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It happens almost every week. Somebody comes into our office with a serious tax problem -- caused by a shoddy tax preparer, either through incompetence, negligence or sometimes downright fraud.
It boggles my mind that there is no regulation of tax preparers. I thought I was the only one who had noticed this problem. But no.
The National Consumer Law Center, a consumer watch-dog group, has recently issued a very good report on this. Following is from the press release announcing the report:
(BOSTON) One of the most surprising aspects about paying taxes in the United States isn't about marginal rates, deductions, or loopholes - it's the lack of regulation for most tax preparers.
Each year, tens of millions of consumers rely upon paid tax preparers to help them file accurate and compliant tax returns, yet the majority of these preparers are not subject to any minimum educational, training,competency, or other standards.
A new report from the National Consumer Law Center (NCLC) documents how a lack of regulation has allowed incompetence and abuses by tax preparers to flourish.
"All 50 states regulate hairdressers, but only three regulate tax preparers," stated Chi Chi Wu, staff attorney at the National Consumer Law Center (NCLC) and author of the report. "Yet an inaccurate tax return can cause a lot more harm than a bad haircut."
The report, "Riddled Returns: How Errors and Fraud by Paid Tax Preparers Put Consumers at Risk and What States Can Do" analyzes years of mystery shopper testing by government agencies, consumer groups, and advocacy organizations, all of which found disturbingly high levels of incompetency and outright fraud, such as:
• Intentional omission of income;
• Falsifying information to make the taxpayer eligible for various credits and deductions, such as charitable deductions, job-related or business expenses, and the Earned Income Tax Credit (EITC); and
• Inability to accurately handle education-related items, such as grants and tuition credits;
This incompetence and fraud could expose consumers to the risk of audit by the Internal Revenue Service, or even criminal sanctions.
Also documented is the severe lack of transparency in tax preparation fees. Taxpayers, especially lower income recipients of the EITC, sometimes end up paying $300, $500 or more in fees. Yet these and other taxpayers often cannot get information beforehand on how much tax preparation will cost them because many tax preparers claim they cannot give a quote or give inaccurate lowball estimates.
"Tax preparation is one of the few businesses in this country where consumers can't get an accurate price quote before buying the service," stated David Rothstein, a contributor to the report and director of Resource Development & Public Affairs at NHS of Greater Cleveland. "The lack of transparency and disclosure is stunning. How can there be a competitive market if consumers can't comparison shop due to lack of price information?"
Government enforcement actions also provide evidence of widespread abuses by paid tax preparers. The latest example is a decision issued just this month by a federal judge shutting down the nation's fourth largest tax preparation chain, Instant Tax Service, and permanently banning its owner from the business of tax preparation due to "an astonishing array of repeated fraudulent and deceptive conduct."
The report also makes the case that the problem is not limited to a few instances, but is endemic and widespread. "Law enforcement action alone is not enough to address the abuses," stated Wu. "Going after a few bad actors would ignore how lack of regulation permits fraud to flourish."
The NCLC report calls on states to regulate tax preparers to address preparer abuse and incompetency. The IRS attempted to address the problem in 2011 with regulations requiring tax preparers to register with the IRS and pass a competency exam. Yet, a federal court struck down these common-sense requirements as exceeding the IRS's statutory authority.
Recommendations
To better protect consumers, state legislatures should require paid tax preparers to:
• Obtain a registration unless they fit into one of exceptions for the limited number of tax preparers already regulated, such as certified public accountants, enrolled agents, and lawyers.
• Pass a basic competency exam.
• Have 60 hours of initial education and 15 hours per year of continuing education.
• Provide a standardized disclosure of their fees.
Along with the report, NCLC is releasing a Model Individual Tax Preparer Act with specific language that states can use to implement these recommendations. It is based on the existing state laws of the three states that do regulate tax preparers (Maryland, Oregon and California), as well as the IRS regulations.
Go to NCLC's website for a free copy of the report and additional information.
And if you're facing a tax problem, give our law firm a call. We'll be happy to help.
It happens almost every week. Somebody comes into our office with a serious tax problem -- caused by a shoddy tax preparer, either through incompetence, negligence or sometimes downright fraud.
It boggles my mind that there is no regulation of tax preparers. I thought I was the only one who had noticed this problem. But no.
The National Consumer Law Center, a consumer watch-dog group, has recently issued a very good report on this. Following is from the press release announcing the report:
(BOSTON) One of the most surprising aspects about paying taxes in the United States isn't about marginal rates, deductions, or loopholes - it's the lack of regulation for most tax preparers.
Each year, tens of millions of consumers rely upon paid tax preparers to help them file accurate and compliant tax returns, yet the majority of these preparers are not subject to any minimum educational, training,competency, or other standards.
A new report from the National Consumer Law Center (NCLC) documents how a lack of regulation has allowed incompetence and abuses by tax preparers to flourish.
"All 50 states regulate hairdressers, but only three regulate tax preparers," stated Chi Chi Wu, staff attorney at the National Consumer Law Center (NCLC) and author of the report. "Yet an inaccurate tax return can cause a lot more harm than a bad haircut."
The report, "Riddled Returns: How Errors and Fraud by Paid Tax Preparers Put Consumers at Risk and What States Can Do" analyzes years of mystery shopper testing by government agencies, consumer groups, and advocacy organizations, all of which found disturbingly high levels of incompetency and outright fraud, such as:
• Intentional omission of income;
• Falsifying information to make the taxpayer eligible for various credits and deductions, such as charitable deductions, job-related or business expenses, and the Earned Income Tax Credit (EITC); and
• Inability to accurately handle education-related items, such as grants and tuition credits;
This incompetence and fraud could expose consumers to the risk of audit by the Internal Revenue Service, or even criminal sanctions.
Also documented is the severe lack of transparency in tax preparation fees. Taxpayers, especially lower income recipients of the EITC, sometimes end up paying $300, $500 or more in fees. Yet these and other taxpayers often cannot get information beforehand on how much tax preparation will cost them because many tax preparers claim they cannot give a quote or give inaccurate lowball estimates.
"Tax preparation is one of the few businesses in this country where consumers can't get an accurate price quote before buying the service," stated David Rothstein, a contributor to the report and director of Resource Development & Public Affairs at NHS of Greater Cleveland. "The lack of transparency and disclosure is stunning. How can there be a competitive market if consumers can't comparison shop due to lack of price information?"
Government enforcement actions also provide evidence of widespread abuses by paid tax preparers. The latest example is a decision issued just this month by a federal judge shutting down the nation's fourth largest tax preparation chain, Instant Tax Service, and permanently banning its owner from the business of tax preparation due to "an astonishing array of repeated fraudulent and deceptive conduct."
The report also makes the case that the problem is not limited to a few instances, but is endemic and widespread. "Law enforcement action alone is not enough to address the abuses," stated Wu. "Going after a few bad actors would ignore how lack of regulation permits fraud to flourish."
The NCLC report calls on states to regulate tax preparers to address preparer abuse and incompetency. The IRS attempted to address the problem in 2011 with regulations requiring tax preparers to register with the IRS and pass a competency exam. Yet, a federal court struck down these common-sense requirements as exceeding the IRS's statutory authority.
Recommendations
To better protect consumers, state legislatures should require paid tax preparers to:
• Obtain a registration unless they fit into one of exceptions for the limited number of tax preparers already regulated, such as certified public accountants, enrolled agents, and lawyers.
• Pass a basic competency exam.
• Have 60 hours of initial education and 15 hours per year of continuing education.
• Provide a standardized disclosure of their fees.
Along with the report, NCLC is releasing a Model Individual Tax Preparer Act with specific language that states can use to implement these recommendations. It is based on the existing state laws of the three states that do regulate tax preparers (Maryland, Oregon and California), as well as the IRS regulations.
Go to NCLC's website for a free copy of the report and additional information.
And if you're facing a tax problem, give our law firm a call. We'll be happy to help.
On July 6, 2007, the court in In re Electric Machinery Enterprises, Inc., ___ B.R. ___, 2007 WL 3031445 (Bkrtcy.M.D.Fla.)(Williamson, J.) issued its decision holding that unsecured creditors are not entitled to collect post-petition attorneys' fees, costs, and other similar charges even if there is an underlying contractual right to them.
The court noted that the majority of the courts have concluded that unsecured and undersecured creditors are not entitled to recover post-petition attorneys' fees, costs, and other charges. The court stated that there are four primary reasons for this view. First, a number of court have focused on the plain language of section 506(b) and applied the legal maxim of expressio unius est exclusio alterius. Section 506(b) provides that to the extent that an allowed secured claim is oversecured, there shall be allowed to the holder of such claim, interest and any reasonable fees, costs and charges. Second, is the Supreme Court's opinion and reasoning in United Saving Ass'n v. Timbers, 484 U.S. 365 (1988), which permitted post-petition interest to be paid only out of an equity cushion and ruling that an undersecured creditor without an equity cushion fell within the general rule of disallowing post-petition interest. Timber's rationale would then apply equally to unsecured and undersecured creditors. Third, courts rely on the plain language of section 502(b) which provides that the court shall determine the amont of the claim "as of the date of the filing of the petition" and that the time for determining the amount of the claim is as it existed as of the time of the filing of the case without the inclusion of post-petition interest, attorneys' fees or costs unless the claim is oversecured where such amounts are allowed under section 506(b). Fourth, courts rely on equitable considerations and policy of providing equality of distribution among similary situated creditors according to the priorites set out in the Bankruptcy Code. Thereby, unsecured creditors with attorney fees provisions in their contracts are not allowed to recover their fees just as unsecured tort claimants are not able.
The court adopted the majority view even though the Supreme Court recently declined to express an opinion as to whether unsecured creditors are entitled to post-petition attorneys' fees in a case under the Bankruptcy Code. Travelers Casualty & Surety Co. of America v. Pacific Gas & Elec. Co., ___ U.S. ___ (2007). The court stated that there is existing Supreme Court precedent under pre-Code law to support he majority view. "Specifically, in Randolph v. Scruggs, 190 U.S. 533 (1903), the Supreme Court formulated the requirement of "benefit to the estate" for the allowance of unsecured creditor's contract claims for post-petition legal fees." The court disagreed with the creditor's contention that the Eleventh Circuit implicity recognized an unsecured creditor's entitlement to attorney's fees in In re Welzel, 275 F.3d 1308 (11th Cir.2001).
Robert Eisenbach, III of In the (Red) Business The Bankruptcy Blog points out in a post dated July 26, 2007 that the Middle District of Florida Bankruptcy Court did not cite to the In re Qmect, Inc. May 2007 decision by the Northern District of California Bankruptcy Court which Bob discussed in a previous post. Bob notes that in In re Qmect, Inc.., the California Bankruptcy Court adopted a view opposite to that of the Florida Bankruptcy Court and held that an unsecured creditor could recover post-petition attorneys' fees as part of its claim if its contract with the debtor provided for recovery of such fees. The court pointed to the policy of the preservation of nonbankruptcy legal rights except to the extent necessary to facilitate the purpose of the bankruptcy proceeding. Bob notes that he expects more decisions to follow on this issue in the wake of the Travelers decision as creditors with attorney's fees provisions in their contracts seek to include post-petition fees in their unsecured claims.
The case of In re Busch, ___ B.R. ___, 2007 WL 1584650 (10th Cir.BAP(Utah))(Berger, J.), also adopted a view opposite to that of the Florida Bankruptcy Court where the court allowed the Debtor's ex-wife, who was an unsecured creditor, to recover certain of her attorney fees incurred in the bankruptcy case. The court reasoned that as the attorney fees would be awardable under state law in state court, that the enforcement of her interests should not be analyzed differently in the bankruptcy court.(305) 891-4055 - Jordan E. Bublick is a Miami Bankruptcy Lawyer with over 25 years of experience in filing Chapter 13 and Chapter 7 Bankrkuptcy Cases.
Often we receive inquiries as to why the trustee in a chapter 7 bankruptcy case is requesting a debtor's income tax refund. The client will call and state that they received word that their trustee filed a notice stating he is taking an interest in the debtor's income tax return, meaning he is going to hold the debtor's case open until they receive their tax refund, and then determine if they need to turn over any portion of it. If the trustee determines that there is an unexempt portion of the refund, he will require the debtor(s) to turn over a certain portion of it. The notice the trustee files with the court gives the debtor's creditors notice that he or she is doing this, and it also instructs the debtor's creditors to file proof of claims with the court (which is the creditor providing proof that you owe them money) so that IF the debtors have to turn over money, it will be distributed to those creditors equally. You are allotted a certain amount of exemptions when you file for bankruptcy. If you have property that exceeds those exemptions, you have to turn that portion over to the trustee who will then distribute it equally among your creditors. Upon filing, all of your property becomes part of the bankruptcy estate, and the trustee has control over the bankruptcy estate. He has the ability to instruct you to turn over unexempt property if he discovers that you have any. When your attorney files your case, they use the numbers that the debtor provides for values of their property. Prior to filing, if all of the property the debtor lists is exempt, there are typically not going to be issues with having to turn over any property. However, if the debtor is expecting to receive a large tax refund, the trustee will sometimes file a notice that he believes there are going to be unexempt assets, such as your refund. If he determines that you do have to turn over a portion of your refund, you will need to do so to ensure you receive your discharge. If you fail to turn over the requested amount, should he ask for anything, the trustee can revoke your discharge, meaning you would still be liable for all of the debts you listed on your petition and you would no longer be able to file a chapter 7 bankruptcy on any of those debts. So, when you file your taxes and determine how much you will be receiving back, it is important to forward a copy of the returns to your attorney's office immediately. Your attorney will need to forward the copies of the returns to your trustee for review and then will let you know if you need to turn any portion of your refund over. Because there is a chance he will make you turn some of the refund over, it is important that you do not spend any portion of your refund until your attorney has the chance to advise you that it is ok to do so. Even if you spend the refund before the trustee can ask you to turn the refund over, he or she will still make you turn over that amount of money.
Medical bills continue to be one of most common reasons why consumers file bankruptcy. Even if you have health coverage it can be challenging to pay co-pays for doctor visits, prescription medications, and make payments on bills your insurance did not cover. Millions of Americans continue to juggle their finances by trying to make their [...]
It happens almost every week. Somebody comes into our office with a serious tax problem — caused by a shoddy tax preparer, either through incompetence, negligence or sometimes downright fraud.
It boggles my mind that there is no regulation of tax preparers. I thought I was the only one who had noticed this problem. But no.
The National Consumer Law Center, a consumer watch-dog group, has recently issued a very good report on this. Following is from the press release announcing the report:
(BOSTON) One of the most surprising aspects about paying taxes in the United States isn’t about marginal rates, deductions, or loopholes – it’s the lack of regulation for most tax preparers.
Each year, tens of millions of consumers rely upon paid tax preparers to help them file accurate and compliant tax returns, yet the majority of these preparers are not subject to any minimum educational, training,competency, or other standards.
A new report from the National Consumer Law Center (NCLC) documents how a lack of regulation has allowed incompetence and abuses by tax preparers to flourish.
“All 50 states regulate hairdressers, but only three regulate tax preparers,” stated Chi Chi Wu, staff attorney at the National Consumer Law Center (NCLC) and author of the report. “Yet an inaccurate tax return can cause a lot more harm than a bad haircut.”
The report, “Riddled Returns: How Errors and Fraud by Paid Tax Preparers Put Consumers at Risk and What States Can Do” analyzes years of mystery shopper testing by government agencies, consumer groups, and advocacy organizations, all of which found disturbingly high levels of incompetency and outright fraud, such as:
• Intentional omission of income;
• Falsifying information to make the taxpayer eligible for various credits and deductions, such as charitable deductions, job-related or business expenses, and the Earned Income Tax Credit (EITC); and
• Inability to accurately handle education-related items, such as grants and tuition credits;
This incompetence and fraud could expose consumers to the risk of audit by the Internal Revenue Service, or even criminal sanctions.
Also documented is the severe lack of transparency in tax preparation fees. Taxpayers, especially lower income recipients of the EITC, sometimes end up paying $300, $500 or more in fees. Yet these and other taxpayers often cannot get information beforehand on how much tax preparation will cost them because many tax preparers claim they cannot give a quote or give inaccurate lowball estimates.
“Tax preparation is one of the few businesses in this country where consumers can’t get an accurate price quote before buying the service,” stated David Rothstein, a contributor to the report and director of Resource Development & Public Affairs at NHS of Greater Cleveland. “The lack of transparency and disclosure is stunning. How can there be a competitive market if consumers can’t comparison shop due to lack of price information?”
Government enforcement actions also provide evidence of widespread abuses by paid tax preparers. The latest example is a decision issued just this month by a federal judge shutting down the nation’s fourth largest tax preparation chain, Instant Tax Service, and permanently banning its owner from the business of tax preparation due to “an astonishing array of repeated fraudulent and deceptive conduct.”
The report also makes the case that the problem is not limited to a few instances, but is endemic and widespread. “Law enforcement action alone is not enough to address the abuses,” stated Wu. “Going after a few bad actors would ignore how lack of regulation permits fraud to flourish.”
The NCLC report calls on states to regulate tax preparers to address preparer abuse and incompetency. The IRS attempted to address the problem in 2011 with regulations requiring tax preparers to register with the IRS and pass a competency exam. Yet, a federal court struck down these common-sense requirements as exceeding the IRS’s statutory authority.
Recommendations
To better protect consumers, state legislatures should require paid tax preparers to:
• Obtain a registration unless they fit into one of exceptions for the limited number of tax preparers already regulated, such as certified public accountants, enrolled agents, and lawyers.
• Pass a basic competency exam.
• Have 60 hours of initial education and 15 hours per year of continuing education.
• Provide a standardized disclosure of their fees.
Along with the report, NCLC is releasing a Model Individual Tax Preparer Act with specific language that states can use to implement these recommendations. It is based on the existing state laws of the three states that do regulate tax preparers (Maryland, Oregon and California), as well as the IRS regulations.
Go to NCLC’s website for a free copy of the report and additional information.
And if you’re facing a tax problem, give our law firm a call. We’ll be happy to help.
In order to be eligible to file for Chapter 13 Bankruptcy one must be an individual with "regular income." Corporations, partnerships, estates, and trusts are not eligible to file for Chapter 13. But individual operating their own business as a sole proprietorship (unincorporated) are generally eligible to file chapter 13 to deal with their personal and business debt.
A husband and wife can file a joint Chapter 13 case. The filing of a joint petition does not automatically result in the substantive consolidation of the two debtors' estates.
"Regular income" means a source of money sufficient to fund a Chapter 13 plan. 11 U.S.C. Section 101(30). Income is not defined by the Bankruptcy Code, but the courts have held that Congress intended a broad definition of income for purposes of eligibility for Chapter 13.
Under Chapter 13, the debtor proposes a Chapter 13 plan that must meet certain requirements. Although the creditors are allowed to object to the confirmation of the Chapter 13 plan, there is no voting process as in Chapter 11.
After the completion of the debtor's payments under the Chapter 13 plan, which is normally of a duration of three to five years, the debtor is issued his Chapter 13 discharge.(305) 891-4055 - Jordan E. Bublick is a Miami Bankruptcy Lawyer with over 25 years of experience in filing Chapter 13 and Chapter 7 Bankrkuptcy Cases.
In the case of In re Foreman, 378 B.R. 717 (Bkrtcy.S.D.Ga. 2007) a wrongful death claim arose post-petition. The Court held this claim not to be property of estate as it arose post-confirmation and that a debtor has no ongoing duty to disclose assets acquired post-confirmation that are not property of the estate.
The Court held that a debtor has an ongoing duty to disclose only property of the estate. Burnes v. Pemco Aeroplex, Inc. 291 F.3d 1282 (11th Cir.2002). In chapter 13, the determination of property of the estate is complicated under sections 1306 and 1327. Per section 1327, the confirmation of the chapter 13 vests all of the property of the estate in the debtor except as otherwise provided in plan or order of confirmation. It noted that Telfair v. First Union Mort. Corp., 216 F.3d 1333 (11th Cir. 2000) adopted the "estate transformation" approach of the 7th Circuit holding in Black v. United State Postal Serv., 115 F.3d 521, 524 (7th Cir. 1997). Under the "estate transformation" approach, only property necessary for the execution of the plan remains property of the estate after confirmation. Muse v. Accord Human Resources, Inc., 129 Fed. Appx. 487 (11th Cir. 2005)(No party asserted property was necessary to fulfull plan).
The court held that Burnes does not apply to chapter 13 post-confirmation assets as it involved the duty to disclose upon a request for conversion to chapter 7 and not the ongoing duty to disclose assets acquired post-confirmation in a chapter 13 case. The court further held that there was no judicial estoppel as the post-confirmation tort was not involved in the bankruptcy case and the debtor did not have the obligation to disclose it and that there was no reason for debtor to amend schedules to list this claim. (305) 891-4055 - Jordan E. Bublick is a Miami Bankruptcy Lawyer with over 25 years of experience in filing Chapter 13 and Chapter 7 Bankrkuptcy Cases.
The Automatic Stay Stops The Wage Garnishment When you file for bankruptcy, you obtain an automatic stay. The automatic stay is the instrument which basically tells creditors that they can no longer take certain actions in an effort to collect a debt from you. If you are being garnished and you decide to file bankruptcy,+ Read MoreThe post What Happens With My Wage Garnishment Prior To Filing For Bankruptcy? appeared first on David M. Siegel.
In the case of In re Buonopane, ___ B.R. ____, 2007 WL 247888 (Bkrtcy. M.D. Fla.)Williamson, J.) the Bankruptcy Court for the Middle District of Florida held that the cap imposed by section 522(p) on the state homestead exemption that a debtor can claim in residential property acquired within 1,215 days of the petition date applied only to the Florida homestead exemption that the debtor could claim under 522(b)(3)(A) and not to the separate exemption available under section 522(b)(3)(B) for property held as tenants by the entireties. In Florida, a judgment against one spouse individually is not enforceable against property owned by both spouses as tenants by the entirety. The court's decision is in accord with a recent decision in the Southern District of Florida in the case of In re Schwarz, __ B.R. ___, 2007 WL 247649 (Bkrtcy.S.D.Fla.)(Olson, J.).
The Court stated while its ruling would appear to provide a way for a debtor to "end run" the $125,000 cap contained in section 522(p), that its ruling is consistent with the legislative history of section 522(p)(1) which was directed to close the "mansion loophole" and not against a state's common law on tenancy by the entireties property.(305) 891-4055 - Jordan E. Bublick is a Miami Bankruptcy Lawyer with over 25 years of experience in filing Chapter 13 and Chapter 7 Bankrkuptcy Cases.
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