Newsletter - Summer 2009

This newsletter is designed to keep you up-to-date with changes in the law. For help with these or any other legal issues, please call today. The information in this newsletter is intended solely for your information. It does not constitute legal advice, and it should not be relied on without a discussion of your specific situation with an attorney.

 

taxformIf you're in the middle of a divorce and your spouse is preparing a joint income tax return, remember that even though you're splitting up, you're still jointly responsible if you sign the return and your spouse has done something wrong.

In a recent case, a couple was still married but living separately with separate checking accounts and credit cards. The husband prepared the couple's joint tax return and gave it to the wife to sign. She checked to see if her information was correct, but didn't question his items on the return.

When the IRS examined the return, it determined that the husband had failed to report about $12,000 in income and hadn't paid enough tax on an IRA distribution. Because both spouses had signed the return, it demanded more money from both of them.

The wife argued that she shouldn't have to pay anything because she didn't know that the husband had improperly reported his own income.

The U.S. Tax Court eventually sided with the wife. It said that both spouses are ordinarily responsible for a joint return, but it would make an exception

in this case because the husband had a history of being evasive and not telling the wife about his finances, and because he gave her the return to sign on April 15 so she had virtually no time to investigate.

So the wife won, but other spouses in other cases might not be so lucky. And even though the wife won in this case, she still had to go to court and spend years fighting the government in order to avoid the extra taxes and penalties.

So the moral of the story is to be careful and look closely at any tax returns before you sign them. If you have any questions, seek outside advice.

A manager at the Cambridge Marriott hotel who was fired after he was accused of sexually harassing a bartender can't sue the bartender, according to the state Appeals Court.

The manager sued the bartender for defamation, claiming she slandered him to the hotel and wrongly caused him to lose his job.

But the court said that a person can't be sued for defamation for statements made in relation to a court case.

In this situation, the bartender hadn't yet filed a court case when she complained about the manager to the hotel. However, by that point she had decided to file a lawsuit and to make a complaint to the state Commission Against Discrimination, and that was enough, the court said.

momA company can be sued if it didn't promote a woman because it was afraid she would have trouble balancing her job and raising four children.

That's the result of a ruling from the federal appeals court in Boston.

The woman, who worked for an insurance company, was one of two finalists for a management job. She had an 11-year-old son and six-year-old triplets, and was taking one course a semester at a local college.

She claims that when she was turned down, a manager told her, "It was nothing you did or didn't do. It was just that you're going to school, you have the kids, and you just have a lot on your plate right now."

According to the woman, this was sex discrimination, because the company wouldn't have had the same concerns about a man in her position.

The manager (a woman) said she wasn't discriminating and merely gave that explanation to the applicant in an effort to soften the blow.

The court said the case should be decided by a jury.

A number of Massachusetts companies have been receiving official-looking letters recently offering to file corporate minutes with the government for a fee. These appear to be scams designed to trick business owners, according to the Secretary of State's office.

Many businesses have received letters from something called "Compliance Services" offering to file corporate minutes statements with the state and

asking for payment of a $125 "annual fee."

The trick? There is no requirement to file corporate minutes in Massachusetts. And the $125 fee is confusing because it's the exact same amount as the fee for filing an annual report.

Before you respond to any such letter, make sure you know what the actual reporting requirements are and whether you're being taken advantage of.

tax_problemA majority - some 53% - of individual landlords make mistakes on their federal income tax when it comes to reporting rental income and expenses, according to a study by the U.S. Government Accountability Office.

That means that out of about 8.9 million individual landlords in the country, nearly 5 million aren't paying the correct tax.

And of those 5 million, fully a quarter paid too much tax and should have had a lower tax bill, the government says.

The agency's figures are based on a comprehensive review of landlords' returns that have recently been audited. While the report doesn't cover state taxes, it seems likely that Massachusetts landlords are making mistakes on their state tax forms as well.

Some 9% of landlords who make mistakes on their federal taxes report over $1,000 more in taxable rental income than they should, according to the study. By contrast, 51% of such landlords underreport their income by more than $1,000, and 6% underreport their income by more than $10,000.

The most common type of error - by far - is in reporting rental expenses. The second most common error is misreporting the amount of rent received. Other common errors are reporting rental income on the wrong part of the return

and misreporting rental-related losses.

As for rental expenses, the government found that about 20% of landlords who made a mistake in this area could have deducted more expenses than they did, and should have had a larger deduction.

Other mistakes include deducting unsubstantiated expenses, improperly deducting personal expenses as rental expenses, miscalculating depreciation, and fully deducting expenses that should have been depreciated.

About 166,000 landlords improperly included the value of the land as part of the depreciable basis in their properties.

As for misreporting the amount of rent received, landlords often make mistakes in how they handle expenses paid by tenants and unreturned security deposits.

A condo resident can file a lawsuit after he slipped on snow and ice while taking out his trash, according to the state Appeals Court.

After a 16-inch snowfall, a landscaping company hired by the condo association plowed out the area. However, it plowed a large pile of snow up against the dumpster.

The resident attempted to make his way through the snow in order to dispose of his garbage. He slipped and fractured his wrist, and missed five months of work as a lithographer.

He sued the condo association, the property manager and the landscaper. He claimed he had previously complained about the danger caused by the company's method of snowplowing.

The court said that while "snow falls in Massachusetts" and "it is no person's fault," this case was different because the resident didn't slip on a natural accumulation of snow, but rather on an unnatural and arguably dangerous pile left by the landscaper.

megaphoneStaples, the office-supply retailer, can be sued for firing an employee and then sending a mass e-mail to other employees saying why it fired him.

That's the word from the federal appeals court in Boston.

The employee can sue Staples for "libel" ... even if what it said about him was true.

In most states, truth is a defense to libel. But Massachusetts is unusual. In Massachusetts, it's illegal even to broadcast the truth about someone if (1) you do it with malice or ill-will, (2) you're not a newspaper or other traditional news source, and (3) the person is a private individual and not a public figure such as a celebrity or politician.

In this case, Staples fired someone for filing bogus expense reports. It then conducted an audit and claimed it discovered that another employee had also falsified travel reports. It fired this other employee, and sent an e-mail to more than 1,500 Staples workers saying why he had been fired.

The employee sued, arguing that Staples acted wrongly in publicly humiliating him in this way.

According to the employee, a Staples executive was embarrassed that he didn't catch the first employee sooner, and maliciously singled out the second employee in order to detract attention from his failure to realize what was happening with the first one.

Staples suggested that it was merely trying to drive home the importance of filing accurate expense reports, but the employee said this wasn't likely because since a large number of the 1,500 employees who got the e-mail never filed such reports.

The court didn't say the employee should win, but it said he had the right to go to trial and let a jury decide.

lastwillA brand new law in Massachusetts will make many changes in the way people's estates are handled.

The "Uniform Probate Code," signed into law by Gov. Patrick, includes the following new rules for what happens if someone dies without a will:

• In many cases, an estate representative can begin distributing assets to heirs before getting a formal court judgment.

• If the dead person's spouse is raising young children from the marriage, the spouse will in most cases collect the entire estate. Before, that wasn't always true.

• Children of married and unmarried couples will be treated the same.

• Estate representatives will have to file an inventory of the estate assets with the court, but in most cases they won't have to make it public, which should help protect people's privacy.

Some other changes affect people who do make wills:

• Previously, if you made a will and then got married, the will was no longer valid. Now, the will remains in effect unless you write a new one.

• If you make a will and then get divorced, however, the will is automatically considered invalid. Transfers outside a will, such as pension beneficiary designations, can be automatically revoked as well.

• You can say in your will that you plan to write a separate memo stating how

certain personal property will be divided. You can change this memo informally at any time. So if you planned to give one daughter the china and another daughter the silver, for instance, and later you decide to swap the gifts, you no longer have to formally change your will to do so.

• Suppose one of your children has five kids, and the other has just one. Before, unless you specified otherwise, any bequest to the grandchildren would go 50% to the one grandchild and 10% to each of the other five. Under the new rules, unless you say otherwise, all grandchildren will get an equal share.

Some of the law goes into effect this summer, although other parts won't take effect until 2011.

The bottom line: The new law is an excellent reminder of the need for everyone to make a will and keep it up-to-date. You should review your will every few years, or whenever there is a major change in your life.