Navigating the complexities of IRS challenges can be daunting for individuals and businesses alike. From tax compliance issues to complex tax laws, understanding and addressing IRS challenges requires careful attention to detail and expert guidance. Derek Dombeck sits down with Marcelino Dodge, an expert in navigating IRS matters. Marcelino highlights the importance of keeping accurate financial records and staying updated on tax obligations to avoid penalties and IRS scrutiny. Tune in to learn more about how to proactively manage your tax situation and minimize the risk of future issues.
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Tax Talks: Conquer Your Tax Worries And Deal With IRS Challenges With Expert Marcelino Dodge
In this episode, we are bringing on a very exciting topic. It’s tax time. The dreaded IRS, but Marcelino Dodge, our guest is an expert in working with the IRS. As always, I like to bring on guests who, have a broad spectrum of different viewpoints to help the audience. I’m going to cut to the chase, Marcelino Dodge, thank you so much for being here.
Thank you for being invited. It’s always a privilege to be able to sit and share this important topic with one because it’s one of the areas that affect wealth more than we realize and can cause one to lose wealth is not taking care of their tax issues.
Why don’t you give us a little bit of background where you cut your teeth in being an expert with the IRS that you are now?
I’ve been dealing with the tax universe for many years at this point. I fell into the business. It’s a secondary career for me, but I’ve taken what I’ve learned in prior experiences, used that, and wrapped that into the tax business. What I do is I simply come in and work with people. At the same time, when I bought into a tax business, bought up some clients almost many years ago at this point, come to think of it, then I always keep to expand my knowledge because I’m also an enrolled agent with the IRS, which means that I’m licensed by the IRS to do taxes that at the same time allows me to represent taxpayers before the IRS at all levels there.
If you have a tax issue, that’s what I’m here for, is to help solve that. As an enrolled agent, I’m a little bit more flexible when it comes to taxes and CPAs because you think about it, people always will take a CPA and think they know everything about tax. It’s simply not true because not all CPAs deal with tax or even want to deal with tax. Many of them do other things like auditing or other types of areas, which is where they focus. Some do tax. Some do a fabulous job at it, but that’s not what all CPAs do. Thousands and thousands enrolled agents, which there are bunches around the country, of enrolled agents around the country, their specialty is in the tax realm some enrolled agents will do tax preparation for businesses and individuals.
I do taxes for individuals and businesses, but I’m also transitioning to work more in what’s called the tax resolution field because I’ve been an enrolled agent since 2006 when I passed all the IRS exams. I continually do education each year, which also allows me to maintain the designation, that I’m not necessarily in the classroom, but there are 50-plus hours that I do to keep up on various tax issues and to continue to expand my knowledge and train my staff as well in that.
What we go in and do is I help people to prevent tax issues and then if they have tax issues come up, we start off with a very careful analysis. One thing I do want to say out there is that you’ll hear a lot of advertisements reading the radio and I hear them, particularly on the radio where they talk about the Fresh Start program. You may have heard those. Some of your listeners may have heard about that. There is no Fresh Start program anymore. It hasn’t been around since 2012 as part of what I’ve learned about, but there are opportunities to work with the IRS. What we need to make sure is that you have to qualify for those programs.
Are you working on the federal level with the federal taxes state level or both?
I work with both because they’re a little bit different animals. because the IRS has specific guidelines that they go by which apply nationwide then states, each state is its own animal in itself. Some of their regulations are different from the IRS. Usually, you have to start with the IRS to see where the state is coming from because each state gets information from the IRS as to what they’re going to do, but then they decide what they’re going to do on their own. Each state does.
What To Expect
I’m going to pretend like I am struggling as a business owner. What’s my first step? I haven’t paid my taxes or I haven’t been able to keep up with my quarterlies or whatever it is. How do I contact somebody like you, what do I say and what can I expect?
What you’re talking about probably is payroll taxes because that’s oftentimes what gets businesses and business owners into more trouble than anything is, payroll taxes. What you need to do is contact someone like me, which I’m at CashTracksFinancial.com where you can get to lay it all out. When we start off and we work with somebody, we get their story, their IRS notices, and authorization to get their IRS transcripts so we know exactly what’s going on. You got to put your whole life out there, and then find out, “Why weren’t these taxes paid?” Depending if you’re a sole proprietor, a corporation, or multi-personnel LLC, even if your business is out of business, you as the owner of it could still be responsible for those taxes overall.
It takes a lot of careful organizing to get to it, but yet as we go through the process, what we do is we sit down, work with you, and try to come up with a solution. Sometimes, depending on financial circumstances, it could end up being some type of payment plan with the IRS or it could end up being like some type of settlement with the IRS. It depends on each individual situation because there are national standards that the IRS has for certain expenses. Based on those national standards, even if your actual expenses are more than that, they only allow whatever that national standard is in their calculations for qualification. That’s where we have to come back in and then figure out, “Do you qualify for perhaps this settlement or do you have to go into a payment plan?”
All that depends on where your whole financial situation is. Sometimes you can negotiate, sometimes you have to go to appeals with the IRS, but there are different ways that it can be worked out. Certainly what we do is encourage business owners to work on this. I encourage business owners, “Never get behind on your payroll taxes in the first place because those are what’s known as fiduciary taxes in the sense that you are collecting money on behalf of the IRS and because you didn’t forward it to the IRS, you have a little bit more liability than like regular income taxes.” They take those types of taxes pretty seriously. You don’t want to ever get behind on those. For people we work with, we make them pay it immediately. That way those issues never come up.
I’ve known multiple business owners that got behind on their payroll tax and it took a long time to resolve. Let’s change the scenario to if you had a banner year, but you do owe the IRS $100,000 more than you have at the end of the year or tax time, what’s somebody’s options at that point?
If you did happen to have a great year and you do happen to owe that and we’ll say, going with what you’re saying there that you also did not make estimated tax payments through the year, which is often the mistake, which will get one into trouble. If you owe that much, basically, if you’re working on it many times to the IRS, you can get into some type of payment plan with the IRS. Those are available and under most circumstances, they can be very easily because they have streamlined processes to get involved in a payment plan, which many times they’ll do. The catch is that there are always requirements to these, you have to be compliant with your taxes, have all tax returns filed, and keep the payment plan current, you also have to keep up with future taxes to keep that going.
You have a great year. You’re making the payments and you’re into your next business year, you need to make sure in that year that you’re keeping up with things like estimated tax payments. That way you keep your installment plan active and in compliance with the IRS and then you can keep it active there so that you don’t have to get behind, have additional penalties, interest, and those things accumulating because even on an installment plan, you’re going to have penalties and interest accumulate, but you can continually make those payments.
You can get it solved then if, depending on your situation, it turns out that later on maybe something doesn’t happen, it collapses because of maybe something because you get out of compliance, sometimes you can get back into it, but yet also circumstances you may qualify to make an offer to it. Everything is based on a person’s facts and circumstances.
It sounds like there are a lot of variables which I’m assuming is by design, by the IRS to somewhat pigeonhole people. You have to play the game their way.
You have to go by their rules. If you work within their rules, usually it can work out pretty good, but you have to work within the rules like many people I work with. We have to get in there and see what’s going on, “How can we solve this within the guidelines and do it legally?” Cooperation with the IRS is often the biggest mistake people don’t make. Let me rephrase that. The biggest mistake many people make is not cooperating or they ignore the notices that come. That’s usually when people show up to us after they’ve received a stack of notices and then they’re like, “I better do something about this.” Usually, we have to do some emergency things to try to help them to resolve some issues.
How long does the resolution take to solve or is that a huge fluctuation in time?
Depending on what we’re doing, it could take two years from the time we start working on it to when it gets completed. I have one right now that I’m been working on for almost a year and a half, and we have an agreement with the IRS, but we’re waiting for the final notice from them to resolve it. Technically, it’s still not resolved yet. This is about a year and a half I’ve been working on it. Depending on what we’re doing, some of them can be solved in six months. Some of them can take two years. It depends on each situation and what each particular case is because the department that processes the offers minimum wait time, even if you send it in can be twelve months before you even hear from them. You’ll get a letter that says, “We acknowledge receipt of this. We’re processing it,” but it’s going to take us at least 180 days to go through it.
That’s remarkable. However, I’m assuming when they want something from you, they expect it immediately. Is that correct?
Usually, they’ll give you a letter that says like, “We expect a response in 30, 60 days, or 90 days,” depending on what the letter is. They give you a certain period of time to respond to it. One thing that you can do in some instances is they’ll give you like a 30-day letter then as a representative, I can call in and say, “We’re going to need another 60 days to work on this.” Many times you communicate with them. They can extend i.t
That goes back to what you said earlier, communication is key. You don’t necessarily deal with audits in your business. You’re dealing in after-the-fact resolutions when payments weren’t made.
It’s usually when payments weren’t made and when tax returns have not been filed for years. We can do audits. We don’t do a lot of them, deal with audits because most of those are correspondence audits, which means you don’t have an auditor show up at the door, which can happen from time to time still, but not as often as even many years ago you get an actual physical audit?
What happens is that we’re dealing with mainly people who are years behind in filing taxes, which sometimes even those who accumulating wealth for your readers, they may be accumulating it but maybe they haven’t filed tax returns for a few years, and then maybe they’re getting notices from the IRS for whatever the case may be. We deal a lot with those who haven’t filed tax returns. Many times people fail to file because they owe money or they know they’re going to owe money so they don’t file their tax return, which is a huge mistake not filing because you owe money.
Many times, people fail to file because they owe money or they know they're going to owe money. So, they don't file their tax returns, which is a mistake. Share on XProtecting Yourself
What should somebody in that circumstance do-file? I’ll give you an example because I lead a lot of different people and I see a lot of different scenarios. Business partners can screw each other up so much by one partner not keeping the books or not doing their portion of the partnership. If the other partner doesn’t have control over those books, tax returns can be either filed incorrectly or need to be amended. How does a partnership, or even a marriage, how do you protect yourself when you don’t have control?
I’ll give you an example from my life. We were involved in a deal where we were a minority owner in a mineral quarry. The person who had the majority ownership of the entity, it was their job to file tax returns get K-1s issued, and everything else. However, unbeknownst to us, this man had some other IRS issues. It was a battle. We could never get K-1. We could never get things. How do we protect ourselves in those circumstances?
What I always suggest people do in a situation where you’re describing you’re waiting for a K-1 but you haven’t got it yet because what you can do is always file your tax return without the K-1. If you’re getting like close to October 15th, you still don’t have the, if you filed your extension, you’re getting close to October 15th the due date and you still don’t have the K-1, usually I’ll suggest to file your personal tax return because what that does is that starts the clock on your tax return. It starts the statute and then what you can do is periodically check your tax record for income that was reported on your tax record. You can periodically check like every six months or whatever. It’s easy to do now online. You can go to Irs.gov, set up your online account, and see what income was reported for you.
You can check and see if a K-1 shows up. If K-1 shows up, then you can go back and you can amend your return and get it corrected there before the IRS goes in and corrects it. Which they will do if they get it when they do their matching, but you start the clock on your tax return when you file. It’s not something I usually recommend filing not, but I don’t usually recommend filing unless you have all your documents. In the case that you’re describing, I would suggest if you’re that close to the extension deadline, get it filed, that way you start the clock on your return and then you can always amend it later because you’re filing an accurate return with the information you have, especially if you happen to owe money on your other stuff, you want to get that file. That way you avoid late filing penalties and those kinds of deals. I would even suggest if you think you’re going to owe, you need to at least make an estimated payment by April 15th to avoid things like late payment penalties.
That way you have the money sitting in the hopper there and then you get it filed because you can go back and amend it later if you ever get the information
In this particular case, that deal didn’t go well. We all lost money. There was never any income. That gentleman loosely still trying to get a resolution with the IRS that had nothing to do with our transaction, but it affects us. I say all this openly because I think people jump into business partnerships way too loosely across this country and don’t think through everything. We didn’t either. At the time, he was a respected businessman in our area, a high net-worth individual.
When we entered into this transaction together and the wheels came off the bus and we were getting, we were along for the ride. That’s why if you’re dealing with a partnership, you got to have some type of written agreement. Usually, with an LLC it’s an operating agreement, but in a partnership agreement, you need to have some type of agreement in place. You don’t have to have one to form a partnership. Whatever the state’s requirement is to file a set one up, you can go and set one up. They’re easy to set up.
My point is in that case there was an LLC and the operating agreement said that person wasn’t in charge of all tax matters. What do you do? As the minority shareholders in the LLC certainly could bring a lawsuit and say, “You’re not fulfilling your obligations via the operating agreement,” All of that takes time and on and forth. I only bring it up because it’s an interesting topic to see where you are coming from on the resolution side. I like using my own pain for education purposes apparently.
If you’re my client in that situation, like I mentioned before, let’s wait and see if we get it or make your efforts to get it. Document the efforts that you made to get this K-1 and then if we’re at April 15th and we know there are other obligations you have to take care of, let’s file your tax return. Let’s get the clock started on the statute because that’s the big thing if you owe money and you never file a tax return, you haven’t started the statute of limitations on your tax return because if you haven’t filed, there’s no statute in place, there’s no limitation on it. That’s the key is starting that statute even if you owe money because there is a time limit the IRS has to collect money.
What is that time limit?
It’s ten years from the assessment date. If you don’t start those dates, it could be a 15-year-old tax debt, but since you’d never filed the IRS could still come back and collect it from you. Whereas if you’d have filed it and they didn’t collect it in the ten years, and it could go away sometimes that does happen. There are cases where tax debt has gone away simply because the statute ran out.
I don’t want to play that Russian roulette, but it’s interesting.
It does happen. That’s where we have to be careful. I mentioned tax compliance, that you have to be compliant to get, to be able to make a settlement with the IRS or to be able to get into an installment agreement with the IRS. The question is, what is tax compliance? Someone comes to me and hasn’t filed in ten years. The question is do they need to file ten years of tax returns to be tax compliant? The answer to that question is no. Would we want to file all ten years? Maybe. It depends on the facts and circumstances of that individual. There could be things that may be from some of those early years that could affect the years that we need to do for compliance.
That’s why go back and look and see. Many times the answer to that question is, “We don’t need to file them.” Back to how many years do we need to be in compliance? According to the internal revenues manual, we only need six years of tax returns. In fact, I got clients that I’m working on who when they came hadn’t filed for eight years and there are some adjustments that we’re working on, but with them in two years we’re not going to file because we don’t need to file. We’re working on six years forward for them. We’re going to get them compliant and then see where we are then, if they owe money at the end of that, then we’re going to work on a deal with the IRS or see where we are to get it taken care of.
Once we’re compliant, then we’re not going to worry about it. It depends on where they are. What we do a lot of is getting people compliant with taxes because the first step is seeing, “Are you tax compliant?” which means you have all your tax returns filed. Once your tax returns are filed, “Do we owe money? How much do we owe? Do we need to determine a settlement for the IRS or do we need to do an installment agreement based on your current income level and so on?” Based on those national standards that I talked about with the IRS, what they allow and what they don’t allow in those areas. Tax compliance is always the big thing with many people who have back tax issues that they haven’t filed. We get it filed so that they start the clock in any money owed.
The first step is to see if you are tax-compliant. Share on XTax Liens
At what point do people start getting tax liens, assets, homes, their checking accounts seized, and all that stuff?
It happens differently than it did many years ago. It’s not quite as aggressive as it was decades ago, but it still can happen. It doesn’t happen right away. It’s not a 6-month thing or even a 1-year thing. It’s funny, I’ve been in this business for many years. I hear people say things like, “The IRS is going to come do this or that.” I’m sitting here thinking, “No, you have to ignore them for a long time.” Seriously, you do have to ignore them a long time before they start doing stuff. It has to be over 10,000 that you owe them before they’ll do a lien. That can still take 1 year or more of ignoring them before they’ll do a lien. They can take even longer before they’ll do a lev, which means they’ll take money out of your checking account. Usually, they only do that if you ignore them. They’ll do that to get your attention.
It usually works pretty well.
The thing about liens is that those expire as well.
How long is it expiration on that lien?
It’s a few years usually. I can’t remember the exact number of years, but it always says on the lien, “This lien will expire on this date.”
Do they reissue if they reissue or renew it?
They can renew it, but if they don’t, one of those things goes away. That’s one of the areas where sometimes people get misinformation. Some people feel that because if you have a tax lien, that means you cannot sell your home. If you have a mortgage on your home, the IRS doesn’t become the number one lien holder on that home because they filed a lien on it. There’s a way a person can sell the home because there’s a whole other IRS form. Like everything else, there’s a form for it.
You can explain to the IRS, “This is the position you’re in. This is the position our mortgage holder is in. This much will go to our mortgage holder upon sale and then this much will go to you.” In essence, a person can sell their home. It says you have to go through a process but it can be done, even if there’s a lien on it or if you have other property that there’s a lien on that you want to sell, the IRS has put a lien on, you can sell it. The other side is to get rid of the lien, and pay off the IRS too.
I’ve dealt with that in quite a few of my real estate transactions over the years and also state-specific. This isn’t IRS, but like in Wisconsin, there is a certain amount of your equity that can be protected. If you’re selling your personal residence, you don’t have to clear all liens and judgments and it can sell with a clear title. That’s something that anybody that’s in the real estate space should find out specifically about your state because that’s helped me a couple of times when sellers show up at the closing table and there’s $10,000 or $15,000 of liens and judgments that they claim they didn’t know about, which they did, but they never want to admit. That’s not specific to the IRS at all.
All I can do is talk about the IRS here because everybody’s state is a little bit different on that. Sometimes you may not even have a state lien on a property. You may have an IRS lien on a property or vice versa when you’re selling a property. It can go either way. I know with the IRS, there are ways to work on it to get it done you can sell the property.
How It Works
As a professional in your business, what can people expect for something like this to cost? You talk about working on somebody’s resolution for two years, I’m assuming, that’s a sizable amount of time for your firm or any firm like yours. How does that work?
The way our taxpayer calls us with their issue, we have a phone conversation initially, which get some background, let them know how we work, what we do, then after that phone conversation and we explain either or my assistant here because she’s good at explaining exactly the what we do and how we do it. What we do is we take usually a $1,000 down payment for an analysis. What is this analysis? What this does is that this gives us the first thing we get an organizer to get your basic information. We get either signed in person or we get e-signature because we can do it this way with the IRS. It’s a Form 2848. We get that signed by the taxpayer, which authorizes us then to look at their IRS transcripts, the wage reports, all of those.
While we’re waiting for the IRS to process that, the client then is asked to provide us with a whole list of documents and information regarding financial information so that we can proceed with an analysis, “This is how much they owe the IRS. This is what their expenses are. What can we do? Do we do an installment agreement? Do we do an offer and compromise? Which way do we go? What are we going to recommend to the client that we do?”
Once we complete that analysis and meet with the client either in person or virtually because we do it all sorts of ways, whatever works well for the client, then the total fee for the service can be anywhere from $4,000 to $5,000. That includes the initial $1,000 that you already paid and then we go from there. Sometimes these cases get more involved depending on circumstances. I’ve done some of these where I have what’s known as an innocent spouse who may not be liable for the tax, but we have to file another form to help resolve that issue and they may not even be liable for any of it.
We go through a process there to file that form for a spouse whose husband perhaps filed a tax return, married but filing a joint tax return that showed income and self-employment tax, these kinds of areas or maybe claim to credit that they’re not eligible for or didn’t report all their income, these areas the other, spouse either had no knowledge or was told sign here. You can use facts and circumstances to get that the wife in this case out of that tax debt showing that she was innocent of it.
Sometimes those cases come up as well through this analysis as you figure out what exactly happening because I think I’m working on one where I think I have a husband who didn’t report all his income. I may have an innocent spouse there that I may be able to file. I don’t know exactly yet, but I see that as a possibility coming forward. To go back to something you had asked a little bit earlier, we skipped over. How can a married person protect themselves? I do this for individuals and what that basically can entail is that just because we’re married doesn’t mean you file a married filing joint tax return. If you have a spouse, a wife who’s concerned about her husband’s business, which I did have, a wife who was concerned about what her husband’s business was doing and he was taking his sweet time to get all the stuff together, which happens. It is reality.
She said, “I’m going to keep my taxes straight.” She did married filing separately for years and made sure her taxes were always straight. One spouse, if they’re concerned about one thing, they can keep their taxes straight all the time, they can do married filing separately. Now they may end up paying more in taxes as a result, but they’re protecting themselves. That’s how they can protect themselves. An interesting fact in the tax law is that if you filed a married filing separate return and then you want to amend or correct married filing jointly at a later date, you can do that.
How many years back can you go to amend?
There are only usually three years you can go back as far as if it’s going to get a refund because the statute only allows refunds for three years from the due date. For example, 2020 tax returns because the due date was extended to May 15, 2021, in that year can still get a refund as long as they’re filed by May 15th. Let me go back on there. If you did a married filing joint return, you’re stuck. You’re done. You can’t go back and change it after April 15th.
You can only go from separate to joint after the return due date. I don’t see that going either way very often. I do know that some people file separately and that’s okay. That works for them and that protects them. That’s how we can do it we’ve done it for several people because one spouse doesn’t want to be liable for the other spouse’s taxes or vice versa. They want to make sure their tax obligations are met.
This is a topic that I don’t see a whole lot of people discussing or talking about in my circle of influence. I appreciate you coming on and having this conversation with us. You also have your own podcast, which I believe is the Tax Answers Advisor. How often do you push that out and where can people find that and listen to more?
It’s been on the Voice American Network Podcast. I’m a little behind on that. I got to get caught up again. I haven’t recorded something fresh in a while but I’ve been looking at getting back to it. I do thank you for mentioning it. I do want to try to get back into that and trying to figure out how I’m going to do that. I do like talking about tax and I’m pushing this tax resolution because there are fifteen million taxpayers out there who have unfiled tax returns and the IRS is paused for some years because of the pandemic. Notices are starting to go out.
They’re opening up the floodgates. It’s going to be important to start getting those taken care of. One thing in accumulating wealth like what you do, one of the areas where people get themselves into trouble is if they sell a property and don’t do it properly reporting that if they’re selling stocks and bonds because there’s areas that come out of there that the 1099-Bs that get issued by the investment companies for that sometimes people don’t get those filed.
I don’t how much you deal with like with cryptocurrency, but that’s also a hot topic with the IRS and they’ve done a lot of what they call John Doe Summonses with Coinbase and those digital wallets to get all that information. I don’t feel like you can hide it from the IRS because they will find it eventually and you’re better off getting it filed now than later because you avoid the hassle, the penalties and the interest and we can help get all of that resolved for you if you do happen to behind. If you happen to be proactive and get it done with the IRS, they’ll work with you. It’s amazing. Many times the IRS is easier to deal with than most state revenue departments.
That is what I’ve been told as well. I’ve heard that from other business owners who have had challenges. I don’t have any goals of being in that scenario. However, we all need to educate ourselves in the event that something comes up or in our case, oftentimes we’re working with clients that we’re maybe trying to buy their real estate or their business and they’re in these challenges. Having somebody like you to be able to turn to, even in those cases, it doesn’t have to be us going through it, it can be somebody we’re trying to help.
I see that the great part about me being an enrolled agent is the fact that it’s a nationwide license so it doesn’t matter what state you’re in, I can help you. That’s what I love about being an enrolled agent. My license is not state-specific.
Just so everybody knows, you are based out of Colorado, but you can work anywhere.
I’m based in Colorado and I do work anywhere. I got two offices. One in Lamar, Colorado. It’s in the Southeast corner and I’m in Colorado Springs as well. I do have clients all over the nation that I work with in various ways, but our main focus here of course is tax resolution and then prevention of having to have tax resolution. We want to help you get both of those, keep you aligned, get you straight, and then keep you straight, and then also help you from never getting off the road there as well.
I guess wrapping up here, why don’t you let everybody know how they can get ahold of you and find you?
My website is CashTracksFinancial.com. Our direct office number is (719) 336-8739 or (719) 395-8799. Our email there, because we want everybody to be successful in getting their tax problems resolved, it’s Success@CashTracksFinancial.com.
I appreciate you coming on. This is not a topic that most people embrace, and I know how important it is for all of my readers to get a broad spectrum of education and knowledge from people who are doing it and doing it right. Thank you.
Thank you so much. I appreciate being on.
Everybody else, please go and like this episode, share it, and give us rave reviews. Jump on Facebook, @TheGenerationsOfWealth Facebook group. Join that. Become part of the Generations of Wealth Network, and we will see you on the next episode. Go out and live your vision, love your life. See you next time.