IRS Sues Billionaire Billy Joe "Red" McCombs for $45 Million

The IRS claims Billy Joe "Red" McCombs owes $45 million in taxes when he sold shares of Clear Channel Communications back in 2002, and didn't give Uncle Sam his cut.

To give you a little background, Billy Joe "Red" McCombs (otherwise known as "Red McCombs) is the founder of Red McCombs Automotive Group. He's a co-founder of the giant Clear Channel Communications, a former owner of the San Antonio Spurs, Denever Nuggets and the Minnesota Vickings. He is the namesake of the McCombs School of Business at the University of Texas at Augustine.  Most notably, he was named one of Forbes magazine's top 400 richest Americans in 2005.

Recently, McCombs announced his investment in Formula 1 racetrack. According to Forbes magazine, his net worth is $1.7 billion. All that money and Red McCombs claims that, by law, too much time has passed for the IRS to initiate legal proceedings against him for the money he didn't pay the IRS?

The IRS isn't going to have much sympathy on a man that owes billions. And in the coming months we'll see the IRS force McCombs to pay up like the rest of us paupers do every year.

Tax News of the Weird: Sperm Bank Fights for IRS Nonprofit Status

A sperm bank if California known as Free Fertility Foundation was denied tax exempt status by the Tax Court earlier this month. The nonprofit organization was formed to provide free sperm (“Sperm vials available immediately with no wait,” according to the company website) and make a “positive difference in the world” (founder’s words) so why did the IRS cut them a break?

The nonprofit founder William C. Naylor, Jr. is a software engineer, he hold more than 10 patents on various inventions. He incorporated Free Fertility Foundation, Inc. to provide sperm free of charge to woman in need. Curiously there’s only one donor listed in the catalog:

fwcn02453 – scientific researcher; mathematics and computer expert; vice-president of company; straight A student in university; chess champion in high school; awards for academic excellence and athletics while child; 6 ft 1 inch tall; Caucasian 3/4 English 1/4 Scottish. Sperm vials available immediately with no wait.

The sole sperm donor is Naylor himself, the foundation founder! But that’s not all, he continues his ultimate expression of narcissism with an extremely stringent application process. No one gets his sperm unless they are worthy, apparently. Preference is afforded to women “with better education” and “whose [family] members have a track record of contributing to their communities” (among many other restrictions and preferences). Because of this elitism 20 of the 433 applicants received sperm in 2004. In 2005, only 4 out of 386 women won the “privilege”.

So what was the Tax Court’s verdict on the sperm bank? They said one man’s sperm distributed to a small number of women doesn’t benefit the general public. Naylor made have said some nice things about “making the world a better place” (again, his real words) with his superior sperm, but the tax court is not convinced. I’ll close with their words:

While Naylor may believe that petitioner’s activities “make more of a positive difference to the world than all of the inventions and scientific discoveries that * * * [he]could ever create”, we are not convinced that the distribution of one man’s (i.e., Naylor’s) sperm to a small number of women, selected in the manner presented, promotes health or confers a public benefit.

So don't get any creative ideas on your tax deductions, guys. It didn't work for William C. Naylor, Jr. and it's not going to work for you!

Chris Tucker Owes the IRS 11 Million- More Celebrity Tax Woes

In July of 2009 Rush Hour start Chris Tucker owed the state of California over $3 Million. Now his Tax Debt is back in the spotlight, he owes the IRS more than $11 Million in back taxes!

Chris Tucker’s lofty $11,571,909.26 was revealed when the Internal Revenue Service filed documents with the L.A. Country Recorder’s Office yesterday. These back taxes are from 2001, 2002, and 2004-2006.

Chris Tucker's $11 Million Tax Debt Breakdown (Per The Notice of Federal Tax Lien provided by TMZ):

2001- $4,007,794.34
2002- $5,060,074.23
2004- $55,544.84
2005- $660,414.94
2006- $1, 788, 080.91

Earn Big- Pay the Tax Man Big Bucks

Chris Tucker earned $20 Million for “Rush Hour 2” and $25 Million for “Rush Hour 3”. With the million she’s earned over the years you’d think he could take care of something like a simple tax bill. There’s no word from any of Chris Tucker’s reps on the tax situation.

Celebrity Tax Debts- Robert Lowe and Wes Bentley Owe the Tax Man

Robert Lowe is the newest celebrity to owe the IRS. Both he and his wife Sheryl Berkoff had a $269,965 Tax Lien filed against them.

Rob’s publicist Alan Nierob said this about Rob Lowe's recent Tax Lien:

“I checked with my client and he knows nothing whatsoever about this and has not been contacted by anyone in reference to this matter.”

Best known as a Brat Pack alumni, this guy needs to get  with the program and take care of his tax debt ASAP.

Lesser-known actor Wes Bentley (best known as the weird kid in American Beauty) owes the as much as $204,000 in delinquent federal taxes.

As we all know, ignorance of the Tax Debt is so no excuse, and he will be expected to pay the full amount he owes the IRS. This is yet another example that proves the importance of carefully reviewing the background of any accountant you hire. Mistakes like this shouldn't slip by unnoticed. Paying your taxes is a #1 all important financial obligation.

How to Find the Best Tax Debt Help

I've been receiving a lot of e-mails from taxpayers that have been burned by shady Tax Relief companies, CPAs, and even attorneys! Many people look for help from an expert to make the Tax Resolution process easier. But how do you know which Tax Relief Professional or Company to choose?

Better Business Bureau Rating

Choose a Tax Resolution company with the highest possible rating with the Better Business Bureau. The Better Business Bureau assigns letter grades A through F to qualifying businesses. Many leaders in Tax Relief industry have low scores. You want to choose a Better Business Bureau accredited Tax Relief company with the highest rating possible and no unresolved complaints.

No Retainer Fee

Retainer Fees or Retainer Agreements are binding contracts. Once you sign one, the Tax Relief Company can charge more fees later. Look for companies with a flat fee that does not change.

No Pressure Agreements

No one should try to pressure you into an agreement on the phone. If you encounter a Tax Relief Professional that requests personal information like credit card or bank account information over the phone, it’s best to just end the call.

Qualified Employees

If you choose to work with a Tax Resolution Company make sure you are only working with one that employs Attorneys, CPAs, and Enrolled Agents.

Avoid “Pennies on the Dollar” Scams

The IRS issued a statement warning taxpayers to be aware of promoters that claim IRS Tax Debt can be settled for “Pennies on the Dollar”. Statistically, few Tax Debt cases are settled with an Offer in Compromise. And fewer still are ever settled for pennies on the dollar. Work with a Tax Relief Professional that gives you realistic expectations.

Good Signs

The following is a list of positive indicators that the company you’re working for is legitimate and trustworthy.

• Free Consultation: An honest company without anything to fear will offer a free consultation, giving you the opportunity to compare your options without losing any money.
• Experience: You should work with a company with at least 10 years of experience in the Tax industry.
• Flat Fee: A stated flat fee means you won’t be in for surprises later. Look for companies that charge a fair flat fee, and avoid companies that require you to sign a Retainer Agreement.

In the end, it’s your responsibility to make sure your Tax issues are taken care of in an honest and accurate manner. It’s imperative to be careful and make informed decisions when you choose a Tax Resolution Professional.

Escort Service Manger Serves Jail Time for Tax Evasion

Yesterday I wrote about The Runner up for the Strangest Tax Form. It was Tax Form TC-63 Sexually explicit Business and Escort Service Tax Return Coupon. And it's oddly appropriate for today's post. A Salt Lake City escort service Manager was recently sentence to 36 months in federal prison for failing to pay income taxes.

Jodi Hoskins, the escort service manager, was ordered to pay $736,183 in restitution when she was found guilty on tax evasion. She was a business manager at Companions, a call-out escort service owned by she and her former husband, Roy B. Hoskins.

The two escort service managers underreported a whopping $1.2 million in 2002, cheating the IRS out of $486,443. Main business owner Roy B. Hoskins was already sentenced to 60 months in prison when he pleaded guilty to tax evasion and it looks like his former wife may follow in his footsteps.

Bottom Line: Pay your taxes or it could be straight to jail. Do not Pass Go. Do Not Collect $200!

This Month's Runner Up for the Strangest Tax Form

Above is the Utah State Commission Tax Form for Sexually explicit Business and Escort Service Tax Return Coupon. Click the image to view the whole form for a good laugh. My favorite line is:

"A return must be filed for every period, even if no activity occurred."

Even Success Company Wyndham Worldwide Corp. Gets Hit with Tax Debt

Wyndham Worldwide Corp. is the world's largest provider and franchisor of travel-related products and services. Providing products for businesses and individual consumers alike with brands in lodging franchising, vacation rentals and exchanges and nearly 6900 hotels under 12 spans spanning 50 countries and 6 continents you'd think this company would be doing just fine with their taxes.

Wrong- Wyndham Worldwide Corp just made an a corporate news announcement that they will pay $145 million in its third quarter as part of their tax settlement to the IRS.

So don't feel too bad if you owe. It looks like successful national travel franchisors are feeling the burn from the IRS.

"We are pleased to have resolved this matter," a Wyndham Worldwide Corp. representative writes, "which successfully concludes the IRS audit issues we inherited upon our spin-off from Cendant four years ago."

"Blade" actor Wesley Snipes' Tax Battle Continues

Wesley Snipes made $38 million from 1994-2004. He didn't file taxes for this ten year period. Mow he's facing 36 months in prison. Wesley Snipes' recent appeal was denied by the judge. Looks like the "Blade" actor will serve his prison sentence, after all.

Avoid the Scams: Wesley Snipe's defense is that he was the victim of crooked advisers. He was given bad advice and acted on it. Many others have been made victims of so-called tax “professionals” that were really scammers in disguise. Make sure to do your research and hire only legitimate tax professionals. Be very careful of what advice you follow and only hire professionals that you can trust.

The Real Deal on Tax Protesters: The real deal is that Wesley Snipes was taken in by stories from Tax Protesters. He believed them when they said the constitution doesn't demand we pay taxes. This is unfortunately untrue, and the IRS will pursue you to the ends of the earth to make you pay what you owe. Now Snipes owes $12 Million and will most likely go to jail for 36 months.

Learn Your Lesson: The message from all of this is clear- file your taxes on time. Pay your taxes on time. Celebrities like Wesley Snipes don't get away with tax evasion, and neither will you.

The Taxman vs. Floyd Mayweather: FIGHT!

Floyd Mayweather clings tenaciously to his undefeated boxing record, he's punching his ways to the top and trains hard to keep his title. Unfortunately for him, outside of the ring The Taxman has already knocked him cold not once, but twice. Will he ever defeat the Taxman?

In both 2004 and 2008, the IRS placed liens on Mayweather's property has insurance for his unpaid taxes. He has an upcoming trial but it looks like he's more focused on his match with Manny Pacquiao than his match with the IRS. According to the 'Mayweather Insider' David Mayo, the financial impact of fighting twice in one year is heavily on the mind of "Money May":

"Why make that money in the same year he already made $40 million for Mosley, when he could put it off until next May and a new tax year? Don't think for one second that this is a minor consideration. Think of it as deferred compensation." Mayo, Grand Rapids Press

In 2004, the IRS put a $3.1 million dollar lien on Floyd's property and in 2008 the IRS put a $6.1 million dollar lien on Floyd's property. It was this latter lien that brought Floyd Jr out of retirement. He was on the verge of serious tax problems that could have led to severe consequences. According to the LA Times, Floyd Jr paid off the IRS's 2008 liens with a significant portion of his purse from the Juan Manuel Marquez fight.

Sports reporter Rick Rockwell and I pose this question:

So, who do you readers think Floyd Mayweather Jr is more scared of 'Pacman' or the 'Taxman'?

An Interview with the Richard "The IRS Hitman" Close

Today I took part in a brief interview. A lot of these questions are frequently asked by readers of my blog, so I'm sharing it here.

Q: How long did you work for the IRS?

I worked for the Internal Revenue Service for seven years as a Revenue Officer.

Q: What does your job entail now?

I've been working to help taxpayers resolve their tax debt since '99. I review taxpayer's cases or debt details and provide detailed solutions for tax debt problems. I use my insider knowledge to provide training for tax professionals, I give speeches and teach tax resolution classes, and all the reality show business too.

Q: What did your father do for the IRS?

He's a retired Assistant District IRS Director for the State of Oklahoma, meaning he was 2nd on the totem pole for all of the state. Yes, we still talk "IRS" when I visit home. Runs in the family.

Q: What exactly triggered leaving the IRS?

Lots of things, but the defining moment was a seizure we did for a corporation who hired a crooked CPA. They basically pocketed the taxes and left, and the business owners had no idea. We had to take everything they owned, all of their business assets. There were other options, realistically. But it wasn't our job to consider them.

It's a tough story to tell. The business owners were the nicest people you could meet, they even served us cookies and tea while we placed seizure stickers on everything they owned. The aging business owner told me we were “kinder to her than those she had paid to take care of her own business.”

“Why doesn’t the IRS care,” she asked, with tears streaming down her face. That was the turning point for me.

Q: When and where do you film your Reality TV Show?

Right now we're shooting in Jacksonville Florida. We usually start after my work day, around 6PM and shooting can go on until 10:30PM or later. It's grueling work, but helping the American taxpayer is worth it.

Q: What's the best advice you have for taxpayer's that owe the IRS?

1) Seek a professional consultation before you have a conversation with the IRS
2) Do NOT make rash financial decisions like liquidating your assets until you have a conversation with a tax resolution professional of some kind.
3) Be proactive with the IRS, DO NOT wait for them to come to you when you owe. Go to them, solve your problem now before it gets worse.

Basically, you need to have a plan before you react to the IRS. A good plan is the only way to achieve your goal of removing tax debt.

Geroge Steinbrenner Cheats the Tax Man in Death

”If you’re super-wealthy, it’s a good year to die,” Jack Nuckolls, an attorney and estate planner with the accounting firm BDO Seidman, told the media. ”It really is.”

By dying in 2010, the billionaire and long-time New York Yankees owner’s wealth avoids the federal estate tax, likely saving his heirs a 55% levy on his assets- amounting to a tax bill of around $600 million.

Mr. Steinbrenner’s death of a heart attack at the age of 80 came during an unplanned year-long gap in the estate tax, the first since it was enacted in 1916. Political wrangling has stalemated efforts in Congress to replace the tax that expired in 2009.

That deprives the government of billions of dollars in annual revenue but represents an unexpected bonanza for those who inherit wealth.

The tax won't be gone for long, though, the 55% tax returns on January 1, 2011.

Steps to Take When You Know You Don't Owe the IRS

Guilty until proven innocent: Is the IRS sending threatening letters and notices when you know you don't owe? You’re not alone. I talk with dozens of people daily that believe they don’t owe the IRS.

The Straight Answer: From my personal experience, only 2% of taxpayers who claim they don’t owe actually have a case against the IRS. If you want to stand a chance, get out your pen and paper and take some notes.

The Top 3 Relief Plans When You Know Don't Owe

Innocent Spouse: If your spouse is to blame for your debt, you can try to move the blame to them. This will work in some cases, but there’s a strict set of rules that must be adhered to. For example, if you signed the tax return with your name on it, you’re responsible for that debt. Even if you didn’t access it! So make sure you read the returns before you sign them.

Equitable Relief: If the client does not qualify for innocent spouse relief, the IRS will look to see what other equitable relief the taxpayer may qualify for. It’s hard to qualify for equitable relief, but the following two factors can weight in your favor:

-Whether your spouse (or former spouse) abused you
-Whether you were in poor mental health on the date you signed the return (or at the time you requested relief.)

Amended Tax Return: An Amended Tax Return can be used to prove the validity of a Tax Debt. For example, if you need to prove your tax deductions are justified, you might file an Amended Tax Return with documentation attached to prove your innocence. You’ll need your original tax return to file an amended one, because the IRS won’t always have it on file.

Proving your innocence: It’s incredibly difficult to prove you’re innocent of the tax charges accessed against you at any point during the collections process. The IRS is rarely wrong about these things, but it’s possible that you’re one of the few that slipped through the cracks. If you need to prove you’re innocent, I highly recommend working with a tax relief company or reputable tax attorney.

Taxes are Priority #1!

Taxes are #1: Nobody likes taxes, but the fact remains, they are your number one financial priority. Refuse to pay your tax debt and the IRS will use their mighty powers to come down on you, hard!

Round One! So you haven’t filed in the last few years. You’ve probably gotten a couple of letters from the IRS, asking about your debt. Now you find yourself holding a letter that says Final Notice. While this may not seem important at the time, you’d better pay attention! That’s the IRS’ final warning before the onslaught begins. And trust me; you don’t want to be on the receiving end of an IRS attack. Here’s what they will do.

Levy – This tactic involves the IRS putting a federal lien on your bank account and holding all funds. In short, you’re frozen out of your bank account. And if you have direct deposit, you can kiss your paychecks goodbye. The worst part? Neither you nor your bank has any say in the matter.

Lien – A tax lien can be placed on your credit, meaning you can’t do anything that involves credit payment. This can ruin your credit score for the rest of your life! The IRS can also place liens on your house, making it impossible to sell or renovate. Eventually, these liens turn into seizures, and the IRS sells your property in order to pay off the tax debt.

Wage Garnishment – This is my personal favorite, and probably the most effective. The IRS will contact your employer and start taking a percentage of your check in order to pay off the debt. They can legally take out up to 80%, and a good IRS Hitman will take as much as he can.

Here’s What to Do: File your taxes! Even if you owe money, and you have to file an extension, make sure you file. The IRS can put you in jail if you don’t file, and the penalties are up to $50,000 per year not filed. If you know you’re not going to file on time, file for an extension. Contact with the IRS is extremely important. The IRS is not the collection agency to mess with.

Going at it Alone: An IRS debt can be a terrible situation. As an IRS Hitman, I know how brutal they can be. If you’re in a rough spot, and you’re losing hope, contact a tax professional. They have the knowledge and experience needed to get the IRS off your back.

Billions in Energy Tax Credits Coming

According to White House Officials, President Obama will soon announce $5 Billion in Energy Manufacturing tax credits.

President Obama will make these announcements during an appearance on the University of Nevada campus in Las Vegas. Other economic policies will be covered.

A White House official stated the following in an e-mail directed to reporters, "The President believes that if an American company wants to create jobs and grow, we should be there to help them do it. Providing an additional $5 billion in Manufacturing Tax Credits will not only help leverage an additional $12 billion in private capital investment in ready projects, but also create tens of thousands of additional clean energy manufacturing jobs across the country."

National Taxpayer Advocate Mid-Year Report to Congress

Yesterday National Taxpayer Advocate Nina E. Olson released a report to Congress that identifies the issues the Taxpayer Advocate Service will focus on for Fiscal Year 2011. Here's the highlight reel:

1. Taxpayer Services

For FY 2011 the Taxpayer's Advocate will continue to rally for improved taxpayer's services (which is always criticized for obvious reasons) and will continue to persist that taxpayer services is important not only as a courtesy for taxpayer but to encourage tax compliance, too.

The Taxpayer's Advocate suggests the the IRS Mission Statement should be revised to clearly state the agency's dual role as part "tax collector" and part "benefits administrator". This revision would require the IRS to make a plan that gives attention to both roles.

2. New Business and Tax-Exempt Organization Reporting Requirements

For FY 2011 The Taxpayer's Advocate wants to examine the impact of the new reporting requirement for business and see how it positively and negatively effects business owners. They want to propose new provisions that would make Congress consider less painful tax gap proposals for business owners.

3. IRS Collection Practices

The IRS has volunteered to perform a comprehensive review of their damaging collection practices (Bank Levies, Wage Garnishments, Tax Liens, and more) but Taxpayer Advocate Nina Olson writes that she is concerned that it may take years to complete the review. In the meantime, IRS Collection Practices will remain the focus on FY 2011 for the Taxpayer's Advocate.

Final Thoughts: These annual reports from the Taxpayer's Advocate are always the same. They acknowledge the cruelty of the IRS's collection practices in these tough economic times, then they say they'll look into it and work harder each year to make it better. We appreciate their efforts, but they're barely making a dent in the big IRS machine.

The IRS Himan Teaser for Episode Two

We're currently filming for the second installment of "The IRS Hitman". Stay tuned for more updates!

Prison Inmates Con the IRS Out of $9 Million in Homebuyer Tax Credits

Unfortunately for the IRS, hundreds (1,200 to be precise) prison inmates, 241 of which are serving life sentences, cracked the code and cashed in on the IRS' Homebuyer Tax Credit. The total in damages? $9.1 Million in Homebuyer Tax Credits!

A lapse in fraud prevention on the IRS's part allowed prison inmates to apply for and even receive the tax credits. You'd think a penitentiary return address would be an obvious red flag for the IRS, but inspectors found other areas were fraud thrived.

These include:

* The IRS allowed multiple claims for the same home.
* Claims totaling an estimated $17.6 million were permitted for homes purchased before the tax credit program began.
* "Questionable" claims by IRS employees themselves.

The report states the IRS is trying to devise a system that would close the loopholes found by the inmates.

"The IRS is running a well-rounded compliance program that has helped protect the interest of the nation's taxpayers," states Richard Byrd, commissioner of the IRS' wage and investment division.

He pointed out that his organization has identified 98 potential criminal schemes, opened 155 criminal investigations, and recommended seven prosecutions. Byrd also says 285,504 claims were denied in upfront processing because they lacked the proper documentation.

In addition, 112,852 refunds totaling $785 million have been frozen pending an investigation and 114,418 post-refund audits have been conducted by the IRS, resulting in a denial of $438 million in claims.

Byrd says the IRS has worked diligently to ensure that the millions of taxpayers who are eligible for the federal tax credit receive it.

In his letter, he noted that through February 2010, over 1.8 million taxpayers received more than $12.6 billion in homebuyer tax credits.

The homebuyer tax stimulus is largely credited with giving a much needed lift to home sales by creating a sense of urgency for potential buyers to move off the sidelines.

It's Independence Day- But Do You Feel Independent?

Do you feel independent when the Tea-Baggers ask the government “to get off their backs” instead of asking government “to get on the case” and make laws and regulations to control free-trade, which is definitely not free of corruption, and outright “Wall Street-style stealing” in countless ways from the US taxpayer.

Do you feel independent when you’re government will be spending $3 trillion dollars next year, with 53 cents of every dollar for defense, leaving 47 cents per dollar for everything else?

Do you feel independent when the national debt is $12.5 trillion? Or do you feel owned by China and other creditors?

These questions and more are posed by Jerry Mazza of "The Online Journal" in a piece that makes you think. Do You Feel Independent on Independence Day?

I'm not trying to spoil the mood of this Holiday, but I like how this articles makes you pause and think. We should celebrate on Independence day, but we should also reflect and think about what we can improve.

More Harsh Truths on Settling Tax Debt

The IRS wants the entire tax liability paid in full. After all, millions of Americans manage to do this every year, why shouldn’t you? The IRS will evaluate every single detail of your IRS case and situation before they even consider your offer. Here’s what you need to know before your submit an Offer in Compromise to the IRS.

• You don’t qualify: If you have the ability to pay the Tax Debt in full or pay it in monthly payments with an Installment Agreement, you don’t qualify for an Offer in Compromise. Even with special hardship circumstances, like unemployment, most people will not qualify for an Offer in Compromise. This is especially true, because the IRS looks at amounts you have made in the past to predict how much you could potentially earn (and therefore be able to fork over to the IRS).

• It’s not the best option: An Offer in Compromise isn’t for everyone. Think about it. Do you even have half of what the IRS is saying you owe to give them in one lump sum right now? There’s a wide variety of ways to solve your Tax Debt issues, and you need to find the solution best suited to you. Sometimes an Installment Agreement is a better solution; it all depends on your situation.

• It'll cost ya: Depending on which Offer you submit, an application fee of $150 and 20% of your offer must be submitted to the IRS. The money you send is nonrefundable! This means you’ll lose big if you’re not approved.

• Your Tax Lien is here to stay: Even if your Offer is approved, your Tax Lien remains until your Tax Debt is paid in full. According to the IRS, you have less incentive to finish paying your debt without the Tax Lien in place.

• Tax Levies are Finders, Keepers: The IRS will keep the proceeds from a levy served prior to submission of an Offer in Compromise. This means the money the IRS seized from your bank account prior to the OIC will not count towards the OIC, and the IRS is keeping it.

• No more refunds: No Tax Refunds will be received until the tax debt is paid in full. The IRS is letting you pay less than you owe, fair is fair, right?

• Collections statutes extended: The statutory period of your debt is suspected while the IRS investigates your Offer, and it’s further extended if you appeal an Offer in Compromise rejection. This will extend the amount of time the IRS has to collect on your tax debt. It’s a good idea to make sure you’ll be approved if you apply, the statute of limitations on your debt can be extended for years.

Ready to Apply? If you think you’re ready to take on the responsibilities of an Offer in Compromise, fill out IRS Form 655 Offer in Compromise Booklet. And remember to double check and proofread, the required $150 application fee and 20% of the offer is nonrefundable. A mistake could cost you big bucks and even more IRS problems.