether: Yeah, that's fine.
Jason Wiggam: It's 404-233-9800. You can find us online at wiggamgeer.com.
Leh Meriwether: Where we left off, we were talking about the enforcement... the idea that we talked about that they can put a lien on your house. I talked about a problem I had where there was an improper lien on my house. A retirement account, that they can seize that. I did not know they could do that. That's interesting. They can garnish your account. One thing you hear about, I know they're fake calls, but they're like, "We're going to put you in jail." The IRS, do they have the authority to put you in jail?
Jason Wiggam: There are tax crimes, but for your average person who just has a tax liability that they couldn't pay for whatever reason, financial hardship, divorce, whatever, you're not going to be put in jail. There's no debtors' prisons. It's not a crime to owe them money. It could get to a level of a crime if you had assets and you hid them from them or fraudulently transfer them to your sister or something, but for your average person, they're not going to put you in jail.
Todd Orston: It's not the IRS actually putting you in jail. They still have to go through the entire process of filing some kind of an action. Wouldn't it be them filing with some court-
Jason Wiggam: Sure.
Todd Orston: ... a criminal action and then going after for tax evasion or something like that? Then, of course, the sanction, if you are found guilty if you will, of that could be jail.
Jason Wiggam: Correct. I guess I was just looking at someone who owed a tax liability. Typically, it's you had unreported income that you intentionally didn't report. You intentionally overstated your expenses. I think earlier you guys talked about a case where someone paid their mistress through their business. Clearly, that's not a business expense so it's done intentionally, and it could be.
Todd Orston: But it wouldn't be the IRS sending you a letter, not calling you, and saying, "Oh yeah, by the way, report to jail because-
Jason Wiggam: Correct.
Todd Orston: ... you've done this."
Jason Wiggam: If you just owe them money, you're not going to jail.
Todd Orston: If they feel that your actions have risen to the level of criminal behavior, they would have to follow the same path, if you will, that any governmental agency, like a county-
Leh Meriwether: Has to prosecute you for a crime.
Todd Orston: ... they would have to prosecute you for a crime.
Jason Wiggam: Correct. Yeah, due process rights and the whole nine yards. The situation I typically see, because I do interact with taxpayers, like criminal liability or the potential for it, are people who are non-filers. What I mean by that is someone hasn't filed a tax return. Typically, it's for a number of years. Someone typically being under the table in cash. I mean it could be other reasons, but that's typically what it is. They're usually self-employed and no one is sending them a 1099 so the government doesn't know about them. I've helped people where they haven't filed for a few years. They haven't filed for 10 years, 20 or ever.
Leh Meriwether: Let me ask you this real quick, and correct me if I'm wrong. That's why I'm asking this question. A failure to file a tax return is a crime.
Jason Wiggam: It can be-
Leh Meriwether: Or can be.
Jason Wiggam: ... if done with criminal intent.
Leh Meriwether: But filing a tax return and you just can't pay the taxes, that in and of itself isn't a crime.
Jason Wiggam: Correct.
Leh Meriwether: So some people are afraid to file their tax return because they know they can't pay it, but you're setting yourself up for bigger trouble.
Jason Wiggam: Right. I see that a lot where people, because they don't have the money to pay it, they choose not to file. The problem with that is they assert late filing penalties. It's 5% per month, the maximum of 25%.
Leh Meriwether: Wow.
Jason Wiggam: Even if you couldn't pay them, just by filing on time, you get a 25% discount if you want to look at it like that. Yeah, they're shooting themselves in the foot because if they had filed the return and just owed the money, there's no criminal liability, but by choosing not to file, it could be. I think very few taxpayers get prosecuted. Typically, it's-
Leh Meriwether: You got to be somebody like Wesley Snipes.
Jason Wiggam: Yes, celebrities, public figures, large dollar amounts and really egregious behavior. What I mean by that is money laundering, skimming, just things that your average person aren't doing.
Leh Meriwether: Isn't that actually how they started catching a lot of the drug dealers down in Miami? It was through money laundering.
Jason Wiggam: Yeah, Al Capone, it was the tax fraud they got him for.
Leh Meriwether: Let's talk about settling and reducing tax liability because I'm sure a lot of people want to understand that, or maybe disputing a liability. Rather than trying to do it yourself, when they hire you, what do you bring to the table to help them navigate that process?
Jason Wiggam: Taxes are complicated. A lot of people make mistakes unintentionally. I'll have many clients who come to us of a tax liability, and maybe they were looking to work out a payment plan or whatever. Once we get all the information and look at their account, I'll see that mistakes were made, I guess, is the best way to put it. Maybe they were audited, and they were unaware. They could have moved. They were so afraid to open the letter, they didn't realize they were audited.
Leh Meriwether: Oh wow.
Jason Wiggam: If you fail to file, they will file a tax return. The Internal Revenue Service will file a tax return for you. So we'll see taxes situations where we end up correcting the liability, disputing, and reducing it. That's step one. Can we do that in any way? Then if we can or if we couldn't, then we look at what are the ways we can get a reduction. So number one, they have 10 years to collect the tax debt from you generally speaking.
Leh Meriwether: The IRS does?
Jason Wiggam: The IRS does, yeah. There are programs that you can enter into where... Well, first of all, if you're going for the strategy, you would want to delay resolution as long as possible legally. Don't hide or do anything insane. Just wait to resolve it as long as you could before they could take action against you. Then you can enter into payment plans with them in some instances where you will not pay in full. Like if a taxpayer owes $100,000, $50,000 and they enter into a $100 a month payment plan, they'll never pay that in full over the 10-year period. Earlier I talked about uncollectible status. They'll just leave you alone. So we put the client into these programs, and they just wait it out. At the end of the 10 years, they literally write off the tax debt. To this day it still blows my mind. I have clients, they owe $300,000. It's there one day; it's gone the next.
Leh Meriwether: Really? Let me make sure I understand this. So you enter a payment plan of $100 a month. You owe $100,000. There's no way you're going to pay it off in 10 years. At the end of the 10 years, maybe you paid $50,000, I know my math's wrong, but you've only paid off half of it. At the end of those 10 years, the other half is just forgiven? I mean it's gone?
Jason Wiggam: In most instances, yeah. Technically, they can convert it to a judgment, but they rarely ever do that. I've seen it once in my career. It doesn't happen very often.
Todd Orston: So the agreement doesn't create some kind of-
Leh Meriwether: Stay.
Todd Orston: ... a stay of that 10-year period. At the end of that 10 years, there might be some things that the IRS can do, but, like you were saying, technically or traditionally, they don't really spend the time and the effort to do it.
Jason Wiggam: That's a good point. The agreement doesn't, but there are other actions you take that can extend the 10 years. That's why I said 10 years generally. If you file bankruptcy, if you file for innocent spouse, if you file and offer in compromise, certain appeals you do, so it's very important to figure out what the game plan is and which route you want to go to resolve this tax liability because a lot of actions you take can screw it up.
Jason Wiggam: The other way that we settle for less than the person owes is they have an offer in compromise program. That's their settlement program where you've offered to pay less than is owed. There, they're looking at what are your assets, your liabilities, and your monthly cash flow. The better off you are financially, the more assets you have, the more money you make, the more money they're going to want you to pay.
Todd Orston: Kind of makes sense.
Jason Wiggam: Yes. Bankruptcy and penalty abatements are the other two big ones.
Leh Meriwether: Interesting. We may not have time to get to it before the end of this segment. You had mentioned that they can actually file a tax return for you.
Jason Wiggam: If you choose not to file a tax return, step one is they send you a notice that says, "Hey, you haven't filed a tax return. Please do so by this date." If you then choose not to file it by the date proscribed, they will prepare one for you.
Leh Meriwether: They don't give you any deductions, right? They hit you with the maximum taxes.
Jason Wiggam: Correct. It's a punishment tool. They want to encourage you to resolve and come into the system.
Todd Orston: Once that happens, we'll get to that in a minute.
Leh Meriwether: Up next, we're going to answer Todd's question, and we're going to have some hypos. We're going to have some hypotheticals that have come out of some divorce cases. Welcome everyone. I'm Leh Meriwether and with me is Todd Orston. You're listening to Meriwether & Tharp Show. If you want to read more about us, you can always check us out online at atlantadivorceteam.com. I'm talking fast because we are on our last segment, and I feel like we've barely scratched the surface of tax law. Of course, we talked yesterday that this was going to happen, but there's just so much interesting... Sometimes taxes can be boring, but sometimes it can be very interesting, and we've been talking about some interesting things. We had to interrupt one of your questions, Todd. What was the-
Todd Orston: It was very rude. My question that I realized we were running out of time is let's say the IRS prepares a tax return for you, and it's the most draconian tax return ever. Meaning, it is as harsh... There's no benefits to you at all. Do you have any recourse to try and change or modify that return?
Jason Wiggam: Yes, yeah. When they prepare one for you, they don't give you any of your deductions. It's the basically the worst possible return that can be prepared. In those situations, step one is we have the taxpayer prepare and file their original tax return which would include all those benefits, deductions. In many instances, it's a significant reduction. I would say in probably 95% of the time the IRS files a return for someone, it's going to be wrong. I think it's designed to be that way intentionally because they want you to engage with them and come back into the system.
Todd Orston: It makes sense. They don't have all of your personal information and financial information, but they're saying, "We want a return filed, so either you do it or we do it. We're going to have to make some assumptions if we do it."
Jason Wiggam: They actually do have some of it. Like, your mortgage interest they have. They have all your income information. Anything that you receive in the mail from a third party, they get a copy of too. Typically, they just take all that information, all the income, and put it on the tax return with-
Todd Orston: No deductions.
Jason Wiggam: ... the minimum amount of deductions. It can be fixed. You're not stuck forever.
Leh Meriwether: One of the things we've seen in divorces is you've got one party, I'll just say the husband. He's been running a business, but he hadn't filed tax returns in five years. So we're getting ready to go through a divorce, and obviously there's this concern. She's been trying to file her returns, but she hasn't. She knows that at the end of this divorce she's going to have to buy a house. Well, they always want to see tax returns when you go to buy a house. Are there programs where you can basically get back into the system of filing without being penalized?
Jason Wiggam: Generally speaking, when one hasn't filed for a period of time, the Internal Revenue Service will require the taxpayer to file for the last six years. But look, you might want to go back and file further. Let's say the taxpayer had losses or some tax benefits that would accrue to them if they filed beyond the six years. Or what we were just talking about, if the IRS filed a tax return for the person beyond the six-year period, you would definitely still want to file that return and correct it. States have... they're called voluntary disclosure programs. They will have programs where it can be even more beneficial. For instance, the Georgia Department of Revenue allows you to file for the last three years, and they will waive all the penalties for late filing and late payments. The IRS doesn't waive any penalties. They just let you get off with filing the last six years instead of 10, 15, 20, whatever the time frame.
Leh Meriwether: Even 10 years, you can just file the last six.
Jason Wiggam: Right.
Leh Meriwether: I'm going to give you a different hypothetical. We've seen cases where it turned out during the course of the litigation where one person was not reporting cash that they had received on their tax return, so it came out in the divorce. I'm not trying to pick on the husbands; it's just that's where I've typically seen it. Let's say the husband hadn't filed... There was $200,000 in cash that was unreported, and it comes out. What should they do? Let's say she doesn't want him to go to jail or get in trouble because she's going to be dependent on him for some child support and alimony. What should the parties do in that situation?
Jason Wiggam: Do you want me to look at it from each person's perspective?
Leh Meriwether: Yeah, yeah.
Jason Wiggam: If I representing husband, I think step one is, does he have any criminal exposure? Just because you didn't report cash doesn't mean that it's necessarily a criminal matter. It could be purely civil. There, we would look at what's the statute of limitations to correct it. If you filed a tax return, generally speaking, it's going to be either three or six years. Let's say he did have criminal exposure. You get immunity from it, generally speaking, if you correct the problem before someone reports you or if the IRS comes after you. I think the answer for him is he would want to resolve it especially if he was concerned that someone would report him, because there are whistleblower programs. I've seen this in divorce cases. It can come out as you're saying. From the wife's perspective, I guess she... Did they file jointly?
Leh Meriwether: Let's say they've been filing jointly.
Jason Wiggam: She would have innocent spouse relief in her back pocket. She couldn't use it until something actually happened, but if something did happen, she would. I guess if she just hated him and wanted to ruin his life, she could turn him in, but she probably doesn't want to do that because she might need funds from him: alimony, child support, whatever.
Leh Meriwether: Let's talk real quick about that whistleblower program because you had mentioned that to me when we were talking on the phone yesterday. I had never heard of it before. It makes sense. I tell a quick story. There was an attorney here in Georgia. He had a divorce, and there was a trial. At the trial, it came out that he had bought a house in cash, well, not exactly cash. It was a $600,000 home, and he paid for it with a series of cashier's checks that were in the amount of $9,999, so just under the $10,000 reporting threshold of the banks. I won't get into all the details why they have to do that. He was under the threshold, and it came out.
Leh Meriwether: Then lo and behold, after the divorce was over, he suddenly got audited by the IRS, and they brought fraud charges against him, tax evasion charges. He was found guilty, and then lost his bar license. Because if you have a felony on your bar license here in Georgia, you lose your bar license. Now I'm wondering was there a whistleblower in that courtroom who called the IRS? Is there incentives for whistleblowers?
Jason Wiggam: There is. If you report a tax issue to the IRS for an individual or a company, any type of taxpayer and it's credible information that they can act on and they choose to take the case, audit the person, and collect the funds, which can be a very long process, you can get 15 to 25% of what the government collects. There actually a pretty famous whistleblower. So this guy, Bradley Birkenfeld, he worked for UBS in their Swiss banking program. He was in the business of having all these taxes US persons come over and hide their cash and untaxed income in Switzerland. For some reason, he decided to disclose all the accounts to the IRS. I assume he was in trouble in some other matters. But long story short, he went to prison for a few years. When he got out, he got a $300 million check because the Internal Revenue Service collected a lot of money from those UBS account holders that he turned over.
Leh Meriwether: Wow.
Todd Orston: I just want to say if any of you in this room are contacted by the IRS and investigated, I had nothing to do with it. The same thing goes for my family and friends. I have no idea. It's just coincidence. 300 million, that's-
Leh Meriwether: Put down your phone, Todd.
Todd Orston: Usually I only know it from movies, but people come out of prison and they get some bus fare and-
Jason Wiggam: He was pardoned, yeah.
Todd Orston: Wow. The limo comes and picks you up. That's-
Leh Meriwether: Wow. If there's anything to take from this, and we're just about out of time for the show...
Todd Orston: Turn in your family and friends. No, I'm kidding.
Leh Meriwether: Here's the big takeaway from this is if you're in the middle of a divorce and there's been some tax issues, you really don't want to go to trial. You need to focus on trying to settle that case because I would think that the court reporter who's recording everything that's being said in that might be a whistleblower. There could be a bailiff in the room who call, I suppose, too, because it's public record. The bailiff could order the transcript and turn it in. So the moral of this story is if you are in the middle of a divorce and you may have not been reporting everything, call Jason to make sure that you report this and clean all this up before it becomes a problem. Before we wrap up, how can people get ahold of you?
Jason Wiggam: The best way to reach us is to call us at 404-233-9800. We also have information on our website. It's www.wiggamgeer.com, W-I-G-G-A-M-G-E-E-R.com, and it's 404-233-9800.
Leh Meriwether: Awesome. Hey, thanks so much for coming on the show.
Jason Wiggam: Thank you for having me.
Leh Meriwether: In fact, I think I have your partner coming on next week.
Jason Wiggam: You do.
Leh Meriwether: We're going to talk about bankruptcy. Actually, there's some interesting bankruptcy tales too. That's another show we haven't made a deep dive on. Hey, everyone, thanks so much for listening. If you're enjoying this show and perhaps maybe you're not listening to it right on the radio station, if you're listening to it in one of the podcast formats, iTunes, Stitcher, SoundCloud, we would love for you to go out there and give us a five-star review. If there's something in particular you like about the show, put it in the review. We'd love to hear it. We love to hear feedback. We like to get better. Of course, if you're going to give us a one-star, just send us an email. Everyone, thanks so much for listening.