New 1099 Form requirements

Originally posted June 10, 2010

Beginning in 2012, new reporting requirements for Form 1099s may impact small businesses. Under current law, a Form 1099-MISC is required to be issued for payments for services of $600 or more. After December 31, 2011, payments of $600 or more for purchases of goods will require the issuance of a Form 1099-MISC as well. For example, if a small business owner purchases a used car for $2,000 on January 30, 2012, he will have to issue a Form 1099-MISC to the seller for the amount paid for the car. The IRS has yet to release all the details. All of the Small Biz Owners, partnerships, schedule C filers, pay close attention to this or you might face complications. As news develops, I will add more postings.

Chapter 7 Bankruptcy – How long does it take and What is involved?

 Bankruptcy is debtor protection provided by the federal government to help businesses and individuals repay their debts or eliminate them by means of liquidations or reorganizations.  The Bankruptcy code is divided by chapters and that is how bankruptcies are referenced.  A Chapter 13 bankruptcy is a bankruptcy where debt repayment plans are reorganized in a manner that allows the debtor the ability to repay those debts; however, that type of bankruptcy isn’t ideal for everyone and they made need to file a Chapter 7 bankruptcy.  A Chapter 7 Bankruptcy is a liquidation bankruptcy where the debtor is only allowed to keep a certain amount of property, as described below, and all the other assets belonging to the debtor is sold off in an attempt to repay the creditors, the companies and people the debtor owes.  A person is only allowed to file a Chapter 7 Bankruptcy every 8 years. 

      When a person files a bankruptcy petition, a Bankruptcy Estate is created.  The Bankruptcy estate contains everything that the debtor owns and all of their equitable interests.  This is then under the control of the Bankruptcy Trustee.  The chapter 7 trustee is an individual appointed by the courts to administer the estate and is entrusted to try to find and liquidate all the assets of the debtor’s and repays the creditors as much as they can from the sale of the assets. 

            Before the decision to file a Chapter 7 petition is done, a Disposable Income Test and a Means Test should be done to determine if the debtor meets the requirements necessary to file.  The Disposable Income Test is used to determine whether the debtor has enough income left over after paying necessary monthly expenses, to pay off at least a portion of their unsecured debts.  If the disposable income adds up to more than the statutory amount set for the debtor’s location, they will fail the means test and cannot file for Chapter 7 bankruptcy.  The Means Test is the method used to determine if the debtor makes more than the median income level for their geographic location.  If their income is less than the median amount, they are allowed to file; however, if they do make more than the median amount, then the Disposable Income Test must be used.

      At the same time the Bankruptcy Estate is created, an automatic stay is put into place to protect the debtor from any other collection efforts by their creditors.  This protects the debtor from creditors proceeding with lawsuits, garnishments, and even initiating foreclosure proceedings against the debtor.  Creditors cannot send the debtor collection letters or assess other charges and fees to their accounts.  This is good for both the creditors and the debtors.  The debtor no longer has the stress of collections while the creditors can be reasonably assured that an effort will be made to pay each and every creditor an equitable distribution of the assets rather than one creditor having the ability to take all the assets.  This Automatic Stay remains in effect until the bankruptcy is dismissed or discharged.

            An individual debtor under Chapter 7 is allowed to keep some of their assets through exemptions allowed under the Bankruptcy code.  Exemptions are statutorily defined properties that an individual debtor may protect from administration in the bankruptcy estate.  Some states offer their own exemptions though and the debtor is allowed to choose to use their states exemption laws or to use the federal exemption laws. In Indiana, the homestead exemption is currently at $7,500 for an individual filing and $15,000 if filing as a married couple. A debtor is also allowed to keep up to $8,000 in personal property or $16,000 is filing married.  Indiana has scattered the statutes pertaining to all of a debtor’s possible exemptions all over the place.  Some are under title 34, some under title 27, and yet you should always look for any other possible exemptions under § 522 of the Federal Code.  There are exemptions of varying amounts for whole life insurance policies, automobiles, business partnership property exemptions, exemptions for crime victims’ benefits, unpaid wages still due to the debtor, earned income tax credits,  health aids, jewelry, household goods, tools of the trade like uniforms, personal injury claims, retirement accounts, and government benefits like Social Security.  There are many exemptions available depending on your state and your circumstances.  It is the duty of the debtor’s bankruptcy attorney to find all those exemptions applicable.

            One of the primary concerns for the debtor is, “How long will this take?” 

There is a deadline of 15 days after filing the petition to file certain financial “schedules” with the court-documents declaring your assets, liabilities, expenses, income, and a statement of your affairs.  These schedules are typically filed with your initial petition. About 15 days after a petition is filed, the courts will mail the Notice of Commencement of Case to the debtor and to all of the creditors listed in the petition. This notice will inform the debtor of the date set by the court for the meeting of your creditors, and the deadlines for your creditors to object to your case and file their claims against you. Within 30 days after filing a petition, or before the meeting of creditors (also called a 341 meeting), you are required to file a Statement of Intention whereby the court is informed if the debtor intends to keep their secured property that serves as collateral for their secured debts, or if the debtor plans to surrender the property.  A debtor can reaffirm the debts and continue to make payments on those debts if they wish to keep the property or it can be sold for fair market value.  Within 45 days after the Statement of Intention is filed, the debtor must surrender or keep the property as indicated in the Statement.

     Sixty to ninety days after filing the bankruptcy petition, there will be a Meeting of the Creditors or 341 Meeting as it is typically called.  The trustee will ask the debtor to testify under oath as to the accuracy of the statements in their petition.  It is vital that the client, debtor, attends the 341 hearing.  If the debtor is not there, the petition will be dismissed.  Within 45 days after filing, evidence of any payments received from any employer within 60 days of filing, an itemized statement of monthly income, and an estimate of any increase income or expenditures expected over the next 12 months must be submitted. 

      Within 60 days of the 341 hearing, the trustee and any creditors must file any objections they have to any of the exemptions in the petition.   Creditors can object to the discharge of a debt if the debt was obtained through fraud or theft, personal injury claims from a DUI or DWI, or assigned debt through a divorce.  Another debt that cannot be discharged is a federally backed student loan without typically being permanently unable to repay it typically due to indigency or handicap.  Orders for child support or alimony cannot be discharged as well.  Creditors can also object to the discharge if it is found that there was any bankruptcy fraud, spoliation of necessary records, failure to explain losses, or failure to respond to interrogatories. Proofs of claim must be filed within 90 days after the first date set for the 341 hearing if they wish to share in the payments from your case if any assets are available for liquidation even though there typically are not any assets to divide in a Chapter 7 bankruptcy.

     It is important to address certain times for the debtor, such as the 341 meeting again.  The trustee will be asking some questions of the debtor like, “Have you paid off any debts to family members recently?” or “How did you get your unsecured debt?”  It is important that the debtor is prepared to answer questions pertaining to their finances going back at least 180 days and that they bring any financial documents that may help to explain their situation and a copy of their most recent tax return.  They should also bring their identification and social security card.  The trustee is trying to make sure there has not been any preferential transfers (paying off one creditor to benefit them more than another creditor) or fraudulent transfers (transfer of assets to another without consideration to hinder, delay, or defraud creditors).  If it is found that there has been a preferential transfer, the trustee is entitled to take that money back from the preferred creditor to more equitably divide among the other creditors.  If it is found that there has been any fraudulent transfers, the petition may be dismissed and the debtor may not be allowed to file for bankruptcy and even be sent to prison.  Make sure your debtors are honest in the preparation of their bankruptcy.  It is also important to include certification of debtor counseling in the petition by the due date so the case isn’t dismissed.  Debtor counseling is a new requirement since the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 went into effect.  This certification is often overlooked by debtors especially if they had filed previously before the BAPCPA.  After all, the purpose of bankruptcy is to give the debtor a fresh start, so that counseling may be the first time they were ever given any tips to stay out of debt.

Looking for a Bankruptcy Attorney in Anderson Indiana? Call us at 765-203-6556 or see us online at

More Marketing for Attorneys

Originally Posted December 5th, 2009

Just started following a bankruptcy attorney, Jay Fleischman, who writes a marketing blog for attorneys at

He was explaining some tips he had for the Christmas season and this is what he had to say…

Thanksgiving begins the strange time of year when most lawyers don’t have much new business to handle. People are more concerned with their holiday shopping than with their legal issues, so the pipeline dries up a bit. You can rattle around in your office surfing the Internet all day or you can take some action to make sure your legal marketing efforts continue to roll on once people come back to reality when the ball drops on January 1.

Here are 10 of my legal marketing tips for slow times:

  1. Review your business card: Your business card is for many people the first impression they have of you. When you hand it out, the recipient often puts it into a pocket or wallet and forgets about it until later. Does your card show your field of practice? Your direct dial phone number? Your website address and email account? If not, get cracking on an update.
  2. Update your website: When you’re busy, your home on the web goes stale. Check the bio section to make sure everything is fresh and up-to-date. If you’ve spoken at an event, had a decision published, or done something interesting then you need to make sure it’s online. One more thing – if your picture wasn’t taken in this decade then it’s probably a good idea to replace it with something more current.
  3. Look at title and description tags: The title and description tags for your web pages are critical to your search engine optimization success. Take a look at them and make sure they’re optimized with your keywords and other critical information to create not only better placement in the search engines, but also to spur searchers to click on your listing rather than someone else’s.
  4. Install Analytics: Google Analytics is simply the best way to track your website or blog traffic. It provides a mess of tools and data to help you keep your site on top of the search engines.
  5. Prepare Client Satisfaction Surveys: Whether you survey your clients online or by snail mail, getting feedback is critical to improving your processes. You’ll never know how to do a better job for your clients than asking them. Caution: send them out after Christmas or they’ll get lost in the shuffle of holiday cards.
  6. Brainstorm blog post topics: One of the reasons you don’t blog is because you don’t have time to think of stuff to write. Well, now you’ve got time. No excuses!
  7. Call a colleague for coffee: Making a human connection is the cornerstone of getting referrals. Go out and meet a colleague for an hour – not to talk shop, but just to talk. It’s the original social networking platform!
  8. Hop onto Twitter and start playing around: 140 characters never seemed so intimidating. But the good news is that you can’t break the Internet. Sign up, log on and poke around a bit. Listen and learn, then dip a toe in the water.
  9. Clean your office: That mess in your office isn’t going to get any prettier when the new clients come flooding back in January. Clean up – it makes a better impression on people who are deciding whether you’re organized enough to be trusted with their legal issues.
  10. Relax: This lull in business isn’t going to last for long.  You’ll need all your energy if you’re going to do good work for people when they show up asking for your help.


I know he wasn’t writing a book but there were some tips in the article that none of the lawyers I know would even know how to do… such as (tip #4) installing google analytics.  I have been in a form of marketing myself and other companies for the past 10 years and I can tell you that I know how to use google analytics but for those that can even figure it out, do they understand how interpret the data and make the adjustments needed to bring traffic to their site.  That is where someone like me, a multi-tasking computer experienced former business owner who just happens to be on his way to law school, comes in handy. 

Tip #1

I designed business cards off and on for 10 years and I couldn’t agree with Jay more.  I lost faith in any business with a bad business card.  It is so much worse when dealing with a popinjay lawyer and then seeing their business card is better suited as a drink coaster.  Keep in mind this is coming from a guy who has personally hired two different firms in the past year after talking to about 15 and quite a few more when looking for an internship.  I am interviewing them more than they are interviewing me.

Tip #2

Updating a website is important but I am wondering why the posting didn’t mention hiring a professional.  Why not even barter services out.  Contract reviews, consults, restructure a new web design firm into an LLC, collection services: the list could go on and on.  If you expect to be hired by people and that are not dying in the next decade or at least moving into a home, then you need to market to those who are internet friendly.  I am waiting for the ABA to come out with a study on who searches FindLaw or ExpertLaw before deciding to hire an attorney and then how do they go about finding one.  I know from experience that your clients are coming by referral from your other clients, then by referral of people who just happen to know you (social and business networking post to come soon), then perhaps some form of internet search, advertising follows, and the phone book is last… well maybe not by those who are sitting in jail looking to make a phone call.  Are you listed online yet?  Where you should be?  Do you want to pay a paralegal $15 an hour while you earn your $200 or would you rather lose $185 per hour.  I can hear it now, “I will just learn how to do it myself.”  How long will it take for you to learn what to do, how to do it, and then understand the follow up processes to keep your traffic up?  Most paralegals aren’t going to know this information but if you can find one, you may have struck gold.  I will make a note to explain some of the best ways to get found online and it isn’t in metatags anymore for google.

Tip #3

Title and Description tags – As I mentioned at the end of tip #2, it isn’t all in the tags but titles, right next to the Internet Explorer logo, makes a huge difference in content matching the search terms; and so does anything that one has bolded in the regular text of the page or italicized. BIG TIP! If you have a flash website, pitch it.  Whoever sold it to you didn’t care about your business.  You are an attorney, not a famous artist with pictures and movies to watch.  The fact is, Flash based websites are not search engine friendly and will prevent you from being found.  BIG TIP 2! The most important aspect of this is that you have RELEVENT content that is text based all over your site or other places that link back to your contact information or your website.  Imagine for a second what someone types into google when looking for an attorney…. using my town… ANDERSON INDIANA BANKRUPTCY LAWYER.  Of course FindLaw comes up and then come the lawyer list… Most people will only go through the top 4-8 before hiring someone if they are ready to retain that attorney.  How big is the town you live in?  Is your city name similar to what could be a last name?  Getting to the top of that list is just a little tougher now.

Tip #4 Discussed that one

Tip #5

Client Satisfaction Surveys… just now starting to make them when times are slow is a little late.  If business is booming right now, implement them right now.  Whether just mailed back to you, sent by email, or an “exit consult” done with someone on your staff.  Should also have had a consult on why you were hired after you get your retainer.  If you understand what you did to get the client, maybe you can find a way of getting a few more.

Tip #6

Blog posting… all I am going to say right now is it is a search engine’s friend to read text that is recently updated.  I don’t pretend to be an expert blogger and I am always worried I am giving away too much information and not getting paid for my work.

Tip #7

Call a colleague for coffee – This should have been listed as Tip #1.  Since most of your clients come by referral, you need to have people falling in love with in all kinds of social circles.  Got kids in sports? Got kids in school?  Belong to an HOA? Ever hear of BNI?  Can you take a position within your local bar?  How many charities have you wanted to donate to?  Find a way to be more social.  Find a way to pass your new lovely business card (that follows a complete theme with all of your other branding material) to everyone.  It should spread faster than a cold in a daycare.

Tip #8

Your current clients may love your tweets but new clients won’t be finding you with twitter.  Knowing how and when to use it though can help you in many other ways though… even legal research.  Type your legal issue into a twitter post search field and see what happens to see my point.

Tip #9

Clean your office should have been listed as tip #2.  It was such a turn off to go into a dirty clutterd office… what is so sad is that they often don’t think it is so bad.  If you can’t eat off your desk this second, get cleaning.  Can’t find a better clue to a scatter brained or mentally disturbed person than to see more than 3 books on getting rid of clutter in a messy office… getting those books just added to the clutter.  Which behavior disorder is that?  I can have a cluttered desk at times but… I will leave the story of the lawyer whose office looked like he used to have an office but the furniture was missing and there were stab wounds from a knife, and the knife, all over the wall.  That was a red flag.  What kind of clients are you trying to attract?  Your office is a reflection of the clients you serve.

Tip #10

Relax – well, keep yourself rested and take a nap in the middle of the day if you can train yourself to handle it responsibly and not like you are depressed.  Recent research studies have proven that a 30 minute power nap in the middle of the day will increase your memory capabilities and react more quickly to questions you already know the answers.  Might be a health benefit every attorney could use.

Just felt like adding my 2 cents and a few more.

Jay Fleischman’s original posting can be found at  His blogs are well worth looking over a few times.

Top Ten Tips for Taxes from the IRS and My tips

originally Posted January 5th, 2010

The IRS sent out a list today of their top 10 tips and I wanted to offer some of my own.


Here are the Internal Revenue Service’s top 10 tips that will help your tax filing process run smoother than ever this year.

  1. Start gathering your records Round up any documents or forms you’ll need when filing your taxes: receipts, canceled checks and other documents that support an item of income or a deduction you’re taking on your return.
  2. Be on the lookout W-2s and 1099s will be coming soon from your employer; you’ll need these to file your tax return.
  3. Try e-file When you file electronically, the software will handle the math calculations for you. If you use direct deposit, you will get your refund in about half the time it takes when you file a paper return. E-file is now the way the majority of returns are filed. In fact, last year, 2 out of 3 taxpayers used e-file.
  4. Check out Free File If your income is $57,000 or less you may be eligible for free tax preparation software and free electronic filing. The IRS partners with 20 tax software companies to create this free service. Free File is for the cost conscious taxpayer who wants reliable question-and-answer software to help them prepare a return. Visit to learn more.
  5. Consider other filing options There are many different options for filing your tax return. You can prepare it yourself or go to a tax preparer. You may be eligible for free face-to-face help at an IRS office or volunteer site. Give yourself time to weigh all the different options and find the one that best suits your needs.
  6. Consider Direct Deposit If you elect to have your refund directly deposited into your bank account, you’ll receive it faster than waiting for a paper check.
  7. Visit again and again The official IRS Web site is a great place to find everything you’ll need to file your tax return: forms, tips, answers to frequently asked questions and updates on tax law changes.
  8. Remember this number: 17 Check out Publication 17, Your Federal Income Tax on It’s a comprehensive collection of information for taxpayers highlighting everything you’ll need to know when filing your return.
  9. Review! Review! Review! Don’t rush. We all make mistakes when we rush. Mistakes will slow down the processing of your return. Be sure to double-check all the Social Security Numbers and math calculations on your return as these are the most common errors made by taxpayers.
  10. Don’t panic! If you run into a problem, remember the IRS is here to help. Try or call our customer service number at 800-829-1040.



  1. Most importantly, unless you qualify for telefile, get a professional.  H&R Block lowered their prices this year and they came out with a wonderful product call H&R Block At Home.  It allows you to do your return inexpensively, then a tax pro like me checks and corrects any mistakes, and then you file it yourself.  It also comes with the guarantee to pay penalties and interest and provide you with audit support and since audits are on the rise, it only makes sense to use a professional.
  2. Don’t start filing until you know you have all of your W-2s, 1099s, Mortgage Interest statements, bill of sale if you bought a house, release of child (8332) if needed, all of your work related receipts, 1098-T for a school loan, etc…
  3. If you own a business – SORT YOUR RECEIPTS.  I don’t mind doing the adding and sorting with you either for a small fee if it is too much to handle.  I would prefer to have everything sorted by category receipt it is with maybe a pile of “dunnos” and then further break them down by quarter (1. Jan, Feb, Mar, 2. April, May, June 3. July, Aug, Sept, 4. Oct, Nov, Dec) so if anything needs to be depreciated then we can easily tell how it should be done.
  4. If you think you want to do your own taxes, take an H&R Block Income Tax course.  It is 2 weeks long either in the morning or evening. 
  5. KEEP ACCURATE RECORDS.  Your miles logged in your car for work, miles logged for charity work, accurate accounts for everything is important.  The IRS requires the tax payer to “keep an accurate and reasonable records of financial statements”.  You are not allowed to “forget” receipts to deduct off of your business income (if you own a business) where it might possibly help you with Earned Income Credit.  Again, AUDITS ARE ON THE RISE.  They are targeting those who cheat on the Earned Income Credit.
  6. Drop off your return and save yourself sometime.  You can step into H&R Block, fill out a little form, leave, and come back after we have input all of the documents into the system.  Ask you some questions over the phone or in the office and then you can approve the return online or stop by, sign papers, and be done.  You don’t have to wait in line for a couple hours.
  7. Try not to bring your kids.  I love kids but it isn’t fair to you, them, me, or other clients in the office to make your kids sit and wait 1-2 hours in what must be childhood hell.  Tax offices are not “fun” but they can be rewarding when you go home with a refund.
  8. Bring something to drink.  It can take 1-2 hours.  H&R Block is now serving coffee to anyone that comes in but if you don’t like coffee, you can bring in something else.  We try our best to make you cozy.
  9. Be calm.  We don’t work for the IRS.  We work for you.  If we give you news you didn’t want to hear, it isn’t our fault.  Every year, people forget that they don’t claim their kids that year, or their boss failed to take out taxes from their paychecks, they forget to pay taxes on disbursements from retirement accounts, etc.   Our job is to try to get your tax liability as low as we LEGALLY can so no one gets in trouble and it happens as quickly and accurately as possible.
  10. Don’t believe your friends and family unless they do taxes for a living.  Every year we have to tell people they are getting back less than what they thought because someone in their circle told them, “the less you make, the more you get back.”  Well, that isn’t how it works.  Last year, a cousin of mine was told he would need to pay about $2000 in taxes by a friend of his so he talked to me for some help. 

“Does your friend do taxes?”
“No, he looked it up online.”
“Let me see your forms…. LOL… hold on…”
30 minutes later I had his taxes done and he only owed about $200.  His friend failed to take his standard exemption, work expenses, calculate, his self-employment tax, and calculate his earned income credit as well as his stimulus check he didn’t receive.

How to Choose a Tax Return Preparer and Avoid Preparer Fraud

FS-2010-3, January 2010
(Jan. 5, 2009 – Corrected 2009 criminal investigation statistics.)

Taxpayers who decide they need assistance when preparing a tax return should choose a tax preparer with care and caution. Even if a return was prepared by an outside individual or firm, taxpayers should remember that they are legally responsible for what they file with the Internal Revenue Service.

Most return preparers are professional, honest and provide excellent service to their clients, but some engage in fraud and other illegal activities. Return preparer fraud involves the preparation and filing of false income tax returns by preparers who claim inflated personal or business expenses, false deductions, unallowable credits or excessive exemptions on returns prepared for their clients.

Preparers may, for example, manipulate income figures to fraudulently obtain tax credits, such as the Earned Income Tax Credit. In some situations, the client, or taxpayer, may not even know of the false expenses, deductions, exemptions and/or credits shown on his or her tax return.

However, when the IRS detects a fraudulent return, the taxpayer — not the return preparer — must pay the additional taxes and interest and may be subject to penalties.

The IRS Return Preparer Program focuses on enhancing compliance in the return-preparer community by investigating and referring criminal activity by return preparers to the Department of Justice for prosecution. The IRS can also assert appropriate civil penalties against unscrupulous return preparers.

Also to combat fraud, IRS Commissioner Doug Shulman recently made a series of recommendations with the twin goals of increasing taxpayer compliance and ensuring uniform and high ethical standards of conduct for tax preparers.

While most preparers provide honest service to their clients, the IRS urges taxpayers to be careful when choosing a preparer –– as careful as they would be choosing a doctor or lawyer. Even if someone else prepares a tax return, the taxpayer is ultimately responsible for all the information on the return. For that reason, taxpayers should never sign a blank tax form. And they should review the return before signing it and ask questions on entries they don’t understand.

Helpful Hints When Choosing a Return Preparer

  • Be cautious of tax preparers who claim they can obtain larger refunds than other preparers.
  • Avoid preparers who base their fee on a percentage of the refund.Use a reputable tax professional who signs the tax return and provides a copy.
  • Consider whether the individual or firm will be around to answer questions about the preparation of the tax return months, or even years, after the return has been filed.
  • Check the person’s credentials. Only attorneys, certified public accountants (CPAs) and enrolled agents can represent taxpayers before the IRS in all matters, including audits, collection and appeals. Other return preparers may only represent taxpayers for audits of returns they actually prepared.
  • Find out if the preparer is affiliated with a professional organization that provides its members with continuing education and resources and holds them to a code of ethics.

Reputable preparers will ask to see receipts and will ask multiple questions to determine whether expenses, deductions and other items qualify. By doing so, they are trying to help their clients avoid penalties, interest or additional taxes that could result from an IRS examination.

Tax evasion is a risky crime, a felony, punishable by five years imprisonment and a $250,000 fine.

Here are recent statistics on tax fraud from the IRS Criminal Investigation Division.

Criminal Investigation Statistical Information on Return Preparer Fraud
  FY2009 FY2008 FY2007
Investigations Initiated 224 214 218
Prosecution Recommendations 129 134 196
Indictments/Informations 149 142 131
 Sentenced 136 124 123
 Incarceration Rate * 85.3% 81.5% 81.3%
 Average Months to Serve 24 18 19

* Incarceration may include prison time, home confinement, electronic monitoring or a combination.

Some return preparers have been convicted of or have pleaded guilty to felony charges.

Examples for Return Preparer Fraud

The following case summaries are excerpts from public record documents on file in the court records in the judicial district in which the legal actions were filed.

Former Owner of Triad Business Services Sentenced for Tax Fraud Conspiracy

On Nov. 2, 2009, in Washington, D.C., Henderson Joseph, the former owner of Triad Business Services, was sentenced to 36 months in prison, followed by three years of supervised release, and ordered to pay a $50,000 fine. Joseph pleaded guilty in January 2009, in connection with a massive tax fraud conspiracy in which Triad Business Services sought over $500,000 in fraudulent tax refunds for its clients. According to court documents, Joseph masterminded a scheme to file fraudulent refunds for hundreds of clients by falsifying itemized deductions and credits on the clients’ individual tax returns.

Former Tax Preparer Sentenced for $1 Million Tax Fraud

On Oct. 16, 2009, in Kansas City, Donald Bushnell, a former tax preparer, was sentenced to 36 months in prison for fraudulently preparing nearly 300 tax returns that falsely claimed more than $1 million in business losses for his clients. Bushnell prepared 272 false and fraudulent federal tax returns from Jan. 9, 2001, to June 6, 2005, for a total tax loss of approximately $1,088,720. Bushnell’s criminal conduct caused dozens of taxpayers to incur substantial costs, ranging between $200 and $400 per return, for interest and penalties.

Daughters of California Return Preparer Each Sentenced to 72 Months in Federal Prison

On Oct. 5, 2009, in Riverside, Calif, Karen Denise Berry of San Bernardino, Calif., and Carla Denine Berry of Rialto, Calif., the daughters of a patriarch of an income tax preparation business, were each sentenced to serve 72 months in federal prison and three years of supervised release. They were also ordered to pay $14 million in restitution to the IRS. Their father, Matthew Carl Berry, a Rialto tax return preparer, was previously sentenced to serve 108 months in federal prison, 36 months on supervised release, and ordered to pay over $15 million in restitution to the IRS, after having been previously convicted at trial on charges that he conspired with others to defraud the Internal Revenue Service and filed false personal income tax returns for the years 2001, 2002, and 2004. Karen Denise Berry and Carla Denine Berry, along with their father, Matthew Berry, were found guilty of conspiring with Ivan Taylor Johnson, of San Bernardino, Calif., and Valerie Madel Dixon, of Rialto to impede and obstruct the lawful functions of the Internal Revenue Service. Karen Berry and Carla Berry pleaded guilty before trial to various charges including conspiracy to defraud the IRS, aiding and assisting in the preparation of false tax returns, and subscribing to a false tax return. According to court papers, the false returns Berry prepared for clients, in conjunction with the returns prepared by Karen Berry, Carla Berry, Johnson and Dixon, caused losses of more than $45,000,000 in tax revenue to the IRS. Johnson and Dixon previously pleaded guilty to charges contained in the indictment. Johnson was sentenced to 35 months imprisonment followed by three years of supervised release and ordered to pay restitution to the IRS in the amount of $19,034,901. Dixon was sentenced to five years probation, including 10 months home detention, and ordered to pay restitution to the IRS of $19,034,901.

Florida Tax Preparer Sentenced to 30 Months for Tax FraudOn Aug. 6, 2009, in Orlando, Fla., Jean Marie Boursiquot was sentenced to 30 months in prison and ordered to pay $149,456 in restitution. Boursiquot pleaded guilty on May 21, 2009 to his role in a conspiracy to defraud the government. According to court documents, Boursiquot ran his own tax preparation company and prepared tax returns and amended tax returns for transient Haitian immigrants in Florida. Boursiquot had the IRS mail him the refund checks directly and deposited the checks into his business account. In 2002, Boursiquot received nearly $400,000 from the IRS and pocketed more than $250,000 of the money that was intended for his clients. In 2003, Boursiquot received more than $500,000 from the IRS and kept more than $400,000 of his client’s money. Boursiquot did not file a tax return for the 2002 tax year and on his 2003 tax return he only claimed $41,341 in income.

Tax Preparers Sentenced to Prison for Filing False Returns

On June 23, 2009, in Riverside, Calif., Matthew Carl Berry, of Rialto, Calif., was sentenced to nine years in prison after having been previously convicted on charges that he conspired with others to defraud the government and filed false personal income tax returns for the years 2001, 2002 and 2004. In addition to prison, Berry was ordered to pay $15,418,393 in restitution to the Internal Revenue Service and to spend three years on supervised release following his release from prison. In addition to the conspiracy charges, the jury found Berry guilty of willfully filing false income tax returns with the IRS for the 2001, 2002 and 2004 tax years. 

Louisiana Tax Preparer Sentenced for Preparing False Tax ReturnsDec. 11, 2008, in Shreveport, La., Clementine Rainey, a former tax preparer for Quick Tax in Shreveport, was sentenced to 21 months in prison and ordered to pay $111,000 in restitution for preparing false tax returns.  Rainey pleaded guilty August 22, 2008, to one count of aiding the preparation of false returns.  According to court documents, she admitted to preparing and filing false individual income tax returns for taxpayers for the years 2005 through 2007 by submitting fictitious W-2 employer and wage information. 

Two Kenyan Women Sentenced for $15 Million Tax Fraud Conspiracy

On Nov. 13, 2008, in Kansas City, Loretta Wavinya and her sister, Lillian Nzongi, were sentenced to prison terms of 168 months and 70 months, respectively, for their roles in a multi-million dollar conspiracy to defraud the IRS. The Kenyan nationals lived in the Kansas City area and were involved in a wire fraud scheme that involved stealing the identities of hundreds of victims, primarily nursing home residents, which were used to seek more than $15 million in fraudulent federal tax refunds. Wavinya, a tax preparer and radiology technician who visited patients on-site at multiple nursing homes, pleaded guilty in June 2008 to using stolen identities to file more than 540 fraudulent federal tax returns using the names of more than 500 identity theft victims. The conspirators filed up to six state tax returns simultaneously with each federal return, causing a loss to at least 27 states.

Reporting Suspected Tax Fraud Activity

Tax fraud or abusive return preparers can be reported to the IRS on Form 3949-A, Information Referral. This form is available as a download from the IRS Web site at or by calling (800) 829-3676 to order by mail. The completed form, or a letter detailing the alleged fraudulent activity, should be sent to Internal Revenue Service, Fresno, CA 93888.

The mailing should contain specific information about the individual or business, the activity, when the alleged violation took place, the amount of money involved, how the reporter became aware of it and any other information that might be helpful to an investigation. The identity of the person filing the report is not required but it could be helpful in an investigation and it can be kept confidential.

Rewards based on the amount of additional tax, penalties and interest owed can be made to individuals who report fraud. IRS Form 211, Application for Award for Original Information, can be used to claim a reward.

The IRS’ Whistleblower Office will make the final decision about whether an award will be paid and for how much. Award amounts are based on the value of the information you provided compared with the amount of additional tax, penalties and interest collected by the IRS.

Legal Expenses as Tax Deductions

I am always getting asked, “Can I deduct my legal fees on my taxes?”  So let me explain the law on that.  Legal fees related to producing or collecting taxable income or getting tax advice are deductible.

Deductible Legal Expenses include:

  • The cost of either doing or keeping a job, such as expenses paid to defend against criminal charges arising from the taxpayer’s job.  This is certainly so for legal fees for a small business to keep running.
  • The cost of tax advice related to a divorce if the bill specifies how much is for tax advice and it is determined in a reasonable way.  Ask for an itemized bill.
  • The cost of collecting taxable alimony.  The key is that the legal fees paid must have been for something that had a direct effect on taxable income.   Legal fees paid to go after Child support is not deductible because it isn’t a taxable source of income.
  • Fees and Court costs paid for unlawful discrimination, a claim against the US Government, or a claim made under §1862(b)(3)(A) of the Social Security Act, are deductible as an adjustment to income rather than as a miscellaneous itemized deduction.  The deduction is limited to the amount included in gross income for that claim.  All other legal fees for this type of claim are deductible as a miscellaneous itemized deduction subject to the 2% AGI limitation.

NON-deductible Legal Expenses include:

  • Custody of children.
  • Breach of promise to marry.
  • Civil or criminal charges resulting from a personal relationship.
  • Damages for personal injury.
  • preparation, defense, or perfection of a title to real property (Land Deeds and houses)
  • preparation of a will.
  • Property claims or property settlement in a divorce.

If you aren’t sure if the fees you have paid are deductible, shoot me an email and I will follow-up for you.

5 Tax Facts about Summertime Child Care Expenses

IRS Summertime Tax Tip 2009-03
Many parents who work or are looking for work must arrange for care of their children under 13 years of age during the school vacation. 

Here are five facts the IRS wants you to know about a tax credit available for child care expenses. The Child and Dependent Care Credit is available for expenses incurred during the lazy hazy days of summer and throughout the rest of the year.

1) The cost of day camp can count as an expense towards the child and dependent care credit.

2) Expenses for overnight camps do not qualify.

3) If your childcare provider is a sitter at your home or a daycare facility outside the home, you’ll get some tax benefit if you qualify for the credit. 

4) The actual credit can be up to 35 percent of your qualifying expenses, depending upon your income.

5) You may use up to $3,000 of the unreimbursed expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.

For more information, including rules for claiming this credit for your spouse or a dependent age 13 or over who is not able to care for himself or herself, check out IRS Publication 503, Child and Dependent Care Expenses. This publication is available on the IRS Web site, or by calling 800-TAX-FORM (800-829-3676).

If you have any other tax related questions, you can contact me at Davenport Law Offices (765-203-6556) during the day.  Working with bankruptcy lawyers in Anderson Indiana.

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