Social Security And Taxes
Many senior citizens preparing for retirement may not realize that their Social Security income could be taxable under certain conditions. When determining whether Social Security income is taxable the government uses a formula that calculates the taxable amount. Basically when a senior citizen’s income from other sources, such as a 401K or investment property plus half of their Social Security income exceeds $32,000 as a couple or $25,000 as a single person some of the Social Security income will become taxable.
That’s not a lot of money, so seniors need to be prepared for the tax bill which can really affect their bottom-like. Unlike earlier generations, many senior citizens are retiring with large amounts of debt including a mortgage. These debts are an added burden to the medical expenses that are more likely to increase with age and the tax burden that seems to never go away. But if a senior citizen is facing a heavy tax burden and/or debt burden that is making it difficult for them to survive during retirement, the bankruptcy laws do offer some tax relief help.
Most types of consumer debt and even some tax debt can be discharged in a Chapter 7 Bankruptcy , especially for those who are on a low fixed income. Call a Dallas-Fort Worth bankruptcy attorney today to hear about bankruptcy options that may be especially beneficial to senior citizens.
Considering Loading Your Tax Refund On A Prepaid Credit Card? Just Say “NO”
As if tax preparation companies haven’t come up with enough schemes to pry money out of taxpayers’ hands, now some tax preparation companies are encouraging taxpayers to load their tax refund on a “convenient” prepaid credit card. Just say no to this new scheme which will leave the tax preparers and banks with more of your hard earned money.
Why you should avoid loading your tax return on a prepaid credit card:
- Prepaid credit cards usually have an ATM fee. What that means is that when you go to withdraw your money from an ATM you will be charged by the issuing bank and probably by the bank who owns the ATM. This could easily add up to more than $4 or $5 per withdrawal.
- Even if you try to get around the ATM fee by going to a bank, there is usually a charge to use the teller also.
- Need to make more than a few calls to speak with an agent of the prepaid credit card company? You will need to pay another fee.
- Not using your prepaid credit card enough? There is another fee-an inactivity fee.
- Unlike unsecured credit cards you will not receive any interest payments on the money you have on deposit. Instead you will end up paying a steady stream of seemingly non-ending fees.
While it may be tempting to go ahead and load your tax refund on a prepaid credit card, do yourself a favor and just have the tax preparer issue a check, even if it costs extra.
Bankruptcy Trustee Forced to Return Tax Refund
n the bankruptcy case of Martin, Renee M.; In re, 19 CBN 870 (Bankr. N.D. Tex. 2009) the bankruptcy court ruled that the bankruptcy trustee must return the balance of a joint tax refund to the non-filing spouse.
The details of the bankruptcy case:
“The debtor filed for Chapter 13 relief on Dec. 31, 2008. The debtor’s husband did not join her in filing for bankruptcy. The debtor and her husband subsequently filed a joint federal tax return. The debtor did not earn any wages during 2008. The couple’s tax refund of $6,482 was based wholly on her husband’s earnings. The court ordered that $1,556 of the refund be applied to cure an arrearage in plan payments, $444 be paid to the debtor, and the balance be held by the trustee pending further order of the court.”
However, the bankruptcy court later determined that since the tax refund came from the non-debtor’s earnings, it was the non-debtor’s solely managed community property. The bankruptcy court ordered the trustee to return the balance of the tax return to the non-debtor spouse because it is not the property of the bankruptcy estate.
This is good news for debtors filing bankruptcy who have non-filing spouses who are the sole breadwinners. Oftentimes debtors who have faced a job loss fear that filing bankruptcy will endanger the earnings and/or assets of their non-filing spouse. Well under Texas law, solely managed community property (including wages) of the non-debtor spouse is not property of bankruptcy estate. To find out more about community property and bankruptcy speak with a Dallas-Fort Worth bankruptcy attorney.
Court Rules Tax Refund Partial Belongs To Bankruptcy Estate
In the Chapter 7 bankruptcy case of Krahn, Joseph A. and Kerri K.; In re, the bankruptcy court sustained a bankruptcy trustee’s ruling that the debtors turnover $3,952 from their federal income tax refund.
The details of the bankruptcy case:
The debtors filed for Chapter 7 relief on Aug. 29, 2008. Their 2008 federal tax return showed no tax liability, but $6,916 in refundable credits including earned income credits of $4,216, additional child tax credits of $1,632, and excess withholdings of $1,068. After an IRS adjustment, the debtors received $6,149 on Feb. 13, 2009. The debtors’ 2008 state tax return showed a $232 tax liability, but refundable credits of $1,291 including earned income credits of $717, a food sales tax refund of $156, and excess withholdings of $418. The debtors received a refund of $684 from the state on July 9, 2009. Both refunds were turned over to the debtors’ counsel pending the court’s determination of how much belonged to the bankruptcy estate.
The bankruptcy trustee in this case determined which portion of the debtors’ tax refund should go to the bankruptcy estate by dividing it into prepetition and postpetition portions, with the postpetition portion going to the bankruptcy estate. The debtors called the bankruptcy trustee’s methods unfair because the birth of a child and an injury of the debtor-husband caused the amount of the EIC to increase. But the bankruptcy court ruled in favor of the trustee saying that dividing the refund in such a manner was appropriate. The bankruptcy court ruled that the trustee could recover $3,952 of the tax refund minus any portion that was part of the sales tax refund on food.
Struggling Real Estate Developers May Get Power To Tax You
Along the lines of the strange and perhaps outrageous, there’s an article in the Dallas Morning News reporting that the Dallas City Council is considering (today 2/11/09) giving real estate developers the power to tax Dallas-Fort Worth residents. That’s not a misprint.
The article said:
The plan to create special taxing areas, known as municipal management districts or MMDs,… Under the plan crafted by the city, just 65 percent of landholders in a given area would need to sign a petition to apply to become an MMD. And once the petition was issued, a simple majority of those landholders could vote to create the MMD and seek the required approval from the City Council and Texas Legislature. Such districts potentially could place significant new tax burdens, in addition to regular municipal taxes, on property owners who never asked for it and don’t want it.
This is how it would work:
A group of landowners (65%), also known as DEVELOPERS in your area decide that they want to create a MMD. If the MMD is approved, they (the real estate developers) can tax everyone in the district, including individual homeowners, many of which are already facing foreclosure and are otherwise financially burdened.
This tax would be in addition to any other taxes the people living in that “special tax area” pays. But not just that, the developers would get a cut of the money as the article points out.
“It’s a good tool for us to use because it creates a funding source for the development community at rates below what they would normally be able to receive” through private financing, said council member Ron Natinsky, chairman of the council’s economic development committee.
Exactly! A funding source for the development community. Right, that’s we thought. Let’s think about this for a minute, just a few days ago we talked about how the IRS is giving taxpayers facing bankruptcy more options regarding paying delinquent taxes, we’ve talked about how many homeowners are facing foreclosure and home many Americans in all walks of life are facing bankruptcy.
How are these people going to pay an additional tax? Is this going to prevent more homeowners from facing foreclosure and bankruptcy or likely increase the number? Plus, who elected developers and gave them the power to levy taxes? That just doesn’t sound right.
Tax Refund Averages
Although the season of taxes has passed, it is always very interesting to hear about the figures and averages in relation to tax time. According to the Internal Revenue Service, for those who received a refund this year that refund averaged to about $3,000 per person.
With about 52 million Americans who filed their taxes, over 45 million of them collected some sort of a refund, according to the Internal Revenue service. Specifically, the average refund was $3,129, and those who received their refunds through direct deposit got about $3,257.
Robert Willens who is a tax professor at the Columbia Business School stated that many people will have a lot of their taxes withheld and then plan ahead for their large refund with plans to use it for things like purchasing a car or going on vacation. At the same time he claims that this is not a good thing to do economically because it is like an interest free loan to the government.
Those who filed taxes online this year was also up by 2 percent versus those who did so last year. About 28 million people have a professional prepare their taxes. The numbers of those who did their own taxes has also increased, likely because everyone is trying to save money. Specifically, the number jumped 6 percent versus the previous year when 19 million filed their own taxes.
Although these statistics do not talk about how many people owed money to the Internal Revenue Service, there are plenty of those individuals out there as well. While the average refund was around $3,000, many people owed that much or thousands more in tax debt when it came to tax time. If you owe the IRS money, you should contact a legal professional. They can sit down with you and go over all your options in how you can get rid of your debt.
Could Tax Refund Anticipation Loans Become A Thing Of The Past?
This year is the first time that the IRS has stopped providing tax preparation companies and financial institutions with a “debt indicator,” making tax refund anticipation loans a lot more risky. The debt indicator use to let lenders know how much of a risk as taxpayer was allowing the bank to make an informed decision about how much to lend the borrower. However, without this information, tax refund anticipation loans may become a thing of the past. Already, many tax preparation companies are reporting that they are making significantly fewer loans to taxpayers and that many would be borrowers are shying away from the loans because of high fees. Could tax refund anticipation loans become extinct?
Some say that’s possible because many taxpayers take out the loans because they don’t want to wait to receive their check weeks later from the IRS. But now with IRS services such as an e-filed tax return, many taxpayers are able to get their refund direct deposited into their bank account within 10 to 14 days. Unfortunately, many unbanked taxpayers are still relying on the tax refund anticipation loans because they don’t have a bank account, but the high fees can quickly eat away at their money, not to mention the problems they run into if their tax refund was over estimated or somehow gets garnished due to unpaid tax debt . As a solution some tax preparers are now offering debit cards on which they load the tax refund; but this service can also be laden with high fees. Unbanked individuals may be better off looking for ways to find a low cost bank account and using it to cash and deposit their refund check.
H&R Block Will Not Offer Tax Refund Anticipation Loans
H&R Block announced that it will not offer “tax refund anticipation” loans to its tax-preparation customers this year due to actions by federal regulators to stop H&R Block’s banking partner from offering the high-interest loans. The inability to offer the tax refund anticipation loans could cost the company about $146 million and they have reported that they have no immediate strategy to replace that income. But that may be good news for taxpayers, especially the poor and those who are living on a fixed income. The tax refund anticipation loan industry is a billion dollar venture but has come under scrutiny by consumer advocates and federal regulators due to high interest and fees.
Taxpayers should consider the following:
- You may not need the loan. Taxpayers can have their tax refunds direct deposited into their bank account within about eight days after they file their taxes electronically.
- Tax firms such as H&R block have a financial incentive to guide you into these loans. They are high interest and have fees that go directly onto their balance sheet. Consider doing your taxes with a firm which does not lean heavily on these types of loans for their revenue.
- You may not get an accurate estimate of your tax refund amount. If the tax preparation firm overestimates the amount of your tax refund, you could be stuck paying the difference. Avoid being stuck with a tax refund anticipation loan payment after tax season by just avoiding the loan in the first place.
IRS Announces New Tax Preparer Regulations
You won’t see any changes this tax year, but the IRS is planning to require tax preparers to pass a test and register with the government so they can more effectively oversee a largely unregulated industry used by many taxpayers.
[Doug] Shulman [IRS Tax Commissioner] said he hopes to have all paid tax preparers registered by the 2011 filing season. Preparers will be given about three years to meet competency requirements, though there is much work to be done to develop standards and tests.
Eventually, tax preparers will be required to complete annual training and will be subject to penalties for unethical conduct, Shulman said. Taxpayers will be able to check the credentials of preparers on a public IRS database.
And while the new regulations won’t affect the 2010 tax season, the IRS is stepping up enforcement on tax preparers this year. The IRS plans to send notices to 10,000 tax preparers who have a history of making errors on customers’ tax returns. Also, the IRS plans to make in person visits to tax preparers and some of them won’t be announced. The agency will send IRS agents posing as customers to see if the preparers give accurate advice. Lawyers, certified accountants and agents registered with the IRS won’t be affected by the new regulations.
The new regulations come as good news for many taxpayers who have been victims of bad advice given by unregulated tax preparers. For debtors who are considering bankruptcy, please remember, you will need to file your taxes this year and give a copy to your bankruptcy attorney. Be careful and make sure you work with an experienced tax preparer and avoid preparers who charge fees based on the size of your refund.
No More Taxes For Seniors? Yes If President Obama Has His Way
Since we’re living in an age of “internet government” I decided to take another virtual trip to the White House web page and found another interesting tidbit of information about reforms supported by the new President Obama administration.
According to the White House, President Obama would like to:
- Eliminate Income Taxes for Seniors Making Less Than $50,000: Obama and Biden will eliminate all income taxation of seniors making less than $50,000 per year. This will provide an immediate tax cut averaging $1,400 to 7 million seniors and relieve millions from the burden of filing tax returns.
Pretty radical, huh? I thought so too. Taxes and other debts are definitely financially strangling senior citizens who are facing foreclosure and other financial difficulties. Eliminating income taxes for senior citizens would go a long way in tax relief help in their golden years.
Many seniors facing difficulties such as foreclosure use bankruptcy to discharge or repay their taxes currently; but if the reform is actually pushed through it would radically alter the financial landscape for many seniors citizen. But for now, if you’re a senior citizen and are having difficulty repaying your tax debt or other debts contact a bankruptcy attorney to discover your bankruptcy options.
Stimulus Payments May Bite Taxpayers In April
Stimulus payments may equal a bigger tax bill for millions of Americans. More than 15 million taxpayers may owe the government $250 or more because of how the IRS organized last spring’s tax breaks which were designed to help lift the economy out of the recession. Due to IRS errors everyone from married couples to struggling students may be forced to fork over up to $400 to Uncle Sam.
Who Should Be Concerned
If you worked two jobs you may have received a $400 dollar stimulus at both places of employment. One of those payments must be returned to IRS once you file your taxes.
Dual-income households. If you and your spouse both work and make more than $13,000 a year, you may need to return up to $400 to the IRS once you file you taxes.
Working students. If you were a single student who worked a part-time job you may have received a $400 increase in your take home pay. However, if your parents claimed you as a dependent on their tax returns you must return the full amount of the stimulus payment.
Working retirees. More than 50 million Social Security recipients received $250 payments; however, retirees who were working will have that $250 payment deducted from their tax credit.
Unfortunately, taxpayers who received extra stimulus payment in 2009 will face penalties imposed by the IRS. Those penalties will be removed but ONLY if you request it. Remember, the mistakes made during this stimulus program are the fault of the IRS. Don’t pay for their mistakes. Please take the time to calculate how much you will owe at tax time. If you are unable to pay your taxes on time, you can file for an extension, request payment plans or even defer payments. Note, interest may still accrue during any deferment or payment plan.
Uncle Sam Giving Taxpayers A Break…Well Maybe…
According to an article in the Dallas Morning News, the IRS is softening some it’s strategies for handling delinquent taxpayers and those who simply can’t pay.
The article said:
“We need to ensure that we balance our responsibility to enforce the law with the economic realities facing many American citizens today,” said IRS Commissioner Doug Shulman. “We want to go the extra mile to help taxpayers, especially those who’ve done the right thing in the past and are facing unusual hardships.”
Some of the actions the IRS is taking are:
- Giving IRS employees more power to suspend collections on taxpayers who have experienced job losses . Although, this option has always been available not just to those who have experienced job losses; but other hardships such as a health crisis etc.
- Making installment plans more flexible and accommodating taxpayers who miss a payment or who need a reduced payment plan because of a job loss or other financial hardship.
- Releasing levies on a taxpayer’s personal property (bank accounts, real estate, wages etc.) if is causing a financial hardship.
I suspect that with at least 6 million jobless Americans many people will be using these opportunities to handle tax obligations they simply can’t pay. But just in case you find yourself unable to benefit from the IRS plans, you can use bankruptcy to repay taxes or even discharge them under certain circumstances.
A matter of fact, you may want to talk to a bankruptcy attorney before you go to the IRS about your tax debt so that you have a backup plan just in case they decide that your financial hardship isn’t “hardship” enough to give you a break on your taxes.
TaxMasters Files Chapter 11 Bankruptcy
TaxMasters, the Houston-based company that claimed to offer tax relief help, is seeking its own relief through bankruptcy. The company filed for Chapter 11 bankruptcy over the weekend while facing claims of allegedly deceiving consumers when it comes to their tax help relief services. The company founder is,Patrick Cox, the bushy-beard late night pitchman seen in dozens of commercials on various television stations.
It has been reported through court documents that the company has less than $50,000 in assets but owes possibly up to $10 million to more than 1,000 creditors. As if owing creditors wasn’t enough to deal with, TaxMasters has been facing allegations of deceptive practices. Consumers who call the toll-free number shown during the commercials were not transferred to a tax professional, but to a sales representative of the company, according to the Attorney General’s office. TaxMasters didn’t disclose to consumers that fees for services had to be paid up front, meaning that some missed tax deadlines with the IRS.
TaxMasters claimed to help individuals settle their tax debt with pennies on the dollar but many consumers felt the saying was a fabrication. There have been several complaints about the company and its practices from numerous consumers with some consumers paying the company more than $3,000 and received nothing in return. The State of Texas has a case pending against the company.
Recent talks with the attorney for TaxMasters claims the company laid off many of its workers recently and is no longer accepting new business. The company is basically shut down with its offices nearly vacated. Although the bankruptcy petition has been filed, it’s unclear if refunds will be issued to consumers whether or not the State of Texas wins its trial.
Foreign Taxes Uncollectible In Bankruptcy
In the Chapter 11 bankruptcy case In re: BearingPoint, Inc., et al., Chapter 11, Debtors, the bankruptcy court ruled that the Republic of Indonesia could not collect on taxes owed using the U.S. bankruptcy court. The Republic of Indonesia filed two proofs of claim in the BearingPoint bankruptcy, one for $389,000 and the other for $3.5 million. However the bankruptcy judge said that even if the debtor in the Chapter 11 bankruptcy owed the taxes, he could not collect on behalf of the foreign entity. Citing what’s known as the Revenue Rule, the bankruptcy judge said that he could not enforce tax judgments of a foreign country in a U.S. bankruptcy court.
The Revenue Rule is a longstanding common law doctrine providing that courts of one sovereign will not enforce final tax judgments or unadjudicated tax claims of other sovereigns. It has been defended on several grounds, including respect for sovereignty, concern for judicial role and competence, and separation of powers. See Attorney General of Canada v. R.J. Reynolds Tobacco Holdings, Inc., 268 F.3d 103, 109 (2d Cir. 2001).
The bankruptcy judge also went on to emphasize that he was not refusing to collect the tax debt simply because it was Indonesia asking for payment, noting that the same rule has been enforced when dealing with taxes owed by debtors to Canada who have sought bankruptcy protection in the U.S. It’s important to note that the bankruptcy judge does not discharge the debt simply because it is coming from the foreign state; but he also does not allow the foreign taxing authority to receive payments from the bankruptcy estate once a repayment plan has been established in the Chapter 11 bankruptcy.
New Horizon’s Tax Debt
Deputy Tax Collector Shirley Boyce reported that Cummings Solomon and her company New Horizons Capital Investments owe a tax of $46,000 to the town of Norway on the 12 properties that she owned during the tax year 2010-11. Out of the total amount of $45,998, $36,097 tax is due on currently owned New Horizons Capital Investments properties; $2,427 tax on a commercial building that was sold in Sept. 2010; $2,994 on one parcel under the name of Dawn Cummings Solomon; and $4,480 on three parcels under the name of Dawn Cummings. Solomon, the wife of co-principal of New Horizons Capital Investments Harvey Solomon, was charged for the embezzlement of $4 million of the states money through her Living Independence Network Corp. She will be sentenced in Oxford County Superior Court on February 18. If the taxes are not paid before next September, the town will obtain a legal claim on the properties and eighteen months later, legal proceedings on each property will be initiated.
The raid on the 180 Main St. property by state and federal agents was followed by sending a tax bill of $2,427.10 to the New Horizons Capital Investments Corp for payment. Later, the Mechanics Savings Bank of Lewiston placed and sold this property on a foreclosure auction for mortgage conditions violated by New Horizons Capital Investments on Oct. 22. Although the property was sold, Boyce said, that since New Horizons Capital Investments was the owner on record the time the tax bill was generated, the liability of the tax bill also lies on it.
Similarly, she said that the next bill will be generated in September and in the name of the person who owns it at that time. If the old owner doesn’t pay the tax, the new owner has to come forward to pay it off and if they don’t, the property can be subjected to a lien. Negotiation between the owner and the town then takes place in an attempt to retrieve the tax bill and give the title back to the owner; however, if it doesn’t work out, the property is put on sale so as the sale revenue can reimburse the unpaid tax bill.
Besides the Norway properties, New Horizons Capital Investment Corp also owns property in Harrison. The tax debt they owe on this property is $10,000 as well as interest accrued. Moreover, the company is also obliged to pay $1,575 plus interest on two apartment buildings in Paris. Five Norway properties are up for sale currently and according to Solomon’s attorney, the Portland Maine Attorney General’s Office is notified of property sales; however, there are no property sale restrictions currently being placed.
Sagging Tax Revenues Shake Up Dallas-Fort Worth
According to an article in the Dallas Morning News, slumping sales-tax revenues are forcing Dallas-Fort Worth municipal officials to monitor their budgets and prepare for possible cuts.
The article said:
Dallas is preparing for a projected budget deficit of as much as $100 million for next fiscal year… The deficit projection in Dallas is based in part on declining sales-tax revenue and a stagnant property-tax base. Lagging sales taxes also are affecting transportation entities such as Dallas Area Rapid Transit.
Less spending equals less taxes and we’re not just talking about sales taxes either, property taxes are being hit very hard because of the foreclosure crisis. The reduction in tax revenues can have devastating effects on a city’s ability to provide the basic services necessary to make any city livable—water, sewage, police and fire protection, not to mention access to fully staffed and equipped schools. Let’s just look at California if we want an example of what happens when tax revenue declines and cities are faced with budget deficits.
This is why it is so important for us to get a handle on the foreclosure crisis facing us. For every foreclosure, there is a loss in tax revenue that may be greater than the initial loss in property tax revenue. Many homeowners who face foreclosure are forced to leave and live in other states with family or friends, causing further loss in tax revenue that would have been gained if they remained paying for products and services in the city. The bottom line is that everything is interconnected and the foreclosure crisis seems to be at the root of our current financial problems including the decrease in tax revenue.
Dallas-Fort Worth Property Values (And Taxes) Plummet
According to an article in the Dallas Morning News, property tax revenues are set to plummet for 2009 as home values tank.
The article said:
About 92 percent of all residential properties will either fall in value or remain the same, said Ken Nolan, the county’s chief appraiser.
Foreclosures , a decline in building permits and rising office vacancy rates have conspired to send property values and property taxes downward for the first time in about 20 years. Although this may be good news for individual homeowners (specifically those not in foreclosure), for the community, it could turn out to be a disaster. Property taxes are necessary to fund our police, schools, firemen and other public services. If revenues from property taxes continue to decrease we may face more budget cuts or even the discontinuation of some services. The key ingredient to this decline in property value is the huge number of foreclosures entering the housing market and driving down prices even in some of the most sought after areas.
It’s foreclosures that have begun a devaluation process, that if allowed to continue can endanger the stability of communities by eradicating the tax base on which we all depend. This is why it is absolutely necessary that Congress move quickly to help homeowners avoid foreclosure and by extension save our communities from a rapidly disintegrating tax base. This is why we want Congress to change the bankruptcy laws and allow bankruptcy judges to modify these toxic mortgages that are root cause for so many foreclosures in our community. We must act now before it’s too late.
Maryland Man Convicted on Multiple Counts of Bankruptcy Fraud and Filing a False Tax Return
A federal jury recently convicted 42 year old Ricardo O. Curry of Randallstown, Maryland of four counts of bankruptcy fraud, two counts of filing a false tax return, one count of false testimony under oath during bankruptcy proceedings and four counts of falsifying bankruptcy records. According to county officials, Curry failed to report more than $740,000 of income and assets while attempting to fraudulently discharge over $1 million in debt through bankruptcy.
Curry worked for a North Carolina corporation, Peerless Real Estate Services Inc. that oversees property sales throughout the state. Curry would recruit investors and receive referral fees. He recruited 12 investors to purchase at least 23 lots during 2005, 2006, and 2007. For each year, Curry earned fees of over $40,000, $43,000, and $330,000 respectively. He reported fees earned as a sales representative for a pharmaceutical company on his tax returns for the same years, yet he didn’t report the referral fees of more than $400,000.
In March 2009, Curry filed for Chapter 13 bankruptcy in Maryland. When he filed, he reported income earned as a sales representative for a pharmaceutical company for 2005, 2006, and 2007, but not the referral fees from Peerless Services. He had ownership interest from a home that totaled roughly $325,000 that he also failed to report when he filed. In July 2009, he filed an Amended Statement of Financial Affairs and again, failed to report over $400,000 in referral fees from Peerless Services.
When he met with creditors in October 2009 during bankruptcy proceedings, he falsely stated while under oath that all assets were listed, when he knew the referral fees and home ownership interest was not included. He also failed to provide his trustee with documentation regarding his hidden income. When Curry tried to discharge debt in April 2010 it was denied.
Curry faces up to 20 years in prison on each count of falsifying bankruptcy records, up to 5 years in prison on each count of bankruptcy fraud and up to 3 years in prison for each false tax counts. Curry will be sentenced in June 2013.
Bankruptcy Court Splits Joint Income Tax Refund
In the Chapter 13 bankruptcy case of (Halverson, Michael; In re), the bankruptcy court ruled that the Chapter 13 debtor’s bankruptcy estate was entitled to half of the joint income tax refunds received by the debtor and his nonfiling wife.
The details of the bankruptcy case:
“The Massachusetts Department of Revenue (MDOR) filed a proof of claim in the amount of $64,172 including $14,936 for joint income tax liabilities of the Chapter 13 debtor and his nonfiling wife. Because the debtor’s wife did not join in the Chapter 13 petition, statutory interest and penalties continued to accrue on her obligation to pay the joint tax liabilities.”
It’s important to note here that the nonfiling spouse does not benefit from the automatic stay of interest accrual enjoyed by the spouse who filed bankruptcy. Ultimately they will both suffer financially once “her half” of the income tax liability must be repaid. This is something to think about has you consider whether to file bankruptcy with or without your spouse.
“After the debtor filed for bankruptcy, he and his wife filed joint income tax returns that generated refunds of $948 and $986. Pursuant to state law, the MDOR offset both refunds to the prepetition joint tax liabilities. These offsets did not reduce the MDOR’s claim because they were applied to statutory interest and penalties that accrued postpetition. The court agreed with the debtor that the MDOR could not offset the entire amount of the joint tax refunds to the statutory interest and penalties that accrued only on the wife’s obligation. “The postpetition tax refund of a Chapter 13 debtor is unquestionably property of the bankruptcy estate,” the court said.”
The court ruled half of the tax refund belonged to the bankruptcy estate and should be used to benefit the creditors in the bankruptcy case. They also warned the MDOR that offsetting tax refunds that are property of the estate not in accordance with the limited exception set forth in the bankruptcy code violates the automatic stay.
Source: Consumer Bankruptcy News, Volume 19, Issue 18, page 9
California Man Pleads Guilty to Tax and Bankruptcy Fraud through Homeowner Scheme
William Barry Blythe, 67, of Murrieta, California is charged with one count of bankruptcy fraud and submitting a false tax return. Blythe carried out a homeowner scheme that included creating multiple fake trust accounts that claimed to hold the title of homeowner properties. In doing so, he claimed to take ownership of the mortgages but instead kept payments homeowners made into his personal trust account.
Blythe plead guilty as part of a plea agreement in late March that included misrepresenting the bankruptcy court and failing to report income on his tax returns. He carried out a scheme meant to defraud homeowners, mortgage lenders and two California bankruptcy courts.
Blythe had more than 5 trusts created and approached homeowners struggling to make mortgage payments. He told homeowners he would negotiate with their lenders to get better terms for their mortgages. The trusts were supposed to be tied to property titles of each homeowner.
The homeowners were directed to place their deeds into the trusts, but Blythe never negotiated with lenders regarding the properties. He made homeowners pay a monthly fee that homeowners thought were going into the trusts he set up. Instead, he was collecting the money into a personal family trust he created.
The mortgage lenders were misrepresented when Blythe claimed he bought the properties but he never did. He also claimed he would take responsibility for them by assuming the mortgages but this did not happen.
Later, Blythe filed bankruptcy in central and southern California court districts. He claimed he bought the properties but made no income. He also claimed he owned mortgages and had other unsecured debts. His cases got dismissed.
From 2010 through 2012 he filed false tax returns leaving out over $177,000 in taxes. Part of his plea deal includes agreeing to pay restitution to victims and restitution to the IRS including penalties and interest total more than $320,000. Blythe will be sentenced in June 2014.
Former Construction Chief to Serve 15 Months in Prison for Tax and Bankruptcy Fraud
Robert “Jeff” Johnson, 46, was recently sentenced to 15 months in prison for fraud, along with being ordered by a federal judge to pay $1.6 million to the Internal Revenue Service (IRS) and a bank he defrauded.
Johnson was indicted on 12 counts in 2010 that included theft, larceny, obstruction of correspondence, falsification of records, and criminal contempt. As part of a plea deal, these charges were dropped. Last September,
Johnson pleaded guilty to willful failure to pay employee taxes, bank fraud, and bankruptcy fraud.
Johnson was a former chief of a Columbus, OH construction company that is now defunct. A lengthy investigation by the IRS led to his indictment. As president of Smith & Johnson Construction Co., he borrowed $20
million for the company, but instead of using it for business purposes he used it to support a posh lifestyle including a Miami Beach, Fla., condo and expensive vehicles.
The loan had enough collateral to cover it according to Johnson’s attorney, meaning the bank lost very little from the transaction. Johnson had been president for 3 years when the company folded in 2006 after being in operation for 20 years. The company had up 500 employees.
Johnson filed false documents and hid assets when he filed for bankruptcy. He withdrew over $1 million in taxes that he failed to pay to the IRS that was from employee wages. When the construction company folded and
a warrant was issued for his arrest, he hid from U.S. Marshals. He was apprehended later at his Florida home.
Some may recognize Johnson from the WE TV network show, Platinum Weddings, which highlights lavish expensive wedding celebrations. His wedding was featured in 2010 on a waterfront estate with a $600,000 price tag. Supposedly, his bride wore jewelry with an estimated worth of $400,000.
Delinquent Taxpayers to Pay Collection Fees
When it comes to paying taxes, the last thing we want are more fees. It is bad enough we need to deal with tax debt, but to have fees added on puts us even further in debt! While there are all sorts of different types of fees, out of the state of Oregon delinquent taxpayers will owe additional fees.
In next to no time, fees are to be charged to delinquent taxpayers in regards to tax debt collection. These fees are collected by firms tasked to gather taxes which are not paid, such as the fees of Oregon Department of Revenue. Delinquent taxpayers will be charged starting Saturday, October 1.
This may be able to be avoided however, not everyone will be able to pay up immediately. To avoid these fee collections, everyone who owes taxes are advised to pay in full prior to October 1. Around 200,000 taxpayers are being notified via mail sent by the department, which contains an announcement regarding these changes. Moreover, people who are not involved with private collection firms and cannot come up with enough money for paying debts in full may coordinate with the department for assistance. Of course, not everyone will be able to do so.
Within the state of Oregon, up to 67% of the overall tax balance may be charged by these private collection firms. The department has gathered about $415,000 during the previous year in fee collections. Tax fees can become such a burden when you ware trying to pay off your tax debt because instead of lowering your debt, it continues to go up. Often times these fees simply unavoidable and we are obligated to find other ways in getting rid of our tax debt.
Find an Experienced Dallas Bankruptcy Attorney
Contact an experienced bankruptcy at Allmand Law to help ensure that any and all potentially dischargeable debts are eliminated.