Debt and Taxes
Tax and estate planning attorney Deborah Weber talks eggshell audits, offers in compromise, and why she doesn’t represent tax protesters
Published in 2014 Upstate New York Super Lawyers magazine
on August 11, 2014
Updated on September 2, 2014
Q: As a tax attorney, what do you do for your clients? Obviously not their taxes.
A: We represent taxpayers who have tax problems both with the IRS and New York state. Let’s say something bad happened to you six years ago: Somebody died, and then you got depressed and stopped filing. A lot of times, people don’t realize that you can pick up the next year and then file late the prior one. So one year turns into six years.
So if you come to me and say, “I haven’t filed in six years”—I’ve had people that haven’t filed for 20 years—the first goal is to get you back into compliance; to develop a strategy to get you back into the system.
If there’s criminal exposure, we want to make sure that we lock out the criminal statute. And even if there’s no criminal issue and it’s just a civil issue, if somebody comes to me and they haven’t filed in five or six years—let’s say it’s the middle of filing season and the IRS just levied their bank account—I call the revenue officer. The revenue officer says, “Hey, Deb, I’ll release the levy, but I want all these six returns in two weeks.” Well, there’s not a CPA in town that’s going to drop everything and prepare back returns. So we have a CPA on staff that can help us create returns in an emergency.
Q: When does the civil become criminal?
A: There’s no perfect answer. I’ve worked on criminal cases before, but they come to me as criminal cases. I’ve never had a civil case become a criminal case. But we are involved in what I often refer to as “eggshell audits.” They’re civil, and it’s my job to keep them in the civil arena. I tell clients all the time, “You’re going to owe money at the end of this, but the main thing is you don’t want to be in jail and owe money at the end of this.” Because we can always work on the collection case: either payment agreement or bankruptcy or offer in compromise.
Q: Offer in compromise?
A: There’s a lot of misunderstanding about what an offer in compromise is. Let’s say you owe the IRS $500,000, OK? The IRS has 10 years to collect the debt from the date of assessment. So we’re two years into it, the IRS has eight years left to collect from you, and you still owe $500,000. You’re making $40,000 a year, you have a modest-sized house but no equity in your home, and a few thousand dollars in the bank account. Well, they’re never going to see $500,000 from you.
In that scenario, you could submit an offer in compromise, which is basically going to be the quick-sale value—defined as 80 percent of the fair market value—of your assets. Then they look at your income and your necessary expenses. End of the day, whatever your net disposable income is, you multiply that by a factor. Then, quick-sale value of the assets plus net disposable income multiplied by the factor is the amount you would offer.
If you’re really destitute, the government basically agrees to just leave you alone unless your financial circumstances change.
Q: I’m curious. How would somebody who makes $40,000 a year with a modest-sized home owe half a million bucks in back taxes? Does that ever happen?
A: Oh, absolutely. It could be somebody who made significant money previously and then either their business went bankrupt or they lost their job. A lot of times it comes from previously employing people. Not having enough money to pay the payroll taxes. And payroll taxes, remember, are quarterly, so those can get big real quick.
Q: So what’s a tipping point from civil to criminal?
A: Well, a significant underreporting of income can always be a problem.
Q: What’s considered significant?
A: Usually you’re talking six figures, but it doesn’t have to be.
Q: So it’s a judgment call from the IRS?
A: Definitely. Other tipping points—which we would not ever be involved in—but if people were to present false documentation to the IRS in New York state, that’s an easy basis for a criminal referral.
Q: Have you ever had a client who refused to pay taxes on political principle?
A: Tax protesters? We refuse to represent tax protesters.
Q: Do tax protesters ever contact you?
A: Probably three or four times a year we’ll get a call from somebody. What we normally do [with new clients] is talk over the phone to make sure it makes sense for them to come in and see us; but sometimes we’re at an actual consultation, and I’ll get the question: “Let me ask you, where does it say that we have to pay income tax?” And I put the brakes on. I’m like, “Oh, no, no, no. I’m sorry. We don’t represent tax protesters.” Because the bottom line is the income tax system has been upheld over and over again under the Constitution. We will not engage in that kind of nonsense.
Q: How do you keep up with changes in the tax code?
A: Research, reading periodicals. Tax Notes Today posts cases on a daily basis. We’re constantly on the IRS website. We get any notification that comes out of the IRS for any changes. We have certain types of software that keep us updated on changes.
I teach tax practice and procedure at SUNY UB Law, and when I’m traveling and lecturing—say it’s a three-day event and I’m lecturing for two hours—I make sure I’m attending other people’s lectures as well. To stay on top of it. We have lunch groups, too, where we meet and talk about different cases and strategize.
Q: Do you charge an hourly rate or a flat fee?
A: Normally, it’s hourly. We do have flat fee cases. If we submit an offer in compromise, a lot of times that’s going to be a flat fee.
Q: How much do you charge?
A: It’s $350 an hour for me and my partner, $300 for an associate, and about $200 for a paralegal. For flat-fee cases, which, like I said, is normally going to be an offer in compromise, that really depends on the complexity of it. [They] generally range between $4,000 and $10,000.
Q: What drew you to law in the first place?
A: I went to undergraduate with the thought that I was going to become a history professor. When I first started, there was a history professor—this young, interesting, dynamic guy. And when I graduated, which was only three years later, he was so burned out and unhappy with the fact that he’d spent 10 years or whatever getting his Ph.D., and he felt so trapped. I mean, let’s face it, if you get a Ph.D. in history, that’s all you’re going to do.
I was the kind of student that loved history, and I used to meet with him and talk with him about things, but a lot of students … Well, you can’t teach intellectual curiosity. And I think he got worn out by that. At the same time, I ended up taking a criminal justice course with a different professor. One time he asked me what I was going to do and I told him. He said, “You know, you really should think about law school. You’ve got a lot more options if you look at law school. You can always teach, but you can do a bunch of other stuff, too. You can be a lawyer; you can work for businesses.” So I ended up taking the LSATs.
Q: How did you wind up in tax law?
A: When I graduated from law school, I started working with an attorney, Gary Borek, who had just left the IRS. When I was in law school I had a clerkship with our surrogate in Erie County—the person that administers wills when somebody dies—and Gary hired me to close a few estates that he had at the time. He was just starting out, probably didn’t think he could afford hiring an associate, but he needed some help. Within a week, he asked me if I wanted to come on full time. It was a great opportunity for me. I was able to learn the inner workings of the IRS without ever having to actually work for the IRS.
This is how small the world is. One of the estates that he hired me to close was the estate of my current partner’s father. At the time, Gary Bluestein was still working for the IRS. When he left the IRS in 1998, that’s when we started our firm.
I should mention that I’m the only one in our firm that actually also does estate planning and estate administration. I always say the two things I handle are death and taxes, so I’m always going to be employed.
Q: What do you like about the estate side of things?
A: Estate planning is rewarding because you’re really doing a great service for somebody. People work hard for what they earn, and it’s important for them to get it to the next generation.
The estate administration side, that’s usually more straightforward: helping a family through a really tough process. Sometimes I’ll get calls from people. You know, I’ve done their estate plan and three years later … In fact, it just happened. I had a woman whose husband, 30 days ago, was fine. Seventeen days later, he was diagnosed. She called me while he was in the hospital and asked, “Do I need to do anything?” I said, “Absolutely not. Everything is in order. You take care of your family.” Then when I do meet with her, it’s my opportunity to do a little handholding.
Q: Both Borek and Bluestein came from the IRS. Is that common—IRS to private tax attorney?
A: Well, a lot of people who work for the IRS stay with the IRS and have very long and happy careers. But a lot of individuals who leave the IRS do get into tax practice. In our firm, Gary Bluestein worked for the IRS, Randy Andreozzi worked for the IRS, and Dan Brown worked for the Department of Justice Tax Division. So it’s only me who did not.
Q: You’re IRS-free.
A: I am IRS-free.
This interview was edited and condensed.