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FEBRUARY 2021
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HOW I REVERSED A CLIENT'S $48,000 IRS DEBT
Inside the IRS’s ‘Substitute for Return’
Last year, the COVID-19 pandemic knocked a lot of us flat on our butts. The financial crash felt like it flipped us — suddenly our feet were in the air and the sky was upside down. Then we crashed back to earth in a heap. If you’ve ever gone head-over-heels like that, then you know how tough it is to get back up. But that’s the only way to keep moving forward, so you do it anyway. It’s the same deal when a client comes to me with a tax problem. More often than not, ignoring the IRS has knocked them flat. It’s my job to help them get back on their feet, dust them off, and give them an ice pack. Feb. 1 was National Get Up Day, a holiday celebrating the grit, passion, and perseverance it takes to get back up in life when we’re knocked down. And to me, no one exemplifies that more than a client of mine who got back up in 2017 after calling me about a 10-year-old tax problem. This client’s “fall” came way back in 2007. He went through a messy divorce and, in the process, sold his home. When tax time came, the title company sent him and the IRS a Form 1099-S to show that the home had been sold. Unfortunately, he didn’t file a tax return. It was a tough year and he let a few things slide. As a result, the IRS prepared a “Substitute for Return” (SFR) and counted his home’s whole $200,000 sales proceeds as ordinary income , on top of the $50,000 he made at his job. This was a disaster! If my client had filed a tax return back then and correctly claimed the home sale as a Section 121 capital gains exclusion for the sale of a primary residence, he would have gotten a refund, but instead, the IRS had him on the hook for $48,000 in taxes (including penalties and interest) ! In 2013, he got a letter from the IRS about the SFR they prepared demanding payment, or they were going to do enforced collections (bank levies, wage garnishment). Instead of looking at the root of the problem and realizing the SFR was not correct, he and the IRS went ahead and created a payment plan. For the next four years, the poor guy paid the IRS $500 per month on a debt he never should have owed in the first place! In 2017, he finally had enough. He and the love of his life wanted to buy a house, but the pesky IRS payments were holding them back. He started to question why or if he should still be making the payments, and that quest led him to my office.
This whole time, my client had assumed the IRS SFR was correct. But I took one look at the 2007 SFR and knew something was wrong. His income was sky-high! I verified the home sale showing on the Form 1099-S was for the sale of his personal residence and proceeded to file an original tax return properly excluding the home sale proceeds from income. My client started kicking himself for getting into such a big pickle, but I assured him his problem was fixable. With the help of a Taxpayer Advocate, I confronted the IRS and started fighting to get him all his money back. I assumed we’d get at least two years’ worth of payments returned. In the end, we won: The IRS did the right thing, which is not always the case! Not only did they refund my client all of his monthly payments, but they also included the seized tax refunds from prior years he was owed (including the refunds outside of the statute of limitations) and gave him interest to boot! My client ended up with a check for almost $35,000, and he used that money for a down payment on a house. This guy is the poster child for getting back up when you’ve fallen down. Ten years after his divorce, he was out of IRS debt and purchasing a home with the person he loved. I was tickled pink to help him along the way! If anything, this story goes to show that no matter how long you’ve been down, there’s still time to get back up and make changes in your life. Paul Francetic
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MONEY SCAMS ARE SKYROCKETING
HERE ARE 3 WAYS TO PROTECT YOURSELF RIGHT NOW
1. SHUT THEM DOWN. If you get a call from a scammer, hang up immediately (better yet, don’t answer unknown callers at all). At the same time, delete scam texts or emails the second you see them. If you get a call, text, or email from someone claiming to be with the government or a government agency, it’s a scammer. No one from any federal agency will ever call you out of the blue. Anyone claiming to have a cure or pretending to be in desperate need of money is also trying to scam you. Never say a word back to them. Cut them off and go about your day. 2. SIGN UP FOR INFORMED DELIVERY BY USPS. This free service is a great way to monitor your incoming mail. Every morning, USPS sends you an email with scanned images of the day’s mail (this doesn’t usually include larger parcels). When you pick up your
For the past year, scammers have been working full time to fleece people. As a result of COVID-19, federal financial relief efforts, and state-level relief efforts, scammers have found a new way to get into their victims’ pockets. Now, they’re using COVID-19 again, this time with the “vaccine scam.” Through this scam, they’ll sign you up for the COVID-19 vaccine in exchange for a fee. They are also using variations of the grandparent scam, in which scammers pretend to be a family member in trouble (this time, they have COVID-19 or have lost their job) and they need money. Scammers make phone calls, send text messages, and craft phishing emails, hoping you’ll take the bait. How can you protect yourself from these financial scams and more? Try these three different ways!
mail later in the day, you can verify if anything is missing. Scammers may prefer phone calls, but mail thieves are still very much on the prowl. 3. SIGN UP FOR AN IDENTITY PROTECTION AND FRAUD DETECTION SERVICE. You never know who might end up with your personal information, but you can take steps to keep it safe. There are several services, like LifeLock, Identity Guard, and Intelius Identity Project, that offer comprehensive identify protection. They monitor credit cards, addresses, phone numbers, bank accounts, and more with the purpose of scoping out unusual or fraudulent behavior. Many services can be customized to fit your specific needs.
t THE BEST LITTLE WINE SHOP IN RACINE
When the COVID-19 pandemic took off, Tony Bigonia, owner of Uncorkt Wine Bar, decided that if he couldn’t bring winemakers to Wisconsin, then he’d send his customers around the world to them — virtually, of course. “We don’t have to have winemakers at the shop anymore. They can be on the phone via Zoom and tell us all about their wine from as far away as New Zealand!” Tony says. “We recently had a New Zealand winemaker on for a tasting, and they told us about their wine and took us on a tour of the vineyard from the comfort of our own homes.” Tony is doing great work, and I’ve been impressed at how well his small shop is handling the pandemic. His virtual tastings, classes, and fundraisers for local organizations like the Racine Symphony Orchestra are top-notch. Plus, he has plenty of wine and beer in stock! Uncorkt even has a bar and a banquet room that can be rented out for events.
Tony has owned Uncorkt for seven years.
“I was in IT as a project manager for about 35 years, and jokingly, I say it drove me to drink,” Tony says. My favorite part about Uncorkt is that Tony and his crew cater to everyone. If you're a wine expert, they can recommend the perfect bottle for your taste, and if you’re new to the wine world, Tony can pick something out that will make you look good at a dinner party. Working with him has been a great experience for me, and Tony’s love for wine definitely comes through. Luckily for me, I don’t only get to see Tony at the wine shop! I’m also his brand-new accountant, and he and his business partner file their personal and company returns with me. “We interviewed [two accountants] and fell in love with Paul,” Tony says. “He’s given us a lot of great advice, and we’ve done everything he told us to do so we’ll be sitting pretty during the tax season.”
I’m looking forward to saving Tony some money this year! If you haven’t checked out his shop at 240 Main Street, visit Facebook.com/Uncorkt/ for the latest events and updates.
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DEPENDENCY TESTS FOR 2020 FTR TAX TIP OF THE MONTH
STRAWBERRY KISSED ALMOND BUTTER MUFFINS
We all know 2020 was a year like none other, having to deal with the pandemic for the last nine months of the year. The pandemic caused many businesses to close permanently or for a period of time, specifically businesses in the service sector like restaurants and taverns. Of course, many employees of these businesses were affected by earning less wages than they would have in prior years. Regarding your tax return, you can claim any child in your care who is under the age of 19 as your dependent, However, there are two exceptions to the age cap.
1. Your dependent is under the age of 24 and was a full-time student for at least five months in 2020.
Inspired by AmbitiousKitchen.com
INGREDIENTS
2. Your dependent is a parent or relative who made under $4,300 in 2020.
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1 cup ripe bananas, mashed 3/4 cup natural creamy almond butter (can substitute creamy peanut butter)
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1 tsp vanilla extract
1 cup oat flour
1 tsp baking powder
If a person qualifies as a dependent based on being a full-time student, then it does not matter if their gross income was over $4,300. I have had many students claimed by parents in past years who had $10,000 or more in income, but the parents benefited from receiving 100% of the education tax credits. The student would have received little, if any, benefit of these same education credits. I think the $4,300 gross income limitation is going to come into play for many taxpayers this filing season, even allowing for grandparents to possibly claim their older grandchildren who may have been adversely affected by the pandemic and received money for rent and food from their extended family. If you have any relatives or friends who may benefit from claiming a dependent for 2020 that in other years would not be possible, please have them reach out to me so they do not miss out on a possible tax credit.
1/4 tsp salt
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2 large eggs
1/4 cup strawberry fruit spread, divided (we recommend Bonne Maman INTENSE)
1/4 cup pure maple syrup (or honey)
DIRECTIONS
1. Preheat oven to 350 F. 2. Line a 12-cup muffin tin with liners and spray with nonstick cooking spray. 3. In a large bowl, mix bananas, almond butter, eggs, maple syrup, and vanilla extract. 4. Stir in oat flour, baking powder, and salt until smooth. 5. Evenly divide batter into liners. Add 1 tsp strawberry fruit spread to the top of each muffin.
6. Use a butter knife to gently swirl the spread into the batter. 7. Bake for 22–27 minutes until a toothpick comes out clean. 8. Transfer muffins to wire rack to cool and enjoy!
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How Paul Reversed a Client's $48,000 IRS Debt Protect Yourself From COVID-19 Scams! Meet the Best Little Wine Shop in Racine February Tax Tip Strawberry Kissed Almond Butter Muffins
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What’s the Deal With Valentine’s Day Cards?
IT’S IN THE CARDS
This may be the first year in a long time that kids don’t pass out Valentine’s Day cards at school. Going in to the new year, the seasonal section of most stores is lined with cards featuring fun characters from superheroes to unicorns. Handing out cards is now a well-loved tradition, but have you ever wondered how Valentine’s Day became one of the biggest card-giving holidays of the year? Like many holiday traditions, the convention of handing out Valentine’s Day cards goes back centuries. During the 1700s, it became fashionable to trade Valentine’s Day cards with a short poem or verse. The popularity of swapping cards only increased throughout the 1800s. Sometimes, people would go as far as to paint or draw spring- like images on the cards. They were much more elaborate than what we typically see today, though they were still usually very small. But where did those folks get the idea? People of that era were likely inspired by stories that go back even further. There are legends that the originator of this holiday tradition was Saint Valentine
himself. One story says that on the night before he was set to be executed, Valentine wrote a small letter to a jailer’s daughter. He ended the note with “Your Valentine.” It’s unknown whether that story is true, but to 18th century Europeans and Americans, it was inspiring! So inspiring, in fact, that the entire Valentine’s Day industry began to gain traction. A guidebook called “The Young Man’s Valentine” was published in 1797 to help suitors garner the attention of their love interests through the written word. Eventually, books aimed at women were also published, including “The Lady’s Own Valentine Writer,” which served much the same goal. These publications, along with young people writing notes to one another every February, have made Valentine’s Day cards an ingrained tradition, and now people can’t get enough of them!
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