Author: TSA Press

Going through a tax audit is a major inconvenience at best and a long exercise in frustration at worst. Especially for small businesses. This is because the IRS and other tax agencies require you to maintain detailed books and records. Even honest taxpayers can have difficulty in an audit if they do not keep proper records. This can result in disagreements with tax auditors which can lead to expensive and time consuming negotiations in addition to taxes, penalties and interest that you do not legally owe.

Even though the chances of being audited is relatively low, you should still take preventive measures. Below are a few issues I have encountered during an audit along with suggestions to ensure that the audit is as painless as possible.

Avoid commingling. One of the biggest problems in a tax audit is when the taxpayer commingles business and personal finances by using one bank account for everything. While it is simple, it can be confusing. First it might be difficult to remember which expenses are personal and which are business. This can be a problem because an IRS audit can happen several years after you file the tax return. The other problem is that even if you can remember everything, the auditor might not believe you and may disallow any expense they think might not be business related.

At a minimum you should set up a separate bank account and a separate credit card account for business expenses. For tax purposes, you don’t need to do anything special with your credit card, such as getting a “business” credit card that has the name of your firm on it. Some business-focused credit cards will provide a year-end expense summary although they may not be completely accurate. But any regular credit card is fine so long as it is only used for business expenses. So if you use a credit card for business purposes frequently, you may want to choose the one that gives you the most points or benefits.

Credit card statements can also help. While they are not a substitute for detailed receipts, it might be worth producing if you don’t have one.

If you have commingled your bank account, now which expenses or withdrawals were business related. Also, notate which deposits are taxable income or nontaxable loans or transfers. You should be able to explain them to the auditor and provide proper documentation to back up your claims.

If you can show that you have kept business and pleasure separate, the auditor is likely to give you the benefit of the doubt in close situations.

Save the proper documentation as soon as possible. While every tax audit is unique in some way, most auditors follow routine procedures which include obtaining certain documents. So it is best to save a copy of all business related documents as soon as possible. Here is a non-exhaustive list of documents that are commonly requested in an audit.

• A copy of the tax returns.
• Business bank statements for the year.
• Copies of canceled checks for all business-related expenses.
• Copies of receipts for all business-related expenses. The receipts should note what was purchased.
• Copies of lease agreements if there are any rent expenses.
• For meal and entertainment expenses, a log that details the person (or people) you met, the location, and the general purpose of the meeting.
• For automobile expenses, a copy of all mechanic’s bills detailing the mileage in the car, and copies of lease agreements, gas receipts, insurance bills, and registration.
• If you are claiming standard mileage, have a log that shows the date, the starting and ending location, the number of miles driven, and the purpose of the miles driven (i.e. meeting a potential client for lunch).
• If you paid independent contractors, have copies of their invoices, and any Form 1099s issued.

To ensure that you can recall all of your expenses, you should also include notes that describe the transactions in detail – particularly the business purpose.

Minimize paper storage if possible. While some people like to keep paper copies of everything, there are some disadvantages. First, the paper can take up a lot of space. Second, papers can fade after the passage of time. Third, papers can get damaged through natural disasters, food spills, or if your dog eats it.

To minimize the chances of loss, scan and save everything. For best results, invest in a high-quality scanner and use it to scan all of your documents. The scanned documents can then be stored in your computer, a cloud server, or a portable storage unit. If the documents are too small or large to fit in a scanner, an alternative is to take a photo of the document and save it, preferably in a PDF file. But make sure that the final saved file is legible, particularly when it is printed.

Some tax auditors will accept an external drive containing scanned documents files instead of paper copies.

Change your habits or hire an assistant. If all of the above sounds so cumbersome that you are tempted to procrastinate, few can blame you. But if you make it a habit to save your documents, it may not seem like work. But if you wait until the last minute to organize everything, it can be difficult because you may forget details or documents may no longer be legible.

If you are too busy to organize your paperwork, or if you consider this drudge work, you should hire a bookkeeper or an assistant to do it for you.

An audit can be a frustrating experience if you are not prepared. This frustration can get worse if it is done years later and you cannot remember the details. To succeed in an audit, keep business and pleasure separate, keep all documentation and store everything in a reliable format, whether in paper or electronically. In a future column, I will highlight some useful apps and software so please forward me any suggestions.

Steven Chung is a tax attorney in Los Angeles, California. He helps people with basic tax planning and resolve tax disputes. He is also sympathetic to people with large student loans. He can be reached via email at sachimalbe@excite.com. Or you can connect with him on Twitter (@stevenchung) and connect with him on LinkedIn.

Josephine Potuto is the longest continuously serving professor — regardless of gender — at the University of Nebraska-Lincoln College of Law, but according to a new lawsuit filed this week, she isn’t paid like it. The complaint alleges that Potuto’s pay is less than her male colleagues, and further alleges that when she repeatedly complained about the unequal pay she was removed from her role as UNL’s faculty athletics representative — a position she’s held since 1997 — in retaliation.

Additionally, the suit alleges that the UNL Commission on the Status of Women has repeatedly cited unequal pay as an issue at the university. Plus, the plaintiff alleges that the law school dean, Richard Moberly, has specifically referenced Potuto’s compensation as an example of gender-based pay disparity.

So what’s the disparity in numbers? The Omaha World-Herald has the details:

The NU system lists Potuto’s salary as $229,460, compared with long-serving law colleagues Robert Denicola’s $273,653 and Martin Gardner’s $256,755. [Potuto’s lawyer Kathleen Neary] said Potuto has no problem with her male colleagues’ compensation, but she wants equal pay.

Those figures include “endowed chairs” for all three (endowed chairs honor distinguished faculty members and are added to base pay) and Potuto’s $5,500 per year as faculty athletics representative.

And remember, Potuto is the longest serving prof at the law school, and she has the requisite accolades that accompany such a tenure.

The university offered the following statement on the litigation:

UNL spokeswoman Deb Fiddelke said her institution “has reviewed the claims of Professor Potuto” and found them without merit. “The university is prepared to defend itself against these claims and is confident that it will ultimately prevail.”

We’ll definitely be following along to see how the case gets resolved.

Kathryn Rubino is a Senior Editor at Above the Law, and host of The Jabot podcast. AtL tipsters are the best, so please connect with her. Feel free to email her with any tips, questions, or comments and follow her on Twitter (@Kathryn1).

The state governments that continue to tax menstrual products have created a tax that is solely directed at people who menstruate. It’s unconstitutional because it’s a government action that is solely on the basis of sex.

— Mary Kate Cunningham, a 3L at Fordham Law School who is organizing her school’s participation in a protest spearheaded by the “Tax Free. Period” project (a collaboration between the nonprofit Period Equity and menstrual product manufacturer Lola), sounds off on the inherent unfairness of taxes on menstruation products. As part of the protest, students from two dozen law schools in states where taxes are levied on menstrual products will buy the products and then claim tax refunds as both a form of protest and to increase awareness.

Kathryn Rubino is a Senior Editor at Above the Law, and host of The Jabot podcast. AtL tipsters are the best, so please connect with her. Feel free to email her with any tips, questions, or comments and follow her on Twitter (@Kathryn1).

I am always amazed when I read/hear stories about judges gone rogue. You think, at least, I think that after a lawyer has worked so hard to don the judicial robes he/she would be circumspect in judicial temperament and behavior, not allowing any reputational snafu to sully judicial performance. However, I would be wrong. (I know, not the first time and definitely not the last.)

I am always astonished at how judges can toss their judicial careers into the dustbins of notoriety and then obscurity. So, all of you out there, from new admittees (congratulations!) to wherever you are in your career, take heed of what can happen if you are lucky enough to be appointed to the bench and then develop a terminal case of “robe-itis.” Yes, there is such a word, which is essentially ego without limits.

Here’s one recent example: Superior Court Judge John Laettner of Contra Costa County in the Bay Area, whom the California Commission on Judicial Performance has ordered removed. Where to begin the litany of Judge Laettner’s acts justifying removal, the ultimate sanction against a sitting judge?

Let’s begin with the Commission’s conclusion: that the judge engaged in five acts of willful misconduct and eleven acts of prejudicial misconduct. I don’t have enough fingers and toes when ticking them all off. Cringeworthy does not even come close (it’s “what was he thinking?”), but the upshot is that a thirteen year judicial career has gone down the chute. You can read the Commission’s 76 page decision if curious.

Here are a few examples that the Commission used as bases for removal:

1. In open court, the judge denied a woman defendant due process by remanding her without exonerating and resetting bail. To add insult to injury, bail was subsequently increased outside the defendant’s presence.

2. The decision cites examples of ex parte conversations (and new admittees, if you don’t know you’re not supposed to do that, learn that now.) Those included one in a courtroom hallway in the presence of potential jurors. The Commission found another example of misconduct to be ex parte discussions with deputy public defenders who were filing peremptory challenges against him.

3. The court engaged in a pattern of misconduct toward a number of women, including those who appeared before him. Misconduct included conduct that was unwelcome, undignified, discourteous and offensive, e.g. gender bias and conveyed the impression that certain attorneys were in a special position to influence him. Comments like “women can drive you crazy,” and comments about female physical appearances, just some of the ones set forth in the decision, did nothing to endear the judge to the Commission.

4. The judge made comments in the presence of and/or about his long-time court reporter that were undignified and offensive, constituting gender bias and sexual harassment.

5. The judge revoked a defendant’s own recognizance release in the defendant’s absence without any opportunity to be heard and giving the appearance of retaliation for a public defender’s exercise of a peremptory challenge.

In 76 pages, there is a lot more.

The Commission acknowledged that there was “substantial evidence that Judge Laettner has had an extraordinary work ethic and has been a responsible and conscientious judge and an asset to his court.” Those attributes were not enough to prevent removal, especially given the judge’s misconduct, severely aggravated by his lack of candor during the evidentiary proceedings and “…his selective and limited acknowledgment of his misconduct.”

The Commission adopted the findings of the special masters who conducted the evidentiary hearing and who concluded that the judge “was not credible or not truthful as it relates to his testimony concerning several events making up this inquiry.”

The Commission found that the judge’s lack of candor as to several instances was “troubling,” and singled out nine specific places where it found the judge’s testimony to be not credible, either explicitly or implicitly.

While the judge asserted that just about all of the complaints emanated from the Public Defender’s office, the Commission stated that the source of the complaints is irrelevant; “…it is the judge’s conduct that matters.” In other words, no excuses.

In its decision, the Commission commented that the judge did not maintain the professional distance required by his position and seemed to let his emotions overrule compliance with judicial ethics. “Wanting people to be happy” is not within a judge’s job description. Think back: how many times has a judge’s decision made you happy? I hear derisive snorts.

Failure to take responsibility for the misconduct and to blame others (of course, no one ever does that) played a large part in the Commission’s decision to remove Judge Laettner. Given “…his failure to acknowledge the impropriety of much of his misconduct and his lack of credibility…” the Commission was not confident that he would not reoffend and so was not taking any risk.

Judges hear all kinds of excuses for bad behavior. ATL uses the term “benchslap” for misbehaving attorneys. Any suggestions for a term for misbehaving judges?

Jill Switzer has been an active member of the State Bar of California for over 40 years. She remembers practicing law in a kinder, gentler time. She’s had a diverse legal career, including stints as a deputy district attorney, a solo practice, and several senior in-house gigs. She now mediates full-time, which gives her the opportunity to see dinosaurs, millennials, and those in-between interact — it’s not always civil. You can reach her by email at oldladylawyer@gmail.com.

As lawyers, you rest at the center of that Venn diagram of “high-information voter” and “having enough disposable income to actually do something about it” so it’s unsurprising that lawyer money flows into political campaigns with as much ease as it flows to Sallie Mae. With the exception of some talented personal injury attorneys who buy private jets and football fields, lawyers aren’t often among the super-rich. Put simply, lawyers generally have enough money to buy their kid into an Ivy, but not enough to buy a new dorm to get their kid into an Ivy. It’s a subtle but important difference.

But as long as we have campaign finance laws — by that I mean, until the next Supreme Court case on campaign finance — lawyers can play with the plutocrats when it comes to giving to individual political campaigns, making attorneys an enviable sector of the donor class for any candidate to bring into the tent.

Bloomberg Law’s Roy Strom took a deep dive into attorney donations and found that lawyers are helping out the Democrats this cycle at an almost unbelievable clip. As of today, 95 percent of law firm employee cash is going to Democrats:

Lawyers and employees of the nation’s law firms have contributed nearly $17 million to presidential campaigns so far this election cycle and 95% of the total has gone to Democrats, according to the Center for Responsive Politics. President Donald Trump’s campaign has raised just over $785,000 from lawyers and law firms.

In fairness, the Democratic contest boasts the largest field in history while the Republicans are so all in on Trump that they’re canceling primaries. Money should flow to the contests that are being, you know, contested. On the other hand, the Center for Responsive Politics compared figures up through the third quarter of the year before an election since 2004 — another election featuring a Republican incumbent who had lost the popular vote — and found that traditionally Republicans secure 41 percent of lawyer donations by this point. In that context, the swing to a 95-5 margin is damning.

Even Jones Day is giving 70-30 in favor of Democratic candidates! Maybe they just want all their partners back.

Call it the George Conway effect if you want. Conway’s impassioned defense of the rule of law against the machinations of his own wife reflects the mood of a lot of long-time conservative lawyers watching their brand of smugly ruthless libertarianism get ground into the mud by Trump’s soggy noodle Il Duce impression. These are the people who really relished the prep school blazer image and it’s all crumbling into a morass of monster truck rallies and meth. At this point, the only conservative lawyers still backing Trump are either already on the bench or currently ignoring a subpoena. Meanwhile firms are driving dumptrucks full of cash to Democratic candidates.

But which candidates get the most love from attorneys? Joe Biden is taking top marks right now, but he’s also the frontrunner and likely locked up his dollars before embarking on his traditional Democratic primary quest of alienating every single constituency one by one. Kamala Harris unsurprisingly receives the second most love based on a campaign predicated entirely upon reminding everyone that she is, in fact, a lawyer. There are associates going home for their first Thanksgiving since passing the bar next week who won’t hear about their job as much as Harris will mention it in a 24-hour period. This also tracks if one reads these donations as a sign that conservative lawyers are crossing over this cycle, giving a boost to the two most conservative candidates in the field who aren’t Michael Bloomberg’s vanity project. It also likely explains why Mayor Pete clocks in at third, probably surging in donations after he decided he’d junk his whole campaign to that point and try to be a version of Joe Biden before the weight of his decades of licking his finger and sticking it in the political light socket wore him down.

Law professor Liz Warren is getting the sixth most, putting her right ahead of Trump, despite offering the legal industry a lifeline with the promise of unending antitrust and consumer protection suits. There might be a lot of Harvard Law grads out there still too shaken by a cold call to give her their money.

Check out more insights from the article including some analysis on the changing ideological bent of the legal profession over at Bloomberg Law.

Snubbing Trump, Lawyers Doling More Cash to Democrats [Bloomberg Law]

Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.

We note with concern the lack of gender balance in key government positions following the appointment of permanent secretaries and the cabinet reshuffle on 6 and 8 November 2019 by President Emmerson Mnangagwa. This has lowered women’s representation in cabinet from 29% soon after the 2018 elections to 24% presently.

Earlier this month the cabinet approved the amendment of section 124 (1) (b) of the Constitution to extend the women’s quota provided for at national level for 10 more years. The amendment excludes local government – a critical omission. In the 2018 elections women’s representation in local government slid from 16% to 14%: a far cry from the provisions of the Constitution as well as the Southern African Protocol on Gender and Development.

“Section 17 of the Constitution should certainly apply to women at the local level, which is the training ground for women in politics,” noted GL country manager Priscilla Maposa. “Since 2013 the Women in Local Government Forum has been lobbying for the inclusion of local government in Temporary Special Measures to ensure gender parity by 2030, the deadline of the Sustainable Development Goals.” Goal 5 of the SDGs calls for women’s “equal and effective” representation in all areas of decision-making.

With regard to parliament, although the extension of the existing quota is well-intentioned, it overlooks some critical concerns. “We must avoid more of the same when there is the opportunity to do better,” noted GL CEO Colleen Lowe Morna, and member of the SADC Gender and Elections team that visited Zimbabwe in June under the auspices of the Zimbabwe Gender Commission. Women currently constitute 31% of members of parliament, just above the 30% seats that are reserved for women on a PR basis. “We need to ask why women are not progressing beyond these minimum requirements,” Lowe-Morna noted.

There are two main types of political system. In the First Past the Post (FPTP) or “winner takes all system” individuals run as candidates for the party. Candidates with the largest number of votes win. In the PR system, parties put up a list of candidates in rank order. They are allocated seats according to the percentage of the vote that each party wins. Evidence from the SADC region shows that women perform much better in the PR system (especially where this is accompanied by a gender quota) than in the FPTP system.

In Zimbabwe, local elections are run entirely on a FPTP basis. The House of Assembly has a mixed system. Women and men are free to contest the FPTP elections. Sixty seats are reserved for women only and distributed on a PR basis. In the senate, seats are distributed on a PR basis for both women and men.

The SADC Gender and Elections Mission proposed that Zimbabwe learn from the senate, where PR seats are allocated to women and men equally on a PR basis, resulting in 48% women in the senate. The mission argued that reserving seats for women (whether PR or First Past the Post) is not the best way of going about gender quotas. It argued for the retention of the mixed system at national level, with a 50% quota applied to both to the PR seats (using the one woman, one man, “zebra” system) and FPTP seats (with all parties being obliged to field an equal number of women and men candidates).

As illustrated in the case of the senate, this method is watertight for the PR seats. For the FPTP seats, there is no guarantee that the 50% women candidates (even when fielded by all parties) will win their seats. However, if having a critical mass of women candidates is accompanied by political commitment, public education and awareness, there is evidence to show that women’s representation will also increase in the FPTP seats.

At the local level, although the FPTP system is not the most favourable for women’s representation, there is a strong lobby in favour of this system because at this level that deals with daily service delivery issues voters want to be able to access their political representative. The SADC Gender and Elections Mission argued for a 50% quota for candidates of all political parties at the local level.

The mission shared the example of Mauritius, where local elections are conducted on a FPTP basis.  In 2013, Mauritius introduced a gender neutral quota at the local level – at least 30% of all candidates must be either women or men. This provision in the local government election act, coupled with political will and commitment, has resulted in a substantial increase in women councillors.

Zimbabwe has the advantage of starting early in debating arrangements for the 2023 elections. It also has the benefit of comparative experience from the region. With only two elections before 2030, GL urges all stakeholders to come up with solutions that will deliver results.

Post published in: Featured

This Am law firm is seeking a senior associate for its Growing Energy Practice in all markets. The winning candidate will have 4-6 years of experience in development of renewable energy projects, with a particular focus on power purchase agreements.

To be considered, please apply through this posting or submit your resume to jobs@kinneyrecruiting.com.

Boy, am I probably writing on the wrong website to voice this opinion, but your alma mater? Yeah, it doesn’t really matter.

The college admissions scandal that first ripped through the headlines a few months ago has been a source of much-needed schadenfreude for the downtrodden masses out there. If you’ve been living under a rock and haven’t heard about this, the gist is that a bunch of B-grade celebrities and other rich people raised kids too dumb to succeed on their own, so the parents bought their kids’ way into elite colleges through various types of bribery and outright fraud. Now all those overprivileged wealthy parents are getting their comeuppance. Neat!

In the most recent example of the bloodthirsty crowd cheering as the deposed royals trudge up to the guillotine, a federal judge in Massachusetts handed down the harshest punishment yet among the 13 parents and coaches sentenced so far in the scandal. Well, really it was only six months in prison, a couple years on supervised release, 200 hours of community service, and a $150,000 fine. That’s hardly life-ruining for someone who had $450,000 to blow to get his daughter and son admitted into the University of Southern California as fake athletes. Still, the sentencing judge’s harsh words caught a lot of people’s attention on this one.

U.S. District Judge Nathaniel Gorton was quoted in USA Today as saying this parent was no better than a common thief, “because that’s what you are — a thief.”

“Higher education in this country aspires to be a meritocracy,” Judge Gorton went on. “Those who work the hardest or make the best grades rightfully get accepted into the best schools.”

But… do they? I have no problem at all with this guy’s sentence, or the damning words the judge had for him. He is a thief. Still, in reality, if you look at actual research and shelve 350 years of Harvard marketing, what this guy stole — two seats at USC — wasn’t worth very much to begin with, and the students who lost them probably ended up doing just fine anyway.

A famous paper by Stacy Dale and Alan Krueger published in November 2002 by the Quarterly Journal of Economics found that after adjusting for student characteristics, like standardized test scores, the income benefits from going to a very selective institution of higher learning were “statistically indistinguishable from zero.” A 2017 study called Mobility Report Cards: The Role of Colleges in Intergenerational Mobility found that although there was not much difference for more affluent students, lower-income students who went to a truly elite school did have a better chance of reaching the top one percent than their comparable peers at good public universities. But the fact that the more affluent students were sitting in the same classes as the less affluent ones and realized no benefit compared to their peers at public institutions shows that the benefit for lower-income students likely was not any difference in the quality of teaching at the elite institutions. Rather, the more affluent students already had good enough networks in place to help them reach the top of the income distribution, whereas the lower- cincome students had to find an elite network through an elite school to reach the top one percent.

So, to state it in non-economist speak, the quality of the school doesn’t matter, the quality of the student does. Elite schools aren’t teaching people any better than reasonably good non-elite schools. While elite schools perhaps provide some networking benefits to people from less affluent backgrounds (at least those who want to reach the top one percent), mostly the elite schools are just attracting more of the students who would do well wherever they went.

Still need an anecdote to convince you? I went to Truman State University for my undergraduate education, and the University of St. Thomas School of Law for law school, and I have more saved than this elite law school graduate everyone freaked out about last month who subsists on beans. And, you know, I’m two years younger and enjoy the occasional New York strip.

My dad certainly wasn’t going to be buying my way into USC, or anywhere else, after his 30 years of laying carpet, two busted knees, and another 15 years working as a public-school custodian. And he didn’t have to. Because him and my mom did the harder work of raising someone who doesn’t need his parents to bribe his way through life.

So, if you ask me, the real victims of the college admissions scandal aren’t the kids who didn’t get into USC. Those bright young people will do just fine anyway. The real victims are the kids of the cheating parents. They’ll be comfortable in life materially. Yet, it’s a special kind of psychological hell to have no choice but to ride your parents’ coattails all the way to the grave.

Jonathan Wolf is a litigation associate at a midsize, full-service Minnesota firm. He also teaches as an adjunct writing professor at Mitchell Hamline School of Law, has written for a wide variety of publications, and makes it both his business and his pleasure to be financially and scientifically literate. Any views he expresses are probably pure gold, but are nonetheless solely his own and should not be attributed to any organization with which he is affiliated. He wouldn’t want to share the credit anyway. He can be reached at jon_wolf@hotmail.com.