Knowledge is Power Part TwoMay 24, 2022
I recently wrote about a movie clip where in hushed tones a man said to a women “knowledge is power”. To this the woman said “Seize him… cut his throat!”. As her bodyguard minions grabbed him and put the sword to his throat, she said “Stop” then said casually, and rather indifferently, “I changed my mind, let him go”. Then she casually told the guards to take 3 steps back. Then to turn around, and then to close their eyes. To this they all did exactly what she commanded. Then she walked up to the stunned man that had suggested that knowledge is power and said in an indifferent tone “Power is Power”. A poignant example of the power of power! I suggested that the IRS has power, and while knowledge is helpful, and if you are going to take on the IRS, you better have a lot of it, but the IRS has Power. Someone who read it asked what I meant that the IRS has ultimate power. I see it on a daily basis, so I take their unbridled power as simply a fact of my career. But if you want some concrete examples of the IRS’s ultimate Power, let’s look at three cases. The first is a collection case where someone had failed to file tax returns. The first thing the IRS can do is take a guess at how much you could possibly owe. Based on a variety of factors, such as 1099s and W-2s or whatever else they may believe would be an indication of income (they can even look at your lifestyle and determine “he/she should probably make at least this much to live like that”). And they guess as high as they possibly can. They don’t allow any credits or dependents you may be entitled to (even if past returns had them), and make that liability as high as they can). If you don’t like it, you can protest it. But get this, and this is important, if you have moved and don’t received any notice of what they are doing, AS LONG AS THEY SENT THE NOTICE TO YOUR LAST KNOWN ADDESS (last return filed) IT COUNTS AS IF YOU KNEW. It doesn’t matter if you had not even a hint of this happening. In the course of time, these returns become legally binding. You owe the money and they can collect. But it doesn’t end there. What they did the first time worked so well, they now start sending collection notices to the exact same address that you didn’t receive before. Eventually, these notices count as legally binding even though you never saw one. As a matter of fact, there is one letter, in all of collections, that has appeal rights that allow for tax court oversight. They send that to the same address. 30 days after that date, you have lost all of your rights. They own you financially.
And how do most people find out that this happened to them? Their employer and bank notify them that the IRS took all their money and hope of having money coming in. Don’t forget, you have no legal remedy at all. You can ask them to remove the levy. But they are going to make you jump through lots of hoops before they even CONSIDER removing a levy. They will make you prove all of your income, and then prove all of your expenses. They limit the expenses that they allow, and even deny some things, like credit cards completely. Anything you can’t prove or any expense like credit cards they disallow, it doesnt exist in their eyes. They will force you into a payment plan that won’t cover all of your expenses, and they don’t care. Don’t forget, these are fictional tax returns that are way over inflated, but are legally due. In many cases, we protest these returns and ask for a correction (with as much knowledge as possible), but they don’t have to change them. You can’t force them. They have the power.
So, let’s talk about what appeals are available in this case. The powerful appeal, called a CDP appeal (collection due process appeal) is not available, as mentioned, and no other appeal has tax court rights in a collection matter. So, you have the opportunity to appeal your situation, but your appeal goes to another IRS agent. They have final and ultimate say in the matter. They are IRS employees just like the employees that did all this in the first place. And they have FINAL say. That’s it, no further remedy and you can’t go over their head. You can ask for a manager conference, but the manager is already familiar with the case and supported the initial decision. I would recommend it, of course, but the ultimate decision is theirs, you have no power. The ONLY thing you have is knowledge, so you better use it wisely. Power trumps knowledge, but ignorance is truly a path to destruction with the IRS. All the tools above are available if you know how. If you don’t, learn to live with your levy. Most people in this situation quit their jobs. That’s not a lot of power. The next time you file a tax return they will now know where you work. Even if you don’t file a return, your employer will send a copy of your W-2 or 1099 to the IRS, so they will know anyway. They also find your bank accounts in the same manner. It’s reported to the IRS. Once they know where you work, and bank, you can guess what happens next. And you have no power to stop them.
The IRS has the Power. The only thing you have is knowledge, but knowledge is FAR superior to ignorance. The IRS destroys ignorant people.
If that doesn’t convince you of the IRS’s ultimate power, read the next blog on what happens if you file a tax protester type return. It makes the above situation seem like child’s play. Part of it will blow your mind. First I read about it, and it was hard to believe. That was many years ago. Then I saw it with my own eyes and have worked on numerous cases where people had made this error. You really won’t believe the IRS’s power. They are literally above the law.
Check back in a few weeks and I’ll have it posted in the next blog or click the link in the side bar to get notified of when It’s posted. Guaranteed to blow your mind.
PS, In the first article on this series of knowledge and power I wrote that I would give a free diyIRShelp module to the first person that can tell me correctly what movie or series that was from. So far, that’s still up for grabs! So, in the spirit of fairness, I will give the first TWO people that can identify the movie I will give a discount coupon for 100% off any one module we offer for sale. That includes the payment Plan module, or with Offer In Compromise Module. So, if you have a tax problem, there you go, you can fix it yourself on me, for free.