Legal Corner

Here's my two cents.
frankie2003a 10341 reads
posted

It's a long way from what you've described to having it
reported.  Still longer for the IRS to go after you.

If the IRS goes after you, you will have to pay back taxes on
the undeclared income plus interest.  That's always the case.

The link below shows the time periods for various "acts".

It would look like there is no statue of limitations on filing
of fraudulent returns which yours would seem to be (assuming
you filed a return that year).  Anything more specific and I
think you would have to talk to a tax specialist.

good luck,
fr


-- Modified on 5/12/2004 10:35:04 PM

Anne_Onimous14020 reads

To all TER members..I want to share a story with you. A few years ago, when I was in college, I started escorting. At that time, I used my real name and I was
 very cavalier about giving out all sorts of personal details. I didn't have a page on the Internet, TER was not on my radar screen and I mainly got referrals from a
 few other providers. One day, I got a call from a very successful professional in his mid-30s. We met at a hotel. He was very attractive, fun, smart, great in bed
 and VERY GENEROUS. He also was, in his own words, ''in a crappy marriage,'' and I was made to feel that this wasn't just a physical encounter, it was also a
 meeting of the minds. He was very complimentary and our meetings became a once-a-month event. We started meeting in his home town a few hours driving time
 from LA. As these meetings were a few hours long, and, I had to do the driving back and forth, I charged accordingly. He was only too happy to pay and to help
 out with my college expenses. After a few months of these meetings, he began to worry about handing me so much cash. He asked to write checks to me, which I
 felt was OK. After another few months of writing checks to my name, he started agonizing that his wife might find out. We both devised a plan that he should
 write the checks directly to various accounts I had, like my car loan, my student account, my credit card account. All the checks were written with the paid to name
 in initials only; for example, the payment for the car loan went to BFXKS, etc. This went on for a few years. He once reflected on it and said, ''oh well, if I get
 divorced one day, she might find out and I might have to pay her a little extra in the settlement, that's all." Besides depositing these checks, I never kept any
 records or accounts of how much money I was given. I never really reflected on the amount, except I was very grateful for his generosity and the entire situation.
 Of course, I provided a service to him and he was undoubtedly grateful also!

 All of a sudden, it was going on year six and he finally separated from his wife. In doing so, he also met another woman ''in real life,'' began dating her and
 effectively terminated our relationship. I understood completely, wished him the best of luck and went on my merry way. Two years passed and life went by as
 usual. Then, one day last week, at 10pm, in my own home, I was served with papers from the wife's lawyer. The experience was very unpleasant and I became
 very anxious. They asked for records (which I didn't have,) but more so, they asked me to call them to discuss the matter, obviously to help them in locating his
 frittered-away community funds so that the wife could recover them in the divorce.

 I called the wife's lawyer the next day. She was an older woman, very kind and sweet, but also very factual. She told me that he had confessed everything, had
 provided the exact amounts, and would I please verify everything with a written statement, thereby avoiding a deposition taken in her office. Of course, I had no
 choice, despite my not remembering dates and the amounts. I worried about the IRS, but fortunately the obligation was spread out over the course of six years,
 so it didn't really qualify. It also turned out that he had cut a wide swath of paid sexcapades all over the country, so in some way I didn't feel singled out. Still, it
 was a horrible experience. I felt violated of any privacy, shamed to discuss intimate details and very, very sorry for the wife, who must have been enraged beyond
 belief. I still live in fear that she is going to somehow ''get me'' (even though it's probably irrational,) but most of all I feel sick about everything having gone on
 legal record. He was the only client I ever took a check from, and of course this had to happen. So, that's why I am so adamant about never keeping records,
 never revealing any names and certainly never taking a check again! Pax vobiscum, Anne Onimous.

If you had taken only cash, it would have been you foggy memory of events against his.  The wife's lawyer would have had a much tougher road to travel to get anything out of you.

Anne_Onimous13122 reads

do you think they will report me to the IRS? The wife? The wife's lawyer? Spread out over 6 years, the sum was less than $10,000 annually. What can happen? Will I owe taxes on that money with or without interest? Does anyone know?

frankie2003a10342 reads

It's a long way from what you've described to having it
reported.  Still longer for the IRS to go after you.

If the IRS goes after you, you will have to pay back taxes on
the undeclared income plus interest.  That's always the case.

The link below shows the time periods for various "acts".

It would look like there is no statue of limitations on filing
of fraudulent returns which yours would seem to be (assuming
you filed a return that year).  Anything more specific and I
think you would have to talk to a tax specialist.

good luck,
fr


-- Modified on 5/12/2004 10:35:04 PM

Turkana10083 reads

I'm impressed by your ability to organize and articulate your story and concerns...but aside from that, consider this:  Don't you owe it to your self at least to contact the wife's lawyer again or have your lawyer contact her and have a frank discussion about what will happen with the information, if anything?  Typically in situations where a party gets served with a subpoena, he/she negotiates a "deal" with the party seeking the information that may include, among other things, assurances of confidential treatment.  You were taken by surprise and didn't have the opportunity to do this.  It sounds, however, like the wife's lawyer is a reasonable person and that you could at least get a verbal assurance about what the info is being used for.  You would also want to know if there are any other aspects that you should be concerned about; for example, if your client took any of your expenses as a deduction -- will that now be questioned?  

On balance, I think the likelihood of your having tax problems is low, but if you're having trouble sleeping at night, you should take steps to give yourself peace of mind.  

PM me if you want further info or to discuss.

That you were one of many women for the guy.  It seems that the man was very wealthy, or at the least, very free with whatever money he had.  To me it sounds like the guy is wealthy and the wife is interested in getting her share plus some.  It looks like you are only a tool for the wife to get what she wants.  She probaly will not go after you further unless you somehow get in her way.

First off, it is unlikely that anyone ever reports you to the IRS.  Even if they did, the amounts are not that greate that the IRS would pursue you very hard.

Even if they did, you would make a claim that they are a gift, which could be argued, but would most likely allow you to settle for a reasonable sum of money.  

The IRS doesn't want to spend a lot of money trying to get money from you that you might not have or would be costly (in their time) to retrieve.

I wouldn't worry much.

I would not worry.  The money could very well have been treated as a gift to you.  If you need more tax information you can email me at [email protected].

Could they report you to the IRS? Certainly. There are two ways that someone can be reported to the IRS. The most common is a report to the Criminal Investigations division. This one has the lowest possibility of progressing due to the requirments set out to instigate an investigation, however since an illegal activity is at the core of the situation, and wrongdoing was admited in a legal document, it is possible for them to take such a case. If you did file a tax return during those years and did not claim the income. The IRS could make a good case for fraud. Which is far an away a bigger deal than paying the taxes and interest. The penalty alone can be as much as 100% of the liability, plus they can choose to prosecute on a criminal level. The most likely way to get results for dropping the dime is to ask the IRS to do an audit investigation. They will almost always do an audit investigation as they are required to do so many of those a year in any case, and it is just one more that they don't have to draw randomly out of the hat. Word of advice, if it is a concern, file amanded tax returns (1040X) an amended sch C, claim the income, right off the expenses against the income. and pay the tax. At that point you are out from under the criminal element of tax fraud - with all of its subsequent penalties. They can't prosecute if you've "fixed" your error before they notify you of a problem. If you have any specific questions feel free to PM me.

PICS R US9133 reads

First mistake was admitting to the acts.  You should have said it was a relationship and they were gifts.  As the tax experts would tell you gifts are not taxable to you.  They are taxable to the giver.

I beg to differ.  I can't imagine any court thinking it was a gift.  Judges aren't idiots and they are good at recognizing something a transaction as it is.  That is really what they love to do.  As much as it may be fictionalized on TV, judges actually send their law clerks scurrying around to find ways to get around the loop holes that lawyers are trying to use.

And is it taxable as income.  Hell ya!  Section 61 of the tax code defines gross income as income from whatever source derived.  That is a really broad definition made specifically to catch this type of stuff.  However, it would cost the IRS more to go after you and it is a rarity they'd do that.  The criminal investigation would be a bigger pain.  And although you could plead the fifth, your affidavit saying what transpired could still be admissable.  You really didn't have to tell the lawyer anything, and for your own protection, you shouldn't have.  The only benefit, among the many downfalls, is that you may appease the wife some and she may not try to get the prosecutor to go after you whereas otherwise she might be unduly angry.

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