It is that time of year again! Your federal tax returns are due in a few weeks. In my line of work I frequently see incorrect returns or returns with questionable information. This blog post is a summary of common mistakes I see – usually created by tax preparers who lack knowledge of the tax laws, ethics or both. Remember, you are responsible for the information contained in your tax return, not the tax preparer. In the end you are signing it, so you need to review it carefully before filing the return (or letting someone else file it for you).

The below tips are not given as tax advice and are not specific to your personal facts. I am merely providing information in hopes that you will review your returns and ask your CPA or tax preparer the right questions. And if the tax preparer will not answer your questions or answers with a ‘that’s just how it is’ I would recommend finding a new CPA who can explain why your returns should or should not be completed a certain way.

Filing Status: This is listed right under the general information on a form 1040. If the errors start here, your tax return may have some serious issues. Generally, if you were married during the entire tax year and lived with your spouse for the entire tax year, you were married. A return for married people should not be marked as ‘Single.’

An ever more common error is when a married person who lived with their spouse for the entire tax year is marked as ‘Head of Household’ on their tax return. According to the IRS website you cannot file as Head of Household if you were married and lived with your spouse during the entire previous tax year(it gets more complicated if you got married or divorced during the previous year). The Head of Household distinction is for single-adult homes with children. More information can be found on the IRS’ website here.

Missing Income: When you earn income, the payor is usually obligated to send both you and the IRS a copy of a document such as a W-2 or 1099. If you forget to provide these documents to your tax preparer or your tax preparer fails to include income, the numbers on your return will not match the numbers the IRS has and you may be audited in the future.

People often think of money from their job as their only income, but did you know that the following items may be considered income for income tax purposes (these are just a few examples from a very long list):

  • A forgiven debt 
  • Early retirement funds liquidation 
  • Money you received from a side business 
  • More information about income is available on the IRS’ website here. 

Business Deductions: There are three important questions to ask about business expenses. First, do you have an actual business? This is a great discussion to have with your tax professional. Your tax professional may advise against taking $5,000 worth of business deductions against the $50 of health products you sold last year. Second, are there legitimate expenses related to your business? Again, a competent tax professional can go through your expenses one by one. You can deduct rent for your store, but probably do not get to deduct the entire monthly mortgage payment on your home. Finally, do those legitimate business expenses count as deductions? Just because your business paid for something does not mean that expense counts as a tax deduction. A commonly confused issue is when meals can be deducted. Meals can be deducted if they are eaten while traveling for business or if business is conducted/discussed during the meal. Bought your office staff lunch last week? This may not be deductible. Information on the IRS’s website can be found here.

Charitable Deductions: Ask yourself when reviewing the charitable deductions listed on your tax return – did I make that donation? If the answer is ‘no’ it may be time to hire a new tax professional. What types of charitable donations count as an IRS deduction is something you should ask your tax professional directly.

Unneeded Extensions: I sometimes have people tell me their tax preparer filed an extension for them. When I ask why, I rarely get an answer at all. When I do, the answer seems to be that the tax preparer was too busy and decided to punt your return down the road. Why file an extension if you do not need to? If your tax preparer recommends an extension I would ask ‘why?’ If their answer is because they are busy, maybe you should pay someone who has time to complete and file your return by the deadline.

Large Refunds: In a vacuum, receiving a large refund probably is not an issue. It may mean you are probably having too much money taken out of your paycheck (based on a form you completed for your employer called a W-4) and you are using the IRS like a savings account. While the feeling of ‘found’ money is a good one, this is not found money. The money you receive as a refund is money that belongs to you that the IRS has been withholding. And they are not going to pay you interest, either. If you find yourself contemplating bankruptcy, however, over withholding can create a slew of issues that need to be addressed before your case can be filed. Speak with your tax professional about whether adjusting your elections on form W-4 makes sense for you.

Failure to File vs. Failure to Pay: Sometimes people will put off filing their tax returns because they know they are going to owe. What folks do not take into account is that not filing is usually worse than filing – the penalties for an unfiled return are higher than the penalties for a filed but not paid return. Finally, a willful failure to file can be considered a criminal offense. While a ‘willful failure to file’ may mean something different in your case, why even mess around with possible criminal problems? Information on the criminal penalties can be viewed here. Here is an article explaining the financial differences in the penalties assessed by the IRS for the failure to file and the failure to pay. It may be outdated, but it will give you a general idea of differences between the two sets of penalties.

Hiring a Company You Saw on TV: While not every company that advertises on TV or the radio is a borderline scam, some are. When selecting a tax professional, I recommend reading my blog post about how to pick an attorney. Many of those principles apply to selecting a tax professional as well. Take time, do your homework and choose carefully. For example, one company that advertises frequently on the radio here in Houston mentions the ‘new’ Fresh Start program from the IRS. If you go to the IRS website, you’ll see that this program was announced in 2013. Do not believe that there is a new program or law change unless the company can provide written information about the law change and preferably a link that leads to an IRS press release or article.

I hope you have found the above thoughts helpful and will lead you to review your tax return more closely, ask your tax professional more questions and find a new tax professional if your current person cannot give good answers to your questions.

The information contained in this blog is for general information and educational purposes and is not legal or tax advice. Reading these posts does not create an attorney/client relationship.
People looking for lawyers are often stressed, confused and afraid that someone may try to take advantage of them. Because of this, sometimes potential clients say or do things that concern the lawyer they’re talking with. Lawyers sometimes refer to these concerning actions from potential clients as ‘red flags’ – and if a potential client raises too many red flags, that may even result in the lawyer deciding that they are not the right person to help with the situation.

To help avoid this type of situation, I’ve compiled the list of tips below is a list of tips to help you build a successful relationship with your lawyer/potential lawyer. Keep these tips in mind during your interactions, and when your case ends you will hopefully feel good about your experience with the lawyer/client relationship.

Many of these tips have to deal with expectations. It is absolutely ok to ask questions of your lawyer (see my post on choosing a lawyer) but you should keep an open mind when entering into a new relationship with a lawyer.
  • Only take legal advice from your lawyer. Sometimes other professionals will (wrongfully) give folks legal advice. While they may mean well, the law says only a lawyer can give legal advice. Do not take legal advice from Realtors, CPAs or other professionals.
  • Do not compare your bankruptcy (or other legal situation) to a friend or family member’s bankruptcy. Every case is unique based on the person’s facts. The laws and how the laws are interpreted can change. Just because something did or didn’t happen in a friend or family member’s case does not mean it will or will not happen in your case.
  • Not everything you read on the internet is true. There are many forums giving legal advice and do–it–yourself legal advice. Laws vary from state to state and even vary depending on what part of a state you live in.
  • Principles are expensive. As an example, some folks may admit that they owe a debt but they dispute a very small percentage of a debt. When people want to make a creditor ‘pay,’ that’s a huge red flag and in reality, it may cost you more money to prove the point than to let go of the principle and focus on resolving the larger issue at hand.
  • Look for ways to move forward and not point fingers at others. As another example, some folks are outraged that the bank refused to work with them when they fell behind on payments. Blaming the bank does not help resolve your current situation.
  • Accept the situation you are in. Disbelief and stress come with the territory, but failing to be able to discuss the situation and only focusing on how unfair you feel the situation is can be a problem. It is difficult for a lawyer to help you if you cannot have an ongoing discussion about your situation.
  • If you are confused, ask your lawyer (not the internet, family or another lawyer). First, non-lawyers cannot give legal advice. Second, it can really hamper the attorney/client relationship when a client has questions and is asking those questions of everyone but the lawyer. Remember, your lawyer is an expert and you’re paying them to help you.
  • Give your lawyer a chance to return your telephone call or e-mail. Lawyers are people, too. My firm strives to return calls the same or the next business day. Do not expect that your lawyer can return every call and e-mail within minutes. The lawyer and the lawyer’s staff may be gone for the day, in a meeting with other clients or in court.
  • Actively listen to what your lawyer tells you. While it may be difficult to retain everything a lawyer says during an hour–long consultation or meeting, it is important to hear the lawyer’s words, process what they are saying and ask any questions you may have. I also encourage clients to take notes during meetings.
  • At the initial consultation, create your questions based on what the lawyer tells you. It is ok to bring questions with you, but the lawyer may answer most or all of them during the consultation.
  • Be realistic or try to understand if you are not being realistic. For example, I sometimes give potential Chapter 13 bankruptcy clients (the type of bankruptcy where there is a monthly payment) a checklist of tasks they need to accomplish before I will take them on as a client. These checklists are usually things I believe are necessary for the client to be successful in their Chapter 13 bankruptcy case. If you get such a list and know that you cannot or do not want to complete the items on the list, tell the lawyer up front. Do not tell the lawyer you have completed tasks/checklists only to have to explain to the lawyer at the next meeting that you actually did not complete the list. Again, remember that you hired your lawyer to help you. Help them help you.
  • Focus on the issue at hand. It is understandable that folks struggling financially are stressed and sometimes they need to vent. As lawyers part of our job is to listen. Continuing to bring up issues that are unrelated to your case, however, will impede moving your case forward.
  • Understand that sometimes getting a fresh start means having to make sacrifices. Sometimes you may have to give up property, cut back on spending for certain items or tell certain people you are filing bankruptcy. As an example, if you have a child support obligation it is a requirement of the bankruptcy code that the other parent receive notice of the bankruptcy. That can be uncomfortable for some people, but it is a means to an end to get your fresh start.
  • The first time you contact a lawyer, call the lawyer yourself. If you are not comfortable making the call, be in the room with the person making the call. It may be, in certain circumstances, that it can be arranged that a family member go through the process with you. You, however, are going to be the client, not your friend or family member, and the lawyer needs to speak with you directly.
  • Do not keep information from the lawyer. What you keep from your lawyer may hurt your case. Make sure when telling the lawyer about your situation and filling out paperwork that you do not withhold anything. In a bankruptcy context, failing to tell the whole truth about your debts, bank account balances or assets can result in losing property, not receiving a discharge or even being accused of bankruptcy fraud.
  • When it comes to unpaid debts, focus on getting a fresh start and not finding a ‘gotcha’ moment to ‘beat’ the creditor. There is a lot of information on the internet about beating credit card companies. If it were as easy to beat credit card lawsuits and make them pay you money as those websites claim, credit cards would probably stop suing people. Sometimes they do make mistakes that violate the law, but let your lawyer make that determination.
  • Let the lawyer decide what is important or relevant. Facts or information that may not seem important to you may be critical to your case’s success. It is much better to tell your lawyer too much rather than not enough.
  • Be on time. Lawyers have very hectic schedules. If you show up an hour late for an appointment you may not get to spend the amount of time with your lawyer that both you and your lawyer need to properly analyze your situation. Or, the lawyer may not be able to see you if you are late because of other meetings or court settings. A potential client who is late or misses an appointment is a red flag. Make sure to leave with plenty of time to arrive at your lawyer’s office.



An opinion was issued by the Supreme Court of the United States last week in a case that bankruptcy lawyers, trustees and judges had been anxiously following. The question was whether the act of a creditor filing a ‘stale’ proof of claim in a Chapter 13 bankruptcy violated the Fair Debt Collection Practices Act (FDCPA). A ‘stale’ claim means that the dates on the proof of claims show that the applicable state statute of limitations had run before the Chapter 13 was filed. The complete opinion can be viewed here.

There are creditors in the business of buying and selling debts in bulk, and sometimes these debts may be past the statute of limitations. A couple of the largest nationwide debt buyers have been sanctioned recently over the practice of filing lawsuits in state courts over debts that have passed the statute of limitations and hoping to win by default judgment (that the Defendant never files a response). As an example, the Consumer Finance Protection Bureau sanctioned two debt buyers in 2015.

Bankruptcy practitioners wondered how the Court would rule. Creditor lawyers wanted a holding stating that bankruptcy law precluded the FDCPA, meaning an FDCPA claim could not be brought against a creditor for filing a stale claim in a Chapter 13 bankruptcy. Debtor lawyers wanted a ruling that said not only did the FDCPA apply, but that filing a stale claim was a clear violation of the FDCPA.

The issued ruling is largely creditor–friendly with a few caveats. The Court held that “the filing of a proof of claim that is obviously time barred is not a false, deceptive, misleading, unfair, or unconscionable debt collection practice within the meaning of the Fair Debt Collection Practices Act.” The Court analyzed the different statutory features of the FDCPA and the Bankruptcy code and how the two sets of laws intersect and interact in reaching their decision.

The dissent (Judge Sotomayor with Ginsburg and Kagan) wrote that the practice of knowingly filing time–barred debts in hopes that no one will notice and the creditor will collect payments, is both “unfair” and “unconscionable.”

The majority explained that they thought Chapter 13 bankruptcy trustees would object to stale claims, but I believe this opinion leaves the burden on the Debtor to continue objecting to these stale claims. I read the opinion to say that Debtors may still bring FDCPA claims in a Chapter 13 bankruptcy, but that the mere act of filing a stale claim is not itself a violation of the FDCPA.

The biggest question left unanswered (though mentioned in the opinion) is whether a debt buyer filing a lawsuit for a stale debt violates the FDCPA. In light of the decision in this case, one wonders whether that question may be more heavily litigated by creditors in an attempt to percolate the issue in the hope that the SCOTUS may hear the issue and make a pro-creditor ruling.

Another question remaining unanswered in the wake of the ruling is whether Debtors can bring an action against creditors under state debt collection laws for the practice of filing a stale claim in a Chapter 13 bankruptcy.

The information contained in this blog is for general information and educational purposes and is not legal advice. Reading these posts does not create an attorney/client relationship.

A mortgage modification is when a homeowner requests that the mortgage lender restructure the loan, usually due to financial difficulties.

When a homeowner requests a mortgage modification, they go into the application process assuming it will be a simple and quick process, only to be met with delays, unreturned telephone calls, and multiple claims by the mortgage company that the homeowner failed to send in documents. Homeowners may even have proof the documents were sent such as a fax confirmation sheet or a certified mail receipt – but the mortgage company denies receiving the document.

To highlight some of the ongoing issues of mortgage lenders abusing homeowners, below are two cases involving two of the nation’s larger mortgage lenders.

Sundquist v. Bank of America, No. 10-35624, Adv. Proc. No. 14-2278 (Bankr. E.D. Cal. March 23, 2017). A copy of the opinion can be found here.

Facts of Case 1

The Sundquists were current on their mortgage when they reached out to Bank of America (‘BOA’) to request a mortgage modification due to financial difficulties. They were told by BOA that they could not apply for a mortgage modification until they were behind on their payments. The Sundquists, on the instructions provided by BOA, began missing mortgage payments and eventually applied for several modifications. They dealt with BOA claiming they did not receive documents, denied the modification application without giving a reason, and promised to offer a future modification, all while putting the home in foreclosure. It was even claimed that one BOA employee told the Sundquists that mortgage modifications were not real and were just a scam so BOA could make more money before foreclosing on a home.

The Sundquists subsequently filed Chapter 13 bankruptcy to keep BOA from foreclosing on their home. The effect on the homeowners was devastating, including a heart attack and an attempted suicide. The Court found BOA acted willfully and intentionally and found the behavior so egregious that the Court awarded the homeowners $1,000,000 in damages and another $45,000,000 in punitive damages.

The punitive damages were intended to send a message to BOA – that this type of behavior was not acceptable and needs to stop. $40,000,000 of the punitive damages were directed by the court to be paid to the National Consumer Rights Bankruptcy Center, the National Consumer Law Center and five University of California law schools.

In my opinion, the initial fines and sanctions that mortgage lenders faced in the past were a drop in the bucket. As more and more mortgage lenders get fined for questionable practices related to mortgage modifications, these hefty sanctions may continue to be imposed. It is expected that this legal decision will be appealed.

Cotton v. Wells Fargo Bank, N.A., Adversary Proceeding No. 17-03056, pending in the United States Bankruptcy Court for the Western District of North Carolina

Facts of Case 2

This class action lawsuit is ongoing (it was filed in June of 2017) and alleges that Wells Fargo intentionally and improperly used forms to put homeowners currently in active Chapter 13 bankruptcy into an unsolicited mortgage modification. As a result of the forms filed with the Court, the Chapter 13 bankruptcy Trustee would start paying an amount lower than the homeowner’s current mortgage putting the homeowner further behind on their monthly obligation each month.

This modification, being called a ‘stealth modification’ by the lawyers handling the case not only put the homeowner further into default on their loan, but it also put them in default of their Chapter 13 bankruptcy plan. The terms of the ‘stealth modification’ frequently extended the term of the homeowner’s loan by as much 26 years and would have cost many homeowners upwards of $100,000 in additional interest.

It is speculation at this point as to why Wells Fargo would have put homeowners into these stealth modifications. Some legal experts believe the reason may have been to receive government payments given to mortgage lenders for each loan modified. Other lawyers believe the reason may have been to receive the increased income that would be paid over the life of the loan. The reason for the stealth modifications may have been a combination of these and other reasons.

It is important to note that this lawsuit comes on the heels of a 2015 settlement in the amount of $81.6 million between Wells Fargo and the Justice department. Wells Fargo was accused of failing to properly file the same forms in Chapter 13 bankruptcies. It is now accused of using them to put homeowners intostealth modifications. The Justice Department’s release regarding the settlement can be read here.

The information contained in this blog is for general information and educational purposes and is not legal advice. Reading these posts does not create an attorney/client relationship.

I am a Houston bankruptcy attorney that primarily helps people and companies to file Chapter 7 bankruptcy and Chapter 13 bankruptcy. I also help resolve other debt issues. I have been practicing as a Chapter 7 lawyer in Houston for over 5 years. My firm, Dove Law Firm, PLLC is a Debt Relief Agency. We help people file for bankruptcy relief under the Bankruptcy Code.

Why Choose Dove Law Firm, PLLC:

I believe that customer service is the number one priority. When people are struggling financially they may be stressed, nervous and scared about their situation. The prompt returning of telephone calls and e-mails is important so as to help alleviate anxiety. You also know you will be speaking with an attorney when you call or come in for an appointment.

WE PROUDLY SERVE THE FOLLOWING COUNTIES:

Montgomery, Galveston, Harris, Fort Bend, Waller, Brazoria, Brazos, Madison, Grimes, Walker, San Jacinto, Fayette, Austin, Colorado, Wharton, Matagorda, Chambers

CONTACT:
Dove Law Firm, PLLC
1111 N Loop W #1115
Houston, TX 77008
Ph: 832-509-3400
Fx: 832-559-0770
Email: rd@dovebankruptcylaw.com