Judge Judy and Tax Law Part II
About ten days ago, in Judge Judy and Tax Law, I shared my reaction to a Judge Judy episode in which tax consequences played a tangential role, demonstrating the maxim that “Taxes are everywhere.” On Thursday, after shoveling snow and slush for several hours, I came into the house, sat down, flipped on the television, and there was Judge Judy. Having missed the first two minutes of the episode, it took me several more minutes to figure out the issue. It was a contract claim resting on a tax return preparation agreement.
According to the plaintiff, a woman whom he knows – possibly the mother of a former girl friend – approached him and said that she understood he could not afford to pay for tax return preparation as he had done the year before. Subsequent testimony revealed that he had been a client of H&R Block. So this woman offered him a deal. Her sister, she explained, was a tax return preparer and charged less than H&R Block. The plaintiff takes her up on the offer. At some point, the woman or her sister suggested to the plaintiff that he claim as a dependent on his tax return the child of a woman – and because I missed the first two minutes, I’m not certain of this – who was the former girl friend. The plaintiff had never previously claimed an exemption for this child, even though his confusing testimony suggested that at some point he thought the child was his but at other times knew that the child was not his. It seems that the child’s mother wasn’t going to claim the child because, having little or no income, she did not need the deduction. So the plaintiff agreed. He also was told that he would be getting a sizeable refund. A few days later, the woman who had initially approached him called him and explained that he would get his refund more quickly if he agreed to have the refund deposited into the woman’s bank account. She promised she would immediately remit the money to the plaintiff. He agreed, but not surprisingly, she didn’t transfer the money to him. So he sued her.
Judge Judy looked at the return in question and noticed that not only was a dependency deduction claimed that should not have been claimed, but that a child tax credit also was claimed. It wasn’t clear how much of the refund was attributable to these two items. The camera zoomed in on a small portion of the return, from which it was impossible to dissect the underlying entries. Judge Judy quickly figured out that the intermediary defendant and her sister were running a scam, and that the plaintiff, knowing he was not entitled to the dependency exemption, was no less complicit. In her questioning of the plaintiff, she used the word “fraud” on at least three occasions. She also, through questioning the defendant, determined that the defendant was not the mother of the woman whose child was being claimed, but was, at best, a foster mother.
Accordingly, Judge Judy dismissed the plaintiff’s case. She pointed out that there are all sorts of doctrines on which she could rely, but that the doctrine of “clean hands” would suffice. The plaintiff had not come to court, she explained, as an innocent victim but as a participant in some sort of scheme. Judge Judy told the plaintiff, “You need to file an amended return. You need to file an honest return.” She added that he knew that he was not entitled to claim the child. She then told both parties that the IRS would be told that the defendant has the refund, that the defendant has money that “belongs to” the IRS, and that the IRS would want to get it back. She also told the parties that the IRS doesn’t like fraud. No kidding.
I wonder what sort of impact on the viewers this episode has made. Has it taught people that it doesn’t pay to commit tax fraud, that the improper filing might be identified even if it is not the IRS that discovers it, that con artists specializing in tax fraud are popping up all over the place, and that one should check out the credentials and experience of a prospective tax return preparer? Or is it putting ideas into the heads of people who figure that with a little more care they can avoid being detected?
There wasn’t any means for me to determine what happened thereafter. Did the plaintiff file an amended return? Did the IRS go after the defendant and recover the refund attributable to the improperly claimed deduction and credit? Did anyone go to jail? Did the tax return prepare sister have other clients? Did she work similar scams with them? Perhaps when “Judge Judy: The Aftermath” debuts, we’ll find out. In the meantime, yes, tax is everywhere.
According to the plaintiff, a woman whom he knows – possibly the mother of a former girl friend – approached him and said that she understood he could not afford to pay for tax return preparation as he had done the year before. Subsequent testimony revealed that he had been a client of H&R Block. So this woman offered him a deal. Her sister, she explained, was a tax return preparer and charged less than H&R Block. The plaintiff takes her up on the offer. At some point, the woman or her sister suggested to the plaintiff that he claim as a dependent on his tax return the child of a woman – and because I missed the first two minutes, I’m not certain of this – who was the former girl friend. The plaintiff had never previously claimed an exemption for this child, even though his confusing testimony suggested that at some point he thought the child was his but at other times knew that the child was not his. It seems that the child’s mother wasn’t going to claim the child because, having little or no income, she did not need the deduction. So the plaintiff agreed. He also was told that he would be getting a sizeable refund. A few days later, the woman who had initially approached him called him and explained that he would get his refund more quickly if he agreed to have the refund deposited into the woman’s bank account. She promised she would immediately remit the money to the plaintiff. He agreed, but not surprisingly, she didn’t transfer the money to him. So he sued her.
Judge Judy looked at the return in question and noticed that not only was a dependency deduction claimed that should not have been claimed, but that a child tax credit also was claimed. It wasn’t clear how much of the refund was attributable to these two items. The camera zoomed in on a small portion of the return, from which it was impossible to dissect the underlying entries. Judge Judy quickly figured out that the intermediary defendant and her sister were running a scam, and that the plaintiff, knowing he was not entitled to the dependency exemption, was no less complicit. In her questioning of the plaintiff, she used the word “fraud” on at least three occasions. She also, through questioning the defendant, determined that the defendant was not the mother of the woman whose child was being claimed, but was, at best, a foster mother.
Accordingly, Judge Judy dismissed the plaintiff’s case. She pointed out that there are all sorts of doctrines on which she could rely, but that the doctrine of “clean hands” would suffice. The plaintiff had not come to court, she explained, as an innocent victim but as a participant in some sort of scheme. Judge Judy told the plaintiff, “You need to file an amended return. You need to file an honest return.” She added that he knew that he was not entitled to claim the child. She then told both parties that the IRS would be told that the defendant has the refund, that the defendant has money that “belongs to” the IRS, and that the IRS would want to get it back. She also told the parties that the IRS doesn’t like fraud. No kidding.
I wonder what sort of impact on the viewers this episode has made. Has it taught people that it doesn’t pay to commit tax fraud, that the improper filing might be identified even if it is not the IRS that discovers it, that con artists specializing in tax fraud are popping up all over the place, and that one should check out the credentials and experience of a prospective tax return preparer? Or is it putting ideas into the heads of people who figure that with a little more care they can avoid being detected?
There wasn’t any means for me to determine what happened thereafter. Did the plaintiff file an amended return? Did the IRS go after the defendant and recover the refund attributable to the improperly claimed deduction and credit? Did anyone go to jail? Did the tax return prepare sister have other clients? Did she work similar scams with them? Perhaps when “Judge Judy: The Aftermath” debuts, we’ll find out. In the meantime, yes, tax is everywhere.
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