Newsletter from
Steve Richardson & Company, Certified Public Accountants

1/18/15

How CPAs Deal With Bullies!

Dear Clients & Friends of the Firm:

Litigation support is not normally a significant part of our firm’s practice; 2014 was different. We were instrumental in winning two important cases both of which could impact you.

This Tax Case Affects You!

We won an important tax case; I was privileged to represent my client before Judge Bill Thompson. Judge Thompson is the Chief Administrative Law Judge for the Alabama Department of Revenue. He is well known and highly respected.

Although CPAs are licensed to practice “tax-law” in court, in practice, in the vast majority of cases, tax-attorneys are engaged to represent clients in the courtroom for a variety of really-good reasons. In this case, hiring a lawyer was not possible. This was not a big dollar case tax case; the matters at issue represented a disputed tax of less than $10,000. In a small dollar case, hiring a lawyer simply does not make economic sense.

Even though it did not make economic senses to hire a lawyer, this case needed to be litigated. The Alabama department, frankly, bullied my client by a willful misapplication of the law believing that the case was too small and the client too poor to hire a lawyer. I don’t like bullies.

I really don’t like bullies. I cannot let a bully win without a fight; so, we had a righteous fight.

I won!

This case is important to you. It is about the documentation required to properly deduct business mileage of an auto. It is also about the business mileage deduction as it related to ministers and whether or not people in ministry are in a “profit motivated trade or business”. I know that last phrase, a “profit motivated trade or business” sounds a bit strange. I thought it strange that Alabama even raised this argument. It was a backdoor attempt to disallow the mileage deduction. To claim a mileage deduction a taxpayer must be in a “profit motivated trade or business”. In short, the Alabama Department tried to use the charitable nature of ministry as an argument that ministry lacks a profit motivation and is therefore unable to take a mileage deduction. Silly argument. But an argument that I had to defeat.

This case will go into the law books and is precedent setting in Alabama and in federal tax law. The case is cited as James M. & Rebecca T. Farrell, Docket No. Inc. 12-430.

If you want a copy of the case, email a request to me and I will forward a copy on to you. It’s only seven pages long but those seven pages say a lot!

The important point is this: to deduct automobile mileage you must maintain some contemporaneous documentation; typically this is a calendar. In this case it was a paper calendar but it could have been Google Calendar or a phone app calendar. Most people actually keep some sort of appointment books just so that they show-up where they are supposed to be, on the right day and at the correct time. That’s all.

You are not required to keep an odometer reading of each trip.

Your contemporaneous records (calendars) must be sufficient so that YOU (not the Alabama Department or the IRS) can communicate to me, your CPA, the business nature of your auto use. That’s all!

This case has some problems; the records were, as Judge Thompson said in his opinion, “inartfully” maintained. That means the records were really a mess; they didn’t even add up. The taxpayer-client admitted to being mathematically challenged. The key fact is this: they kept records and they knew exactly what, where, when and why they used their auto on any given day. It was enough to win.

Why is this case important?

I was able to convince Judge Thompson that a taxpayer who complies with the letter of the law (IRS §274(d)). The Alabama Department had made a corporate decision to hold automobile mileage deduction to a much higher legal standard than required by law.

This case established that the Alabama Department cannot arbitrarily hold a taxpayer to any standard other than the law. They simply do not have that legal right. This is a big deal! This case affects you.

If you want to see the full case you can look it up on-line or email me and I will mail you a copy of the decision.

The Second Case —

I mentioned that there were two significant cases that involved our CPA Firm this year. There is only one common point between the Farrell v. State of Alabama and this second case: I cannot let a bully win without a fight!

I simply can’t.

This second case was a civil case that involved very wealthy people, active business enterprises and lies. Lots and lots of lies. Unfortunately it also involved serious physical and mental abuse.

The details of this case are unimportant but the central truth, the important point, of this case is immensely important to you.

The Central Truth –

Whenever you are in trouble, no matter what the trouble is, always tell the truth! Always!

Lies have consequences; lies in a courtroom can have catastrophic consequences.

For my clients!

• Never make an important legal statement without talking to a lawyer first!

• In any legal case, even minor legal cases, be they criminal or civil, the first and only word out of your mouth should be “lawyer”!

• The 5^th Amendment is a powerful right; know what it is and how to use it.

• Always tell your lawyer the entire truth – never hide anything from your own lawyer.

• When you are compelled to speak, say exactly what your lawyer has told you to say – no more.

• Make short answers; you, no, I don’t know, I do not recall are all perfectly acceptable answers.

• Do not defend yourself; that is your lawyer’s job.

• Never lie! Ever!

The plaintiff in this case broke each of these rules in an effort to hurt my client. More distressing is he coopted his CPAs and had them to lie on his behalf.

My response –

I went through thousands of paper documents, page at a time, hour after hour, and uncovered every lie. The judge was not happy! My bill was, even to me, obscene.

The results –

The person who lied lost – everything. He lost his businesses; he lost his wealth; he lost his reputation and he lost his freedom. The not happy judge put him in jail for contempt.

For my clients –

How does this case impact you? What should you do about it?

Learn the eight rules shown above on this page; teach them to your children, your spouses, your cohorts and colleagues.

Thanks! I love my job and, without you, I would not be able to so what I do. Thank You!

Steve Richardson, CPA