Paying taxes is painful… but reading about them shouldn’t be.
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I get a number of bankruptcy-related questions submitted via ask the taxgirl. That’s why I was intrigued when I was asked to write a piece on Wallet Pop about how Chapter 13 payments affect your taxes. You can check out what I had to say here: Wage earner’s bankruptcy doesn’t kill all tax deductions.
If you have additional bankruptcy-related tax questions, you can ask the taxgirl.
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It’s a chilly Sunday morning here in Philadelphia. I thought a bit of housekeeping might be in order, so I’m opening up the ol’ taxgirl (e)mailbag. I have a bunch of non-technical tax questions which were submitted as “ask the taxgirl” questions but I thought it made more sense to answer them in one big post. So grab a cup of coffee and pull up a chair!
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Taxpayer asks:
Dear taxgirl, why did you decide to become a lawyer? I’m thinking about going to law school this fall and I’d love your thoughts.
taxgirl says:
I watched a lot of TV. Seriously. I didn’t really know any lawyers growing up so I based most of my impressions of lawyers on what I saw on TV or read in books. I was a big fan of Perry Mason and, of course, Nancy Drew’s dad, Carson (what girl didn’t have a crush on him?). But mostly, I loved the idea of doing something that made a difference. Remember that great scene in To Kill a Mockingbird?
I wanted to be able to stand tall like Gregory Peck (the tall never happened) and say things that mattered, take a stand for justice. Of course, that’s not exactly what happens in the legal profession – it took me awhile to figure that out. But at the end of the day, despite the lawyer jokes and bad press, I love what I do. I help people. And that matters to me.
That said, the legal market is really tough now. Law school can be expensive (I’m still paying off my loans) and jobs can be hard to come by. Make sure that you really want to go – and you’re not just going because your parents want you to (we had a lot of that in law school) or because you’re a smart kid and don’t know what else to do (we also had a lot of that in law school).
If you’re not completely sure, my advice is to talk to a bunch of lawyers: small firm lawyers, big firm lawyers, government lawyers. Intern in a law office. Sit in on a law school class or two. Then make your decision. Good luck!
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Taxpayer asks:
Have you ever filed your taxes late or owed taxes? I’m just wondering.
taxgirl says:
Yes and yes. Our tax system, as it exists, is self-governing. That means there’s no one standing over you screaming at you to file and pay every year – or every quarter in the case of small businesses and those who owe estimated taxes – and I’ve been both. Sometimes the mistake is on the employer side (as when I was first in Philly, my NJ boss didn’t withhold wage tax) and sometimes the mistake is on the employee side (as when you just get overwhelmed and forget a deadline). Mistakes happen. I always tell clients that there’s no shame in it: just fix them.
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Taxpayer asks:
I’m a 2L and am thinking about classes for next semester. Which tax classes do you recommend? Any to avoid?
taxgirl says:
I loved Federal Estate and Gift Tax and Tax Policy, hated Partnership Tax (though it is handy). I’d recommend starting off with baby tax (federal income tax) and seeing which aspects of tax law appeal to you. I also recommend taking some non-tax courses, too. I never intended to be a tax lawyer but I really enjoyed a class that I signed up for just because it fit my schedule and it wasn’t litigation-related. So don’t stack up on tax in the beginning, you never know. Try a bit of everything.
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Taxpayer asks:
You talk a lot about living in Philadelphia but you call yourself a Southern girl. What am I missing?
taxgirl says:
Easy. I grew up in North Carolina. I’ve lived in Hampstead (early years), Durham (high school) and Raleigh (college). I moved to Philadelphia to go to law school and loved it so much that I stayed.
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Taxpayer asks:
What’s the strangest deduction that you’ve ever seen on a tax return?
taxgirl says:
Hmm. I’ve seen some odd things. But one that jumps out at me is pet therapy – as in therapy for a pet. While I understand that pets are like children (we joke that our dog is our first born), you can’t claim pets or related expenses on your tax return.
And then there’s flat out lies like the guy who claimed his Disney cruise was a business expense (he ran a car dealership).
One thing you can say about tax law: it’s never boring.
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Taxpayer asks:
I see you practice with your husband. Do you talk tax at home? Just curious.
taxgirl says:
Yes, but he doesn’t listen. My husband isn’t a tax lawyer, he practices international and corporate law. But that doesn’t stop me.
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Taxpayer asks:
I saw this and thought of you: http://www.abajournal.com/magazine/the_25_greatest_legal_tv_shows What’s your favorite TV law show? Are there any tax lawyers on TV?
taxgirl says:
I did see it, thanks. Um, my favorite? I used to love LA Law – what a great cast! I also used to watch Perry Mason reruns with my grandfather and Matlock since it was filmed in my hometown. In law school, I watched Ally McBeal and The Practice even though they were completely unrealistic. I actually don’t watch any legal shows now that I practice, they drive me nuts.
I can’t think of any tax lawyers on TV off the top of my head. My guess is that the work doesn’t seem glamourous enough. “Watch me research this deduction!” It just doesn’t have the same on air appeal as, say, defense work. But hey, Hollywood, I am available. 
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That was fun and the mailbag is a little bit lighter now… Thanks for writing in!
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I know what you’re thinking – McVeigh was executed, right? What’s this about a tax deduction?
You’re right. Timothy McVeigh was a US Army vet who was eventually found guilty of bombing the Alfred P. Murrah Building in Oklahoma City on the second anniversary of the Waco Siege, April 19, 1995. He was labeled a “domestic terrorist” after the event. The bombing claimed the highest death toll (168 people) of any single act of terrorism on US soil prior to September 11.
McVeigh was convicted of 11 federal offenses and sentenced to death. He was executed on June 11, 2001, exactly three months before the September 11 attacks.
After McVeigh’s conviction, his lead defense attorney, L. Stephen Jones withdrew as lead defense counsel. That same year, 1997, Jones donated discovery material from the case to the Center for American History at the University of Texas (Jones’ alma mater). The materials included information prepared by the FBI; the materials were given to Jones by the prosecutors in preparation for McVeigh’s trial.
The discovery materials, which included FBI photos and statements, were appraised by Jones’ appraiser at nearly $300,000. Jones took the donation as a deduction on his personal income tax return. Due to the sizable amount of the donation, Jones carried the deduction forward.
The IRS issued a notice of deficiency related to the donation in 2004. Due to the statute of limitations, the IRS could not challenge the donation for the years 1997-1999 but did issue the notice for the years 2000 and 2001. The deficiency at that point was a mere $15,000, much less than the tax initially attributable to the donation.
Jones challenged the deficiency in Tax Court and lost. The Tax Court found that Jones did not own the property to begin with and therefore couldn’t take the deduction; the materials belonged to the (now deceased) client. I kind of thought that was something that we learned in law school. Apparently, they don’t teach that at the University of Oklahoma Law School (though, in his defense, he might have missed it when he temporarily dropped out of law school to work as a research assistant for Richard Nixon).
The 10th U.S. Circuit Court of Appeals agreed with the decision to reject the donation but on slightly different grounds. The appeals court found that the deduction Jones could claim was limited to the amount he had paid or invested, which was nothing. The appeals court noted: “We note that the discovery material was provided to [Jones] only because of his position as lead counsel for McVeigh, and it was the type of material typically produced for defense counsel in the course of a criminal trial.”
Jones is likely to appeal, despite his own comments that he has spent more money fighting the deficiency than he owed to the IRS. He believes that the opposition to the deduction was based on his choice of client (McVeigh) and emotional Oklahoma City federal workers. As a result, Jones had asked that the agency’s Oklahoma City office be disqualified from the case. The appellate court, which also ruled against Jones, was based in Denver.
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Taxpayer asks:
Taxgirl, where do you deduct expenses for fixing your home? My neighbor said that I can take off the cost of fixing my roof on my taxes but I don’t know where to put it.
Taxgirl says:
Hmm. I’m not sure that you should be getting your tax advice from your neighbor.
Generally, repairs to your primary residence are not tax deductible. There are some exceptions to this rule, depending upon your personal circumstances, such as:
1, If you claim a home office deduction, you may be able to take a pro rated deduction for home repairs.
2, If you rent out part of your home, you may be able to take home repair expenses related to the rental.
3, If you are making a repair subject to the casualty/loss rules, there may be an adjustment (though technically speaking, the cost of repairing damaged property is not part of a casualty loss – but you may be able use the cost of cleaning up or of making repairs after a casualty as a measure of the decrease in FMV).
Repairs to your home may affect your basis for purposes of calculating a gain or a loss at sale, but your run of the mill home repair expense – even if significant – is not deductible on your federal income tax return.
Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.
Have a question? Ask the taxgirl! – Now on Facebook!
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