What began as a motion in a divorce case by defendant Chinelo Onyiuke to relocate her children to Maryland resulted in the discovery of fictitious child care expenses deducted on her ex-husband’s personal tax returns. David and Chinelo were divorced in May 2007 with two children. In June 2009, Chinelo filed a motion to relocate with her children to Maryland for both financial and personal reasons. [Read more…] about Tax Fraud in NJ Divorce Case Reported to IRS
Estate Deduction for Caretaker Expense Disallowed by IRS
Estate of Emilia W. Olivo
In a recent estate case, the US Tax Court held that an unrecorded caretaker expense was not deductable from the estate. Mr. Olivia had taken care of Emilia Olivo, his elderly mother, who had numerous health issues and required assistance in the performance of daily tasks for about ten years until her death in April, 2003. Mr. Oliver subsequently became the estate administrator and claimed a deduction of $1,240,000 as a debt that the estate owed him for the care he provided. According to his testimony, his mother agreed to pay him $400 per day with payment deferred until after her death. Mr. Oliver failed, however, to record the agreement in writing, and the deduction was therefore disallowed by the Court. [Read more…] about Estate Deduction for Caretaker Expense Disallowed by IRS
NJ Fraud Case Highlights Importance of Internal Control
On Tuesday, July 12th, the U.S. Attorney’s Office announced that Kathleen Baker, a former office manager at Bathgate, Wegener & Wolf (a real-estate partnership in Lakewood) has admitted to embezzling $1.14 million over six years. Prosecutors say that Baker created a fictitious company (also known as a “straw man” company) called “Corporate Solutions,” and directed funds to a bank account under its name. The money was subsequently used to pay off her credit card bills and personal debts. Baker faces up to 20 years in prison. [Read more…] about NJ Fraud Case Highlights Importance of Internal Control
Unreported Income Disclosed to IRS in Divorce Case
Patricia Spence V.S. Walter Guy Chalow
Patricia, the plaintiff, and Walter, the defendant, were divorced in January 1995, with two children. The PSA (property settlement agreement) incorporated into their final judgment a child support obligation upon the defendant of $150 week. The PSA noted that this amount was not “based on the child support guidelines because both parties are self-employed”(Walter was a contractor; Patricia, a “credit searcher”) their incomes fluctuate and cannot be precisely determined.” The court determined that the defendant’s annual income was $153,199 and set a child support obligation of $267 per week.
[Read more…] about Unreported Income Disclosed to IRS in Divorce Case
Dementia Caregiver Expenses Tax Deductable!
Dementia: A Growing Challenge
8 million Americans currently exhibit some signs of dementia and this population is steadily increasing. Eventually, few people will be spared the challenge of caring for a relative with this disease. In many cases, a physician may determine that the patient requires 24 hour supervision. If no relative or friend can provide the required supervision, it can result in considerable caregiver expenses. Often, people will hire unlicensed caregivers to minimize this cost. In a recent Tax Court case, the issue presented was whether or not these expenses are deductible for income tax purposes. [Read more…] about Dementia Caregiver Expenses Tax Deductable!
NJ New Budget Decreases S-Corp Minimum Tax
On June 30th, 2011, New Jersey Governor Chris Christie signed into law portions of the legislature’s New Jersey budget that included a 25% decrease for the minimum corporate business tax on S-corporations. The new rates are as follows:
Gross Receipts Minimum Tax
$1 million or more $1,500
$500,000-$999,999 $1,125
$250,000-$499,999 $750
$100,000-249,999 $562.50
Less than $100,000 $375
The only exception to the decrease will be S-corporations which are members of affiliated or controlled groups with payrolls of $5,000,000 or more. Their minimum tax remains at $2,000.
This last exclusion from the new minimum corporate tax law seems to unfairly discriminate against staffing agencies and service corporations, as their primary expense is payroll. In fact, payroll IS the product being sold. Typically staffing agencies have controlled groups and reach the $5,000,000 threshold. Yet, solely due to their line of business, they will not benefit from the new reduction.