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Lauryn Hill Faces Jail Time for Un-filed Tax Returns

June 12, 2012 by Steven A. Leahy

Many of my clients ask me about criminal charges for un-filed tax returns.  While the IRS doesn’t always seek criminal action against non-filers.  It DOES happen.  Singer Lauryn Hill was recently charged with failing to file 2005-2007 tax returns. She faces JAIL time – one year in prison and $100,000 on each count if convicted.  So, be careful. If you haven’t filed your tax returns, you need an attorney.  Call me at 312-664-6649.

Filed Under: Uncategorized

Student Loan Garnishment

February 10, 2012 by Steven A. Leahy

Another great question by a former client today: She has some outstanding student loans and is worried about student loan garnishment on her wages and/or her checking account.  She also questioned whether she was breaking the law. Here is my answer:

First, it is NOT illegal to owe someone money.  So, it is not a crime.

Usually, the loan company can get a student loan garnishment  without a court order – they don’t have to go to court. All they have to do is send you written notice:

  • at your last known address (right?)
  •  at least 30-days before issuing a garnishment order to your employer.

With a student loan garnishment, they get 15% of your after tax income (The amount must be less than 30 times the hourly minimum wage). – Unless, the student loan company takes you to court and gets a judgment (they usually don’t).  The rules are a little different for a judgment creditor garnishment. The creditor gets 15% of the gross.

It is my understanding, if you were recently unemployed, the student loan garnishment cannot be issued until you have been continuously re-employed for more than 12-months.

Without a court order, I do not believe they can reach the money in your bank account (I have seen some conflicting stories on that). I have never seen that happen.  (remember, without a court order).

You have to know they can take your Tax Refund too, again without a court order.  Same rules apply. They have to send you notice, just like the wage notice.  If you file married filing  jointly (usually the best way for a husband and wife to file) any refund will be used to set off the student loan – all the refund.  They do not split between husband and wife – they take it all.

It may be best to try to workout some sort of payment with them.  You know I would be happy to help you do that.

 

Filed Under: Uncategorized

Child Exemptions on Taxes for Divorced or Separated Parents

February 4, 2012 by Steven A. Leahy

I am a contributor on the Web Site Avvo.com.  I answer legal questions in the Tax, Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, and Foreclosure Practice areas (mostly) posted by “Askers.”  The most common question, by far, asked in the Tax Practice area concerns child exemptions on taxes for divorced or separated parents.

So I thought it was a good area to post on our blog.  Generally, the parent who has custody (the “custodial parent”) is entitled to take the child exemptions on taxes.  The custodial parent is defined as the parent having custody for the greater part of the calendar year and the one who provides more than half of the child’s support.  The other parent (the “noncustodial parent”) may be entitled to the deduction when:

  • The custodial parent releases or gives the exemption to the noncustodial parent for the year
  • The child lives with the noncustodial parent for more than half the year

When both parents have joint physical custody of their child, it may not be clear which parent is entitled to the exemption. This can be avoided by agreeing, in advance,  on who will take the exemption and having the other parent sign a release (IRS Form 8332)  of the exemption and/or including your agreement concerning the child exemption on taxes in your Divorce Decree or Child Custody Agreement.

What should you do if the other parent claims the exemption when you are entitled to the exemption?  

I had a client call today who filed his return electronically, and his return was rejected because the noncustodial parent claimed the child exemption of taxes first.  He wanted to know what he could do. I told him, there are four steps to to take in this situation:

  1. First, determine if you want to make an issue of the exemption.  If you do,
  2. make SURE you are entitled to the exemption.
  3. Next, print, sign and date your return and MAIL it to the IRS.
  4. Expect to receive paperwork from the IRS – the noncustodial parent will also receive the same paperwork. Once you receive the paperwork from the IRS:
  • complete the paperwork and send it back promptly.
  • provide evidence that the child lived with you – school records are VERY persuasive.  But you could use Doctor visits, day care receipts, etc.  If your child has lived with you, you will find something to prove it.  The noncustodial parent will also have to complete the paperwork and send it back to the IRS.  The noncustodial parent will not be able to prove that your child lived with them – because your child didn’t.

I hope this post answers your questions about Child Exemptions on Taxes for Divorced or Separated Parents. If you have IRS problems, you need an attorney. You need me Steven Leahy. Call me (312) 664-6649 or Toll Free (866) 664-6647. 150 North Michigan Avenue, Suite 1120 Chicago, 60601

 

Filed Under: Uncategorized Tagged With: Child Exemptions, Divorce, IRS, Tax Return

1099 C and Bankruptcy

February 3, 2012 by Steven A. Leahy

It’s tax time!  What do you do if you receive a 1099 C (Cancellation of Debt) from a creditor after you file bankruptcy.

When a creditor forgives (charges off) a debt, the IRS recognizes this as a “taxable event”   That means you must pay taxes on that amount, as if you received the forgiven debt as income.  With the mortgage foreclosure problems many have been facing, this could mean a tremendous increase in the amount of taxes that are due.  For example, I received a call today from a client who received a 1099 C in the amount of $40,000.00.  This increase in income could translate into thousands of dollars of additional income taxes.  Not a good alternative.

Take heart.  If you filed for protection under the bankruptcy code and received a discharge, the IRS has a process to exclude this type of income – so you don’t have to pay taxes on that forgiven debt.  You need to file Form 982 with your federal income tax return for a year a discharge of indebtedness is excluded from your income.  The purpose of Form 982:

“Generally, the amount by which you benefit from the discharge of indebtedness is included in your gross income. However, under certain circumstances described in section 108, you can exclude the amount of discharged indebtedness from your gross income. You must file Form 982 to report the exclusion and the reduction of certain tax attributes either dollar for dollar or 331/3cents per dollar.”

You must complete Form 982 and attach that form, along with the 1099 C , to your tax return.  Don’t just ignore this matter.  Often people receive these documents and simply discard them because they received a Discharge.  But the IRS is funny that way.  The IRS expects you to document and file all matters involving your income.

So, if you received a discharge  of your debt in  bankruptcy and you receive a 1099 C from a creditor, you should file the 1099 C along with IRS Form 982 along with your tax return, and protect yourself from additional taxes.

 

 

Filed Under: Uncategorized

Avvo Questions – Avvo Answers

January 29, 2012 by Steven A. Leahy

Avvo.com is a web site people can go to “Get free advice from  top-rated lawyers, doctors and dentists.”  I found Avvo about 30 days ago.  I know this, because Avvo has a pretty go0d analytic function that tracks my use of the site.  I was visiting a colleague’s web site and noticed an Avvo Rating Badge on the bottom of her page.  I clicked through for the first time, and have visited Avvo everyday since.  I found the Avvo Answers to legal questions posted on Avvo to be thoughtful and helpful.  I wanted to participate to the Avvo Answers.

Now I act as a contributor on Avvo; that means I answer questions presented by “Askers” from around the country.  I field questions from the Tax, Chapter 7, Chapter 13 and Foreclosure practice areas (mostly).  In the first 30 days I have answered 409 questions, and risen to “Contributor Level 14.”  It’s been interesting.

Some years ago, I answered legal questions through email I received from a bankruptcy site. I answered thousands of questions.   That turned out to be good preparation for learning how to answer complex legal questions in a clear, understandable way.  Avvo has given me the forum to put this ability to good use, and help lots of people too!

From both of these experiences, I noticed that many of the same questions rise again and again.  For example, on the Avvo Tax Practice Area the most common questions revolve around which party gets the child tax deduction after divorce.  For the Chapter 7 Bankruptcy Practice Area, the most common questions ask about Schedule C Exemptions.

Over the next several months, I will present some of my Avvo Answers to these, and other, Avvo Questions.  In addition, I will convert these blog posts to Legal Guides, published on Avvo.  My goal is to make answers to common questons available to those who need these answers, when they need the answers.

Filed Under: Uncategorized

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