The Truth About IRS Debt (And How to Fix It)

In this powerful and eye-opening episode, Derek Dombeck sits down with Carlos Samaniego, a former medic-turned-enrolled agent who helps individuals and small business owners resolve their most stressful tax problems. From his own 8-year battle with the IRS to starting Tax Debt Consultants with his wife, Carlos shares raw, inspiring insights and busts myths about dealing with Uncle Sam. Whether you’re behind on your taxes or know someone who is, this episode is a must-listen.

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Welcome to the Generations of Wealth show. I am your host, Derek Dombeck. And, you know, today’s topic is one that I don’t hear on any other real estate investment shows. And it’s about how do you deal with the IRS if you have tax problems? And Carlos Salmoniego is truly a heart-centered person. You’re going to hear that in the show. His story is amazing on how he even got to, you know, what he does now as a profession. but um you know this this show ends up being very long and i was kind of surprised but it was great all the way through and through so before we bring carlos on um just as always anything i can do to help you please don’t hesitate to reach out go in through our websites thegenerationsofwealth.com derrickdombeck.com or shoot me an email directly just derrick at global gow.com let me know what i can do to help you and help us grow this show as well you know get out there and share it and with that let’s get on to our really really awesome show about dealing with everybody’s favorite uncle uncle sam and now as promised mr carlos samaniego carlos thank you so much for joining us from the west coast um we were talking a little bit before the show started about uh mother nature and and how finicky she can be. But why don’t you introduce yourself? Tell us a little bit about you.

Thanks, Derek, for taking the time to have me on your show here. You know, I’m just a small business owner out in Southern California fighting the IRS on a daily basis. And people always kind of ask me, what do you mean you fight the IRS? And, you know, Derek, there’s people all throughout the country and, heck, lately it’s been the world that got the IRS coming after them for whatever reason. It could be that they got balances, balances that they can’t pay or they haven’t filed tax returns or a variety of different IRS issues. And I decided just over, what, back in 2017, that I would make it a full-time career fighting the IRS. And the funny part about that, Derek, is I didn’t wake up one morning kind of thinking about that. You know, kind of my life, people always ask, well, Carlos, how in the world did you get into this industry that you do? And I go, actually, my dream, you know, coming out of high school, Derek, as we were talking about earlier, you know, born and raised in San Diego, ended up moving here to Redlands, California, which is kind of just about an hour and a half north of San Diego and about an hour south of Los Angeles. And parents moved down here. My dad was a Vietnam veteran, 100 percent disabled veteran. We moved up here. It was close to the VA hospital, a very big VA hospital here. And my dream was to go serve in the Army and, you know, coming out of high school. And I that’s kind of what I did. I got out of high school, joined the Army. And I did that for a couple of years. But I don’t know. I’m not sure if you’ve ever, if you know anybody that’s served out there, that for some people, it’s a lifetime career. It’s just like they love it. My son, you know, my son’s a naval officer. My daughter’s getting ready to go in the military here soon. And for me, I lasted about three years. And I realized, you know, the military was an amazing experience, but I didn’t see it as a lifetime career for me. So I ended up getting out of the military. And then as I got out of the military, I did like the job that I did in the military. I was a medic in the Army and ended up becoming an EMS worker, you know, an ambulance guy, EMT paramedic, as most people would know. And I did that for 11 years, Derek, and really enjoyed that type of work. You know, the work of kind of saving people’s lives, being of service to people. and for those people that are listening to this and you know they got friends and family members that actually do that type of work um it’s an extraordinary job uh very fulfilling fulfilling um but that’s kind of where my entrepreneurial journey started Derek and uh the nice thing about that job is I had what you would call people say the firefighter type job where I worked 24-hour shifts so i work you know like on a monday wouldn’t work again until a thursday didn’t work you know um make 40 you know two to three actually was that specifically it was 10 10 days a month that’s that was my total job um because of these nice 10 hour jobs so that gave me the opportunity to kind of explore um as people call it today they call it side side gigs or side hustles um so that’s what i started doing i started doing a lot of little side hustles um It was kind of my first introduction to the network marketing industry, which a lot of people kind of get their first introduction into the network marketing industry as a business.

And what I loved about that industry, it introduced me to personal development. And at a very young age, I started getting very into personal development. Remember Tony Robbins, remember those cassette tapes, personal power back in the day? That was one of my very first personal development purchases and got very involved in that and started making some extra money because I was here. I am working at this job that gave me the opportunity to do these little side hustles. But something happened that changed my life forever, Derek, during that time frame. And I bring this up because I want to share with people, you know, how do you get into fighting the IRS? And for me, it was more it’s because of some bad personal financial information that I took from a very not qualified person. And that financial information that I took or the advice that I took from was the older guy that I was working with in the ambulance. And when I say older guy, remember I was actually pretty young. So he was just a couple of years younger than me, probably in his early 20s. And I happened to be working a lot of overtime during the holiday season. And he said, hey, Carlos, you know, he’d ask me, why are you working so much? Because I was working 48, you know, 48 hour shifts, trying to get, you know, 72 hour shift type of a situation. And I told him, just try to make some extra money. And he’s like, hey, if you just take your paycheck, go to HR, claim exempt or 10 exemptions, you’re going to get a bigger paycheck. Because what happens when you claim exempt? They don’t take any personal income taxes from you. And I did that. And that’s where the beginning of my story kind of really starts there. Because what happens is I get that first paycheck that comes around after working all these extra shifts. I got this huge paycheck. There’s no income tax coming out of it. And, you know, I continue to work the rest of the year during this time frame and make some really good money. But tax time rolls around just like we just had tax day deadline here about 15 days ago. And when I went to get my taxes done, I realized I had a big tax bill because I had claimed exempt on these big paychecks. And I did what a lot of people actually, believe it or not, do, Derek, is that they don’t. Because they owe, they think, I’ll just not file the tax return. And that’s what I did. You know, I didn’t file that tax return. But the problem was I didn’t learn my lesson there. I never changed that exempt status. Worked another entire year. Another tax season rolls around. And I’m back in that same predicament. Go to file the taxes. Realize I have a massive tax bill. So I don’t file the tax return. Derek, that went on eight years. Wow. Where I went eight years not filing income taxes at all. Tax debt just building up. And I literally became one of these people that owed almost – by the time this was all done, because not only was I not filing federal taxes, I wasn’t filing state taxes. And a lot of people know California got big state tax bills here.

What? Oh, that’s breaking news. It’s just, Derek, I was in a bad predicament and really didn’t know what to do. I was afraid, scared, didn’t know what to do. You know, once you start, you know, a lot of people think, you know, you miss one or two years. It’s pretty easy to kind of just, yeah, get the tax returns done, get back into the system. But when you’ve got eight years, there’s nothing but fear in you because who do you talk to? You know, you don’t talk to your friends about it, right? It’s not like one of those things you go to your local bar and tell your buddy, hey, I haven’t filed taxes in eight years and I owe $100,000. You know, what do I do? That’s an embarrassing thing, right? You don’t go to your family members. Believe it or not, you’ll be shocked how many spouses don’t know that their spouse is in that situation. So it was just I was kind of frozen in time because I had no idea what to do. Eventually, I ended up leaving that industry. That’s a whole other story. I could write a book about why I ended up leaving the medical industry. And I ended up getting it, believe it or not, getting into the real estate industry after I left there. I ended up getting into the real estate industry, became a mortgage lender, started doing that type of work. During this time frame, though, the state of California had eventually did catch me. And when I say catch me is that a letter got to me where I actually opened up the letter in California. He was just asking, hey, where’s your tax return?

Yeah. And I had known I’d got caught. And I initially was able to deal with them. They’re just like, because what happens when a lot of people don’t know is that when you don’t file a tax return, The IRS and the states will actually just file a return, what they call a substitute for return. They file it on your behalf so they can start collecting the tax bill from you. So they did that with me. They still want the tax return, but they did that part of it. And at least I started paying them on a monthly basis that kind of kept them off my tail for a little bit. But I knew it was only going to be a short time before they actually contact the IRS to let them know, hey, we found him. It’s time for you guys to go after him. Because they do share information with each other. And as this was going on, I was just kind of, you know, again, I’m trying to make a career. I ended up getting hired at Chase Manhattan Mortgage as a mortgage lender. My first introduction into the financial industry, other than the network marketing and a bunch of side gigs I used to have, I ended up getting involved in that industry and started working in that industry. And something big happened while I was working in that industry. I was introduced to a young lady that was interested in qualifying for a mortgage, was looking to buy a house here in the city that I currently live in, and was introduced to her. She came in, got pre-qualified. Derek, I asked her out to lunch because she was waiting for the realtor to take her on an open house. I ended up asking her out to lunch. And as we ate lunch, I realized that I would actually marry this girl. I fell in love with her the day I saw her. And decided that I would not do the mortgage because I was interested in her personally. We ended up, we started dating. And a couple of years later, we actually end up getting married. And the reason that’s important to my story is that as we got married, I had never told her about the IRS coming after me, not filing my tax returns. And I had this ugly monster coming after me, yet I married her and basically she married into my tax problems. As we all know, you know, once you get married, your finances are intertwined.

And when I married her, that had happened. And that moment changed everything for me. And that was a scumbag move, Derek. To this day, I admit that it was a complete scumbag move. But when I married her, literally right after I married her, I’m talking about like within the week after I had realized what I’d done. So I started doing some massive research. Who can help me with this tax problem? And realize that there’s three people in the world that can actually legally represent me with the IRS. It’s an attorney, a CPA, or an enrolled agent that are licensed by the Department of Treasury, the IRS. So I’m doing this research. I ended up finding somebody local. His office happened to be two blocks from my house. He calls me up. I talked to him. He goes, Carlos, the only time I can talk to you, it’s going to be Christmas Eve. I’m going to be at my office. I went over to his place and Ernie, the enrolled agent, former IRS agent, I sit down with them and he goes, Carlos, you’re not a bad person, but you made a stupid decision, but it can be fixed. Any tax problem can be fixed. And that day, a billion pounds of bricks fell off my shoulders. I went to my wife. I sat down with her. I told her, I decided to have a confession, hopefully, that she wouldn’t divorce me at that moment. And she said, let’s, do you have a plan to get this fixed? And I said, I did. And I told her about Ernie. Ernie fixed my problem. And after he had fixed my problem, we got it all resolved with the IRS. He had told me, hey, if you ever decide to make a decision to make a career change, I think you’d be pretty good at this. That was almost 20 years ago. And about 15 years, just back 2017, 2014, right around that time frame, I was looking to make a career change, right? I wasn’t in real estate anymore, decided to make a career change, almost became a minister. and realized that I still had a family support, kid support, and wasn’t really going to make it as a minister financially. So my wife says, hey, why don’t you do what Ernie did for you, help people with their tax problems? And that started our company, Tax Debt Consultants. And Liz, my wife, who’s sitting over my shoulders, she’s the co-founder of the company, Tax Debt Consultants. So here we are.

Well, there’s a lot to break down in that story. But first and foremost, I appreciate your service, your family service to our country. And your whole story that you just told us, you’re very heart-centered. It’s obvious. Like, you want to help people, and that’s so honorable. And, you know, that’s why I love having people like you on this show, right? Because it’s not you trying to go out there and take advantage of people in bad situations and make money off of their challenges. Not that you shouldn’t make money and provide for your family, obviously, but I love that. So with the IRS, so Ernie is now mentoring you, right? He’s teaching you the game. Is that kind of what we’re at? what happened well the beauty behind ernie um um he didn’t teach me the game he uh he you know he fixed my problem and gave me that inkling of you know hey do this so i had to figure out well uh when my wife said why don’t you um you know why don’t you become um do what ernie does and help people with tax problems i had to figure out well so i mentioned earlier there’s only three types of people that can that help you well i’m like well i’m not going back to college to become an attorney I’m not going to become a CPA I have no experience in CPA so I’m like really the only option is the enrolled agent part of this thing so when I was doing my research I realized there’s two ways to become an enrolled agent one you can go work five years for the IRS and as long as you work for five years you can get licensed as an enrolled agent with that five years of experience or the other part you can take the test to become an enrolled agent. The test is a three part four hour exam for each part. If you can pass that test and there’s no formal education for it, you have to go study for it. There’s courses you can take to study for it. And that’s literally what I did. It took me about a year and a half of intense studying, learning about every aspect of taxation that exists. You know, each test, the test one is individual taxation. So you dig deep on individual taxes.

Test two, which we call the monster, is everything about business taxes, partnership taxes, corporation taxes, farming taxes. So you learn everything about that. And the final test is representation, how to represent people and the roles and responsibilities of dealing with that. And I went in, you know, after doing all that study, I went and took that test and and I finally passed it. And then now as an enrolled agent, I’m like, OK, believe it or not about 95% of enrolled agents don’t do representation work like my practice Derek is that I don’t just have a tax practice my practice is not your standard oh go to Carlos and get your taxes done all I do is legal represent or representation for tax problems that’s all if you got a tax problem I can help you if you’re just looking to get your taxes done because you you fired your tax guy that’s not what I do it’s kind of a really specialized role and a lot of industries like that just like you know you have heart surgeons and foot surgeons you know you they’re really specialized so um i was surprised to find out that 95 percent of enrolled agents don’t do representation they actually just do taxes they that’s that’s their their forte so i literally seeked out some of the best mentors in the country um to learn that representation and Ernie eventually did become one of my mentors I remember going back to him saying hey I became an enrolled agent and in fact the last couple of years Ernie came came to me and he started referring he was close to retirement age over the last couple of years and he decided to retire so he started telling all his clients come to me come to me so I started taking over he actually worked with me for a little bit and unfortunately he recently passed um just recently um you know god rest his soul but um earning was a big if it wasn’t for none of this would exist for me

yeah yeah well that’s amazing so what are some of the the misconceptions that people have about dealing with the IRS. You mentioned fear earlier. Anybody that gets a letter that’s stamped IRS before they open it, the hair stands up on the back of their neck. Let’s kind of go into that first. The IRS, there’s obviously a lot of hate, natural hate. Everybody thinks they’re taking, they are, they’re taking our taxes. and we don’t none of us like to pay bills but and that’s one of our biggest bills but i i look at them when the when the irs is coming after you most people i would say most people in the country don’t have irs problems because they just pay their taxes and they’re just collecting that tax and we you know whether whether we got to how much we pay they all all they want you to do is pay what you legally, the legal amount that you owe. And when you don’t do that, now that’s when they become a thorn on all of our sides. And my relationship with them is very good. And from this point of view, they love, a lot of people always say, well, do they get upset when they hire someone like you? No, they love it because we understand the rules that they play by. They understand that we have responsibilities that we can’t play games with them. We have to legally represent somebody correctly. We’ve got to make sure that when they ask for documents, we know exactly what documents they want. And they know that we’re doing our best to resolve a case, and that’s all they want. There are arrests that a lot of people kind of think that they get bonuses the more they can collect. No, that does not exist. But they do get bonuses for closing a case. So if they can get a case off their – if that file comes off their table because we got it resolved, I’ve heard that they actually get bonuses for that. That’s wonderful because they just want to get cases closed. But when you’ve got a tax problem, probably for me, one of the biggest misconceptions is that they don’t care about your financial situation. They do. One of the things I tell people all the time is that, you know what, if you have a bill that you can’t afford to pay, we just got to show the IRS why.

We got to show them the proof. You just can’t say that, oh, I can’t afford to pay you, and they’re going to take your word for it. They kind of want to get a sense of, well, what are you paying for your mortgage, your house payment, your utilities, your cars? And depending on your financial situation and how much money you owe, there are quite a few options that the IRS has. And a lot of people don’t realize that. They just think that if I call the IRS, they say they want $3,000 a month. Well, if your bill is that big enough and they need $3,000 a month to pay that, that’s what they’re going to ask you. But if you can’t afford to pay that, we just need to show them the proof that you can’t afford to pay that. And we work with them on that. And the great thing is that I’ve had really great experiences. I mean, they’ve really bent over backwards helping me with my clients. And the hard part is that because of some, there’s a lot of firings going on, a lot of layoffs going on, a lot of people just taking their retirement and getting out of the service. That’s going to get really hard. Just this week, just yesterday, I got three letters from the IRS, some appeals that we were doing that they’ve been canceled and will be rescheduled at a later date. And it’s because people are, two were being terminated. One was taking the proposed, what do you call that, when they forced retirement? Yeah. Just take the retirement early type of a situation. So that’s going to get much harder, much, much harder. I already can tell we’re already dealing with a lot of automated computerized stuff. And the phone wait times are getting really delayed right now. So there’s going to be some challenges there. So are you seeing where you’re successful in getting dollar amounts reduced, or is it just reducing their payment, stretching it out longer? What does that look like?

It really depends, and it comes down, it goes back down to, Derek, the finances. It always comes down to the finances. The big thing the IRS warns about, and we all hear it on the radio, you know, do you owe the IRS tens of thousands of dollars? We can settle for pennies on the dollar. The Fresh Start Program, that is a very common radio ad. Well, the Fresh Start Program is not really a fresh start thing. It’s been around for ages. The official name for that is called an offering compromise. That’s where you have a certain balance due and you’re offering the IRS less money for whatever you owe. That program does exist. And there’s some very strict guidelines for that program. And it works excellent. I’ve had multiple cases. One of the most recent cases I had, somebody had over $300,000 of tax debt. We sold it for about $3,900. But you’ve got to understand what the IRS is looking at. They’re going to look at your income, as we talked about. They’re going to look at your expenses. Excuse me. They’re going to look at those expenses. They want to see how much money you have left over to pay the debt. Okay? The second part that they’re looking at, and I’ll come up with kind of an example here. Excuse me. Getting over a cold here. The second part of that is that they’re looking at your assets. How much assets do you have? 401k, savings account, checking account. Do you have real estate equity? And I can tell anybody right now that if you’re listening to this podcast and you owe the IRS a lot of money and you have equity in a property or in an investment, and if that equity exceeds the amount that you currently owe, the chances of getting that offer in compromise, that fresh start, the pennies of the dollar, is zero to none. Because the government just looks at this. We’ll just put a lien on your property, and someday you’re going to sell it. Someday you’re going to want to refinance it. And we’re just going to take the equity right out of your property. So I get people all the time that call me up. And I’ve had multiple people call me up that have been scammed by companies telling them, oh, yeah, you definitely qualify for that program. they’ll pay them 5, 10, 15, 20 thousand dollars to do the paperwork only to find out quite a few months later they never qualified because they were sitting on 200, 500, a million dollars worth of equity. California pricing out there.

So, and then they go back to the company trying to get their money and the company has been shut down. Or they shut their companies down purposely. Yeah, I know of people that have been through that scenario and have told me the stories. It’s devastating. That’s why I tell people, and I offer a free, for all new clients, a free consultation just to say, hey, tell me your story. I can run some quick numbers, just rough estimate numbers, and say, yeah, that’s a possibility. No, maybe not. It’s just because these companies do this, and again, they’re popping up left and right. And it’s the saddest thing to see somebody coming to me. I’ve been paying this company $700 a month for the last two years, and they said I would qualify for this program. And I’m going, you got $300,000 of equity in your property, and you got a $60,000 tax bill. That is never going to happen, ever. And that’s a sad thing. It’s just that, and you mentioned earlier, there’s just a lot of people that are taking advantage of clients’ personal financial situation in fear of the IRS. And they take advantage of that. And a lot of these companies, too, Derek, is that they don’t even exist. You can’t go to their office if you wanted to. It’s all phone-based or Internet-based. And you know what? There are a lot of legitimate companies that are that way. But what makes me unique, and I’ve actually had people flying to California to meet with me because they say, I just want to be able to know I can go sit down and talk to somebody or to find out what’s going on with my case. is because XYZ Company says that you’re being assigned to our collections team B. They’re going to handle your case, and they can never get a hold of somebody. And it’s a bad scenario.

Yeah. So if you have $100,000 that you owe the IRS, the federal IRS, typically you owe your state as well. so do you work with just the federal IRS programs or do you work with state programs just within California or not at all great question um here’s uh we do both we we work with both entities because there’s typically tax um obviously there’s about six or seven or eight states that don’t have taxes but I always tell people and people are always surprised because somebody will call me and they’ll say, hey, Carlos, I got an IRS problem. Or it could be the IRS just took money out of my bank account. And what I have found is that 95% of the time, probably even higher than that, it’s not even the IRS that did that. Take the money out of a bank account. It’s the state that did it. And so I always tell people when you got an IRS problem, there’s a very good chance you got a state problem. So I start asking about the state and they’ll say, well, Carlos, why are you talking about California or Illinois? I need help with the IRS part of it. I go, it’s because if you got this IRS thing, I guarantee you probably have a state thing, and the state is going to come after you much faster. They’re going to come after your paycheck faster. They’re going to come after your bank account faster. And you’ve got to realize the reasoning behind that, right? The federal government has the ability to do what? Create money. Right? the states do not have the ability to print money so really their only revenue source is coming from for for most states is income tax and they know that if the irs gets a wage garnishment or a bank levy they’re not going to get their money because they’ve already gotten so they speed up the process because they want to get theirs before the irs can get their money right so the answer to the question is that we deal with both. We have to deal with both. It’s just because the other reasoning behind that is a lot of states really don’t negotiate their debt. I know like California, I’ll talk California specifically, and I know a lot of states are very similar. They don’t like negotiating their debt a whole lot. They’re like, you know what, we’re going to get paid no matter what. Like in California, if you owe taxes to the state and you don’t deal with it, they can take your driver’s license away. They can take your occupational license. If you’re a mortgage person, they can pull that license. If you’re a doctor, I’ve had doctors get their licenses pulled. Any type of occupation, they can shut down your business because businesses are typically a state licensing issue. So they have such extreme power that we got to deal with that state issue first. And then what’s great about that, if we deal with that, and let’s just say we get you on an installment agreement with the state, you know, whether, you know, making up figures here, it’s a $500 installment agreement. And now it’s time to go deal with the IRS. When we’re doing our financials with the IRS, we can put the state tax bill as a line item expense that could potentially reduce the money that’s available to pay the IRS.

Sure. So whether it’s state and or federal on these payment plans, are they charging interest and penalties and everything else? Yeah, unfortunately, that is a very common question is that, oh, if I get into a payment plan or we get into a resolution, and I’ll talk about the four different types of resolutions here in a second, But the thing to understand is that all states and IRS, it is mandatory that they charge penalties and interest on a debt that is owed as long as the debt is owed, period. A lot of people say, well, can you just get them to stop it? Well, no, you can’t do that. It’s just it continues to kind of accumulate even as you’re paying. Sometimes we can get, you can get an abatement, a penalty. There’s a thing called a first-time penalty abatement with the IRS. And there’s also called reasonable cause penalty abatement. And that’s basically, you know, something happened in a certain tax year because whether it had been a death in a family that caused some challenges that you didn’t file or maybe it was a natural disaster, There’s ways of possibly getting some penalty abatement, but overall, they’re going to continue charging penalties and interest on all that. And is that a line item that’s the same across the board, or is that different based on how much is owed? The interest rate is the same on how much is owed. It’s basically the same amount, but there are different depending on the reasoning. There’s a specific interest rate for owing a tax debt and it hasn’t been paid. There’s a specific interest rate for that and penalty for that. And then there’s a different penalty if you hadn’t filed a tax return, which is the worst thing you can do. So people that have unfiled tax returns, you need to understand that that unfiled tax return, And if you owed money, that interest rate is 5% a month up to 25%. So it literally can skyrocket an unfiled tax returns tax bill.

Okay, so if you were unfiled and now you file and you find out you owe $100,000. So you’re filed, you acknowledged it, everything’s signed, it’s with the IRS, and you need to work out a payment plan for the $100,000. yes what does that look like again you gotta uh depending on how you know to give you an example let’s just say you had a hundred thousand dollar tax bill this today right um this tax bill the irs will give you up to 10 years believe it or not to pay that that tax bill that’s 120 months you’re looking at about $833 a month bare minimum but here’s the interesting part about this is that a lot of times what happens people don’t pay their taxes don’t pay that tax bill right away so here’s an interesting concept that happens with the IRS every year you don’t pay on a tax bill the monthly payment goes up and why is that? because all tax bills have a 10-day, once a tax return has been filed and processed, assessed. Once it’s been filed and assessed, so the IRS says you officially owe this money, is the IRS got 10 years to collect on that debt. So let’s assume this imaginary $100,000 tax bill, it was assessed this year, you’re looking at roughly $833 a month, right? And next year, you didn’t make any payments. Guess what? That monthly payment just skyrocketed. Because now there’s only nine years left. Let’s say you missed the 90 years. So every year, and the reason is the IRS has to collect that debt before it expires. So let’s assume that you didn’t pay that tax bill for nine years, and you have a $100,000 tax. Now it’s probably going to be a lot more because of penalties and interest, right? that you’re looking at possibly a $10,000 to $15,000 a month minimum payment just for that tax year. So a lot of people, when people come to me and they have years of unfiled tax returns or years of just filed tax returns, but there’s debt every single year, sometimes they’re shocked when they say that, oh, I called the IRS and they said, my minimum monthly payment is $4,500 a month. How is that possible? And I explained to them, it’s just because you haven’t dealt with this for years. They’ve only got a certain amount of time to collect on that. So they’re telling you what their minimum payment is because they’re trying to collect on that debt before it expires. So that’s where I come in and say, well, let’s take a look at your actual income, your actual expenses. And maybe we run those numbers. And I say, well, based on your numbers, you can only afford to pay $600 a month. And, you know, and again, we’re just rough numbers. If it’s $4,600 a month, now I can literally go to the IRS and say, hey, they only have the ability to pay, you know, $400 a month based on your guidelines. And the IRS, there’s a very good chance the IRS will accept that. And that’s actually called a partial pay installment agreement where they accept that $400 a month, even though they wanted $4,000 a month. And that’s expected, Derek, to a lot of people say, well, what options are available if you have like these tax problems or this tax debt? There are four basically what I call four major options. Option number one is an installment agreement. Basically, you owe money.

You can – based on what you owe, there’s going to be an installment agreement amount that the IRS comes up with. Either you can afford to pay it or you can’t afford to pay it. So that’s a basic installment agreement. You know, a lot of times people, I had one yesterday. They said, Carlos, I had a tax bill last, this last trial season, it was $15,000. You think the IRS would negotiate with me? And here’s what I did. I took $15,000. I divided it up. What I did is I divided it up by just seven years. I said, that’s $214 a month. If we did that $10,000, divide that by 10 years, that’s, you know, let’s do 10,000, divide by 120. That’s $83 a month. So you’re telling me you have no ability to pay a minimum of $83 a month based on your income and your expenses. Well, yeah, I could probably pay that. Well, then you’re going to pay $83 a month. They’re not just going to get rid of this thing. So installment agreement is number one. Okay. And on that installment agreement, there is interest on top of that. Interest and penalties on top of that. Is that double-digit interest or is that single-digit interest?

It’s prime plus whatever the interest rate. So you might know better, but I’m not a realist. Whatever prime is, I don’t even know what the interest rates are right now. So it’s that plus whatever the interest plus whatever the penalties are. So it is going to go up. So the next thing too is the next option is what’s called a currently not collectible. This is a powerful option people don’t realize exists. A currently not collectible status is where you can show the IRS based on your income and your expenses, you do not have the ability to pay anything to them. And the IRS will shut off all collections. They won’t come after you for the money. here’s the negative part about that that money continues to accrue penalties and interest but sometimes here’s a powerful part of that if you have debt that’s getting ready to expire remember that 10 years collection thing and i’ve had this situation where somebody had a bunch of debt that was going to expire over the next year and we were able to get them in a not collectible status, that clock keeps on ticking, and that debt will expire and disappear. So that’s a very powerful option that’s available if somebody’s in that type of a situation.

Basically, they can’t have assets. If they have assets… If you’ve got assets, they’re going to come after those assets. And when I say come after it, they’ll just place a lien at your county reporter office. The IRS is not into taking your, let’s just say you have a home. One big fear is, are they going to take my home? The IRS is not into making people homeless. But they will put a lien on the property. Right. If you got equity. So again, we talked about installment agreement. Currently not collectible. The offer and compromise, as I talked about earlier, that fresh start, as people know it by. But offer and compromise is where you settle for pennies on the dollar. That is a legitimate program. It works great. but again you need to qualify um and i always tell people i get people all the time that call me hey carlos i have like sixty thousand dollars of debt i want to do an offer in compromise and i’m looking at their situation running some rough numbers i’m like you may qualify because you don’t have any income or you don’t have any assets um or when i say income after your expenses there’s no income really left over um but the problem is sometimes is that they haven’t filed their tax returns or they have missing tax years that need to be filed. So we got to get those tax returns filed because the IRS wants to deal with all their debt, not just part of their debt. So offer and compromise is a great program if you qualify. And so we talked about installment agreement, currently not collectible, offer and compromise. The other option, as I talked about earlier, is that partial pay installment agreement. Maybe you can’t afford a regular installment agreement, but you can afford to pay something. I had a really great case just recently. A lady had a real estate broker actually owed almost $400,000. The IRS wanted about $10,000 a month based on her debt. And the IRS actually got, I was able to get them to agree on a $400 a month installment agreement on that debt, which makes it technically a partial pay installment agreement. because if any debt comes due for expiration, it will fall off.

Okay. And the final one, I call this the bonus one. Bankruptcy is actually an option with the IRS. Some debt can be dischargeable by bankruptcy. I had that question written down. I was going to ask you that because most people think that’s not possible. That is definitely a possibility. Here’s a key thing, and this is really important for people to understand, is there’s really specific rules. One of the rules is the debt has to be at least three years old. So I had somebody recently, hadn’t filed tax returns in like 19 years, and he was planning on filing all his returns and then just claiming bankruptcy right afterwards. Problem is the debt has to be at least three years old. So if you filed a bunch of returns and thought you were going to claim bankruptcy the minute the IRS processed that, you’ve got to wait at least three years before that debt expires. So there’s some additional rules. Bankruptcy attorneys can help you. So one of the key things I tell people that are interested in this option, especially if they haven’t filed tax returns, go file your tax returns. Because one thing that will not work, I talked about this earlier, if you don’t file a return, the IRS or state has the right to file a return on your behalf to collect. Anytime the IRS does that, that year just became ineligible for bankruptcy, even if you do file a tax return. So that’s why it’s so important to file those tax returns, even if you can’t afford to pay the bill and just get them filed. You don’t want the IRS filing that substitute for return on your transcripts.

Excuse me. So when people need your services, whether it’s you or anyone else, obviously they should come to you. But if it’s you or anybody else, what can they expect to pay? Is it based off of a flat fee? Is it hourly? Is it based off how much they owe? How does that work? The way I do it, every agency is – every person that represents a person is dramatically different. As you can imagine, attorneys are dramatically different than other people. Attorneys charge attorney prices, charge certain retainers. I can kind of tell you how I actually work. Maybe coming from the medical industry, I use kind of a medical payment, what I call billing the way I do it. So I tell people all the time is that a lot of times when people have a tax problem, one thing I say, Derek, is that most people, almost 99% of people that have tax problems don’t know what the problem really is. They have an idea, you know, and here’s what I mean. Well, Carlos, I owe money to the IRS. I think I owe money to the state. I think I filed my tax return back in 2020. They really don’t know because they do what we all naturally do. They kind of put it away, right? They don’t want to deal with it. They throw the IRS bill into either the trash or in a box. They don’t even open it. So coming from a medical background, when you have a problem, a medical issue or a symptom, what do we do, right? If I had a really extreme headache and I’m like, I don’t know what’s going on here. And if I call my doctor and if my doctor says, hey, Carlos, you know what? Let’s schedule you for brain surgery next week so we can see what’s going on. We got a problem, right? It’s just like, but that’s not what doctors do. Here’s what they say. Let’s get your blood labs and let’s get some blood labs or maybe an MRI or an x-ray done. And let’s see what the actual problem is. Because they don’t want to do a treatment plan more than what you actually need. And kind of similar to me, I don’t want to charge somebody more than what they actually need. So I do what I call a phase one investigation. And my phase one investigation means I’m going to file a power of attorney with the IRS and their local state, whatever state. because what I want to do, I want to get in all your internal records with each of these agencies and find out what the actual problem is. You know, what tax years were filed? Which ones weren’t filed?

Where are you in the collection process? Has the IRS placed the tax lien on you? The IRS, I also get like the last 10 years of wage and income transcripts for you. So every W2 1099 that was ever issued to you over the last 10 years, we’re going to get access to that. I’m going to be able to see, do you qualify for penalty? There is a lot of information I’m able to collect. And then once I’ve gotten all this information, I can look at it like a doctor looks at the blood work and looks at the x-ray and says, oh, I see what’s going on here. Now I can come up with a game plan, a treatment plan, as you will, on how to solve this problem. So I have a specific cost for that. That could be anywhere from $500 to $2,000. Depends on the situation. Are we dealing with one state? Are we dealing with multiple states? Are we dealing with an IRS? It just depends. I don’t know. It’s just like when a doctor says, well, depends on your symptoms, what’s going on, what type of tests we need to pull to figure out what’s going on. I tell people this is the best money you can possibly spend. because one, we’re going to make sure that we don’t do something that is stupid. And here’s what I mean by that. I had an entertainment director, director, producer out of Hollywood reach out to me, owed just over a million dollars, if I remember this right. And I was explaining this process. Phase one, we’re going to do this and we need to find out what’s going on. And he paid me. went through his records and I called him back up to go over the findings. I said, here’s what we’re going to do. We’re going to do nothing. He’s like, what do you mean? That’s not what I hired you to do, to do nothing. I said, we’re going to do nothing for the next few months. And I said, the reason is you got a half a million dollars of tax debt that’s getting ready to expire. Like literally disappear off your account. Like it never existed. And he’s all, what? Are you sure? I said, I’m looking at their records right now. And guess what happened a few months later? That debt disappeared. But had he had done what he wanted me to do initially, he wanted me to start doing some things. And I said, no, I’m not doing that. I need to look at what’s going on before we do anything. We could have screwed all of this up on exactly how this was. So that was a half a million dollars was able to get wiped off just because we did this in this specific order. So that’s phase one. It’s just that investigation to figure out what’s going to be the treatment plan. During this time frame, I’m also collecting some financial information from the client. So I can get a rough idea of which direction are we going to resolve your tax issue. Or another thing I always find out in phase one, maybe you don’t have a tax problem. I had one client, I’m like, for 20 years, you thought you had a tax problem. You don’t. You have a filing problem. Once you file these certain tax returns, there is no tax bill. It’s zero. It disappears. Because they had a bunch of refunds on a bunch of the years that they claimed that he owed. So one company was trying to charge him like $15,000 to handle his tax problem. I go, you don’t have a tax problem. You’ve got a filing problem. And I was able to find out because we did that phase one first.

Gotcha. Phase two, my next phase, is that once I know what the problem is, now I know which tax returns need to be filed. Because here’s the thing. The IRS, if you’ve got a bunch of missing tax years, More than six years of tax return. More than six years of unfiled returns. The IRS doesn’t want them at all. They just say, hey, if you get us the last six years, we’re good to go. We’ll just ignore. I’ve had, Derek, I get people 15, 20 years, you know, 25 years haven’t filed a tax return, and they’re coming to me. And I’m telling people, like, right now, if you’re in this situation, now is the time to deal with that problem. Because the IRS is in such an overwhelming chaos going on over there. Get back into the system quietly. So, but if you’re a non-filer, the IRS only wants six years of tax returns. So, phase two is just doing the tax returns that need to be filed. Period. That’s all it is. It’s getting you with what we call into compliance. That’s what phase two is, compliance. Because the IRS will not deal with any tax problem whatsoever until you are fully compliant. And again, the IRS only wants six years of compliance for you to start dealing with your tax problems. Now, here’s where states are a little bit different. States may ask for all your tax years. It just depends. It depends on which state that you’re in. California, I always tell people with California, I’m just going to call them and ask them, what tax returns do you want filed? Because I don’t have to file tax returns that we don’t need. They’ll let me know. So, and again, every state is going to be slightly different. The other thing, too, with part two, compliance, even though the IRS only wants six years, if you have years that the IRS filed or the state filed what’s called a substitute for return, where they actually filed a return on your behalf, you always have the right to file an original return to replace that assessment.

Okay. We might be in a situation, and again, I wouldn’t know this unless I did phase one, right? Where, hey, Derek, back in 2010, the IRS says that you had a 20, it could be a $60,000 tax bill. But based on your information that you gave me, Derek, you would owe zero. So we just need to file that tax return so we can replace that assessment. So, again, it’s all strategy based on that original phase one investigation. You know, which returns need to be filed, which ones should be filing. So that’s phase two. Cost there, I can tell people it’s the cost of doing returns. You know, you got to file some returns and you got to pay the – we got to get the tax returns prepared and filed. Is it a simple W-2? It’s going to be very cheap. Are we dealing with corporation returns, partnership returns, business returns? It could be slightly more, whatever the cost per return is. But the final phase, what I call this is that now we’re coming to the finish line. As the doctor would say, now that we know what the symptoms were, we got you all prepped up for dealing with this problem. And now we actually know what the problem is, because once all the returns have been filed and processed by the IRS, now we know how much money you really owe. You could be in a situation, Derek, where, as I told that other person, once we filed all the returns, you don’t even have a tax problem. your case is done. There is no tax problem to deal with. So there is no cost for phase three. That’s why I always tell people, I can’t morally charge you for something that you may not need. And I don’t want to do that. So I’d much rather just do this in phases and charge you for exactly what you need. So, but we may get to phase three. And after filing all your tax returns, find out that you do have a tax problem. You’ve got a big tax bill here. Now we’ve got to figure out how to resolve this tax problem. Is it going to be, as I mentioned earlier, installment agreement, offering compromise, currently not collectible, partial pay installment agreement? And each one of those pricing is dramatically different. I always say the most that you would pay on any of those would be the offering compromise just because that takes so long. A lot of people don’t realize when you’re trying to sell debt with the IRS, that can take up to 18 to 24 months. The fastest I’ve ever happened is three weeks, but that was like a rarity. But I say the average is nine to 12 months on average. We’re going back and forth dealing with the IRS. There’s negotiating going back and forth. We’re analyzing numbers. And sometimes we have to go to appeals because sometimes the IRS gets it wrong. I’ve had multiple cases. The IRS is looking at our numbers and they’re saying, no, that’s not our number. We don’t agree with that. And I’ll give you a specific case. Had a single mom owed quite a big tax debt. And they said that her car was worth, a used car was worth like $18,000. So they wanted to add like $18,000 to the offer that we submitted, which was dramatically more. And I’m like, there is no way in the world this car is worth that. And she would not budge. And I said, okay, that’s fine. we’re going to go to appeals and we actually went to an appeals department with the irs and we submitted our documentation showed that that car was not worth that amount of money and they actually just agreed with us they’re like you know what you’re right and then we actually was able to get the offer approved through the appeals department so that’s why that can actually take a little that’s going to cost more because we’re dealing with it if it’s an installment agreement and we’re on the phone maybe a couple of hours is not going to be all that you know it’s going to be a certain price point based on our time that we’re spending on it.

Well, speaking of time, we’ve been rocking and rolling for like an hour on this. I mean, no shit. Yeah, but time flies when you’re talking about fun stuff like taxes. So let’s kind of wind this up. You actually have a podcast that you host as well, so I want you to mention that. And then, of course, anything that we can do to get contact information for you, that’d be great. Absolutely, yeah. My podcast is going to restart here in May. It’s called Carlos Brew, where we talk about business, life, and taxes, of course, and primarily for the self-employed entrepreneur. But the big thing I would like to offer all your listeners is a copy of my book called How to Make the IRS an Offer They Can’t Refuse. You can see that there. You can get the digital version of this book at taxdebtbook.com. But I give away this book. It tells the story I told at the very beginning why I do this. And it’s basically, you know, and I talk about the book’s subtitle, Learn of Three Crucial Steps You Must Take to Handle Your Tax Debt Problems. Reduce your tax debt and get the IRS hitman off your back for good. So we briefly talked about that on the show. But, you know, have your readers grab that book and you’ll get all my contact information once you grab the book.

OK, well, that’s awesome. Appreciate you having, you know, giving us your time today. And all of your knowledge, of course. And as I said earlier, just thank you not only for your service when you were in the military, but just your service now. Like you’re truly a heart-centered person and that’s awesome. Awesome.

I appreciate that, Derek, so much. Thank you.

Well, for everybody else, go file your damn tax returns. And if you’re having issues, find good quality people like Carlos. And while you’re doing all that, help spread the message, grow the generations of wealth, and get out there on social media, tell everybody about our shows, what we’re doing to bring information to you, and how it can help them as well. So until the next one, we’ll look forward to seeing you again.

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About Carlos Samaniego