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Laws You Must Know Before Starting Your Own Business

Starting a business is an exciting and wonderful prospect for so many individuals.  It is risky, but the reward can be more than worth it.  That being said, if you do not know the legal implications of your actions as a business owner and operator, you may be shooting yourself in the foot right out of the gate.  Read on to learn more about some basic laws pertaining to businesses.

Truth-In-Advertising Rules

This should go without saying but, as a business owner, you must make sure your ads are not deceptive.  Your ads must be supported by evidence.  The FTC describes deceptive advertising material as:

  • ‘Likely to mislead consumers acting reasonably under the circumstances’;
  • Misrepresents or omits information that ‘is important to a consumer’s decision to buy or use a product’.

Is Medical Bankruptcy a Real Thing?

Medical bills are the number one reason for bankruptcy in the United States.  Multiple studies have shown the in 25% – 50% of bankruptcies, medical debt was significant.  However, the answer to the question ‘is medical bankruptcy a real thing?’ is ‘no’.  While medical bills are a heavy contributor to personal bankruptcy, it is not its own form of bankruptcy.  It is, however, an interesting topic that has reached as far as Washington D.C. and ‘medical bankruptcy’ is a term that is resurfacing as Elizabeth Warren begins her bid for Presidential election in 2020.

What is ‘Medical Bankruptcy’?

This is a concept that was first made famous by a couple of papers written by a group which included Elizabeth Warren in 2005 and in 2009.  The papers claim that at least 50% of all bankruptcies were caused by medical debt.  A ‘medical bankruptcy’ is one that is linked to substantial medical debt.  Many experts have since refuted the accuracy of the claim.  However, what cannot be refuted is that medical debt is a major contributor to many bankruptcies. 

Can You File for Personal Medical Bankruptcy?

In short, no.  There is no legal version of bankruptcy called ‘medical bankruptcy’.  In terms of personal bankruptcy, you are mostly limited to chapter 7 and chapter 13 depending on your income limitations.  That does not change the fact that debt related to medical expenses is a serious consideration when filing for any type of debt relief.  Medical debt is considered ‘unsecured’.  This means, just like credit card debt, it can be reduced or even eliminated during the bankruptcy process.

When Should You File for Bankruptcy Due to Medical Debt?

Well, there are many factors that go into the decision:

  • Are you behind on medical bill payments?
  • Are you missing payments altogether?
  • Are you receiving snail mail and phone calls from collectors day and night?
  • Are you behind on other bills such as mortgage, credit card, and car loans?

If the answer is ‘yes’ to even half of those questions, it might be time to talk to a professional.  In many cases, medical debt is valuable and debt collectors do not give up easily.  Harassment from debt collectors does not have to be a way of life for you.  Elias Dsouza is a skilled and licensed attorney that is equipped to guide you through any debt settlement process.  He can help you determine if bankruptcy or debt settlement is the right answer for you.  Contact Elias today for a free consultation.

The Largest Case of Tax Evasion in U.S. History

So, maybe you didn’t pay Uncle Sam enough in 2018 and now you have a gnarly bill.  Maybe you started a business and did not pay any taxes all year.  Paying your taxes will not feel great, but your bill is probably way less than Walter Anderson’s.  Walter decided he did not like the idea of paying taxes, so he hid most of his earnings in off shore banks.  We are not talking about a couple of thousand dollars here or there.  We are talking about hundreds of millions.

Walter the Entrepreneur

Walter Anderson made his money as an executive in telecommunications.  He invested in telecommunications companies that later sold earning him a huge profit.  He became famous when he invested in a private space venture that aimed to refurbish the Mir space station which was an old Russian space craft.  His group’s plan was to send people to the space station for “vacation”.  Some say he started the privatization of space travel or at least the idea of it.  He was one of the original supporters of the International Space University which is a multidisciplinary program focused on the study of space at MIT.

Federal Tax Evasion Charges

In 1998, Walter was managing companies with a total revenue of around $500 million.  He made just under $130 million.  In 1999, he made just under $240 million.  How much income did he report to the IRS? $67,939 and he paid $435 in income tax.  Due to the absurdly large sum of money Walter was making, the IRS took notice.  On February 26, 2005, he was arrested at the airport returning from a trip to London.  Officials spent the previous year investigating Walter’s income and found out that he was hiding money in the British Virgin Islands and Panama.  He did this using aliases, tax havens, and shell companies. 

He almost got out of having to pay $100 million to $175 million dollars of the owed taxes because the Federal government left a typo in their contract.  The court imposed a $23 million fine and told the Feds they must sue in civil court.  Well they did, and the total bill ended up being $247,482,114.  Whenever you are feeling down about your tax bill, think about Walter’s and you will no doubt feel better!

If you run into tax issues and are unsure what your options are, you need assistance.  The IRS is not an agency you want coming after you.  For over 15 years, Elias Dsouza has been working with people just like you to manage their tax burden.  Contact Elias today for a free consultation.

3 Huge Tax Breaks for the Self-employed

Starting a business is a great idea in so many ways.  Giving yourself the freedom to work whenever and wherever you want is priceless (figuratively speaking).  Especially in the beginning, it essential to give yourself and your business the best chance to survive financially.  An important piece of the puzzle?  Tax breaks.  There are tons of deductions and subtractions which were created specifically for small businesses.  Do not miss out on these breaks when filing your 2018 tax return.

Simplified Employee Pension (SEP-IRA)

One of the biggest mistakes new business owners make is forgetting to create a retirement account.  Giving up employer contributions to a retirement account is a big hit for some people.  If you have not already done so, you must consider starting a SEP-IRA because:

  • You need to save money for retirement, and you do not want the money to be stagnant. Make it work for you utilizing the stock market.
  • The money you contribute is pre-tax and you can contribute up to 25% of your net income. The maximum contribution is $49,000.  Keep in mind that the max one person can contribute to a traditional 401k is $18,500 for people under 50.
  • You can decide what to contribute at the end of the year. If your business did well, contribute more and vice versa.  This flexibility is key for many business owners.

Corporate Bankruptcy News Updates

In 2018, we saw some shocking bankruptcies and they were mostly brick and mortar retail chains.  Companies such as David’s Bridal, Mattress Firm, Brook Stone, and Nine West all filed.  Read on to get an update on a few of the companies we reported on in 2018.

Sears

In October, we covered the history and events that led to the downfall of Sears (catch up here).  A lot has happened since October.  As we reported in the previous post, CEO Eddie Lampert stepped down but kept his post as Chairmen.  Mr. Lampert is now using his hedge fund to take over the failing chain.  The bankruptcy court agreed to allow Lampert to be the sole party in the $5.2 billion dollar bid.  Creditors are livid and claim that they would get more if the court allowed liquidation of assets to take place.  Lampert plans to keep Sear’s 45,000 employees in their positions.

PG&E

Everyone with television has heard of the California wildfires that took place in 2018.  Well, an investigation determined that PG&E, California’s largest utility company, was to blame.  In our previous article, we explained the faults of the utility company, California law, and plans to file for bankruptcy in anticipation of an earth-shattering lawsuit.  On January 29th, 2019, PG&E filed for chapter 11 bankruptcy in anticipation of a lawsuit and potential liabilities in excess of $30 billion.  On their website, they outline the changes they are making which include:

  • Enhanced safety inspections
  • Intense vegetation removal and infrastructure enhancements
  • Equipment replacement

PG&E fully expects to be able to restructure and make it out of chapter 11 bankruptcy while “keeping the lights on” for its customers.

Mattress Firm

On October 20th, 2018, we reported that Mattress Firm was filing for bankruptcy under chapter 11.  Just over one month later, the court agreed to allow the company to exit bankruptcy.  After filing, Mattress Firm closed about 700 stores.  The newly emerged company does not plan on slowing down.  According to the CEO, bankruptcy “significantly improved financial and operating position [and] will enable us to strategically expand our business in new as well as existing markets, while continuing to focus on enhancing our omnichannel capabilities and product offerings.”

Bankruptcy can be an essential business tool.  It often does not mean the business even has to close its doors.  Chapter 11 allows businesses to restructure debt and stay open.  If your business is struggling and you need help, contact Elias Dsouza at Dsouza and Strachan Lawgroup GroupElias has been guiding businesses through difficult financial situations for over 15 years.

3 Ways to Use Your Tax Return

Let’s be honest, if you are eagerly awaiting your tax return, you are not planning to spend it on the right things.  Too often people get a chunk of money they usually do not receive at any other time in the year and their eyes light up.  If you are really excited to get your refund this year, it is doubtful that you plan to pay off credit card debt, take care of healthcare-related expenses, or pay down your car loan.  Read on to find out why you should do exactly those things.

PLEASE Use Your Tax Refund to Pay Down Credit Card Debt

If there is one good thing you do with even a portion of your tax return, make it credit card debt annihilation.  You would be hard pressed to find a loan with a higher interest rate than that of a credit card.  Use this year’s tax refund to reduce the savage interest payments you make every month and lower the principal balance.   The average tax refund in 2017 was about $3,000.  The average credit card debt was approximately $6,375.  If you are average, you could save yourself a lot of money in interest payments by cutting that debt in half.

Medical Expenses

The most common debt on a person’s credit report is that of medical expenses.  Medical expenses are the number one cause of bankruptcy.  Medical debt is often passed around from collector to collector until something is done about it.  Every day people are hassled and sued for medical debt worth less than $1,000.  If this is you, please use your tax refund to pay it off.  Negotiate with the collector and save yourself some money, but most importantly, improve your life by stopping the phone calls and snail mail associated with this sort of debt.

Pay Down Your Car Loan

Maybe you have always had a monthly car loan payment and you do not know what is like to exist without one.  Let me tell you, it is possible, and it is SWEET.  Imagine a world where you get paid and you do not have to fork over 25% of your paycheck.  Take your tax refund and pay off even a few months of your loan term.  Down the road, you will be so happy you did.  This will save you from paying expensive interest if your rate isn’t great.

Paying off debt with your tax refund is one of the best things you can do for yourself (albeit not fun).  If you are ready to take your debt seriously but you do not know where to start, contact Elias Dsouza.  Elias can help you plan and negotiate the elimination of your outstanding debt.

3 Tax Deductions You May Not Know About

Tax season can be stressful.  However, many people look forward to a tax return.  Some people even depend on it (not recommended).  Tax software can only get you so far, you have to know how to save money for yourself.  Deductions and subtractions are a great way to offset some of your taxable income.

Charitable Donations

A charitable donation does not have to be huge to make a difference during tax season.  When you donate to a charity such as the Salvation Army or Goodwill, make sure you get a voucher and save it with your tax records.  Also, this deduction is not limited to donating physical items.  If you do charitable work, you can deduct items and consumables bought and used.  You can also deduct mileage (14 cents per mile) for using your personal vehicle.  Did you incur any toll costs?  Deduct it!

State Taxes Paid in the Previous Year

If you are like me, you have owed the money to the state a time or two.  Did you know you can deduct that on your taxes the following year?  You may also be surprised to know that you can deduct income tax withheld by the state in the previous year.  It should be noted that the new tax law limits your deduction to $10,000 per year and this amount includes state income tax withheld, sales tax, and property tax.

Jury Duty Pay Given to Employer

More and more often, employers offer their workers paid jury duty.  However, they demand that the employee turnover the money they receive from the government for participating.  The money you receive for jury duty from the government is taxed as income before you give it to your employer and is treated like taxable income.  Because of this, you are allowed to deduct the amount you give to your employer on your taxes.

Notable Deductions That Are No Longer Available in 2018

All good things must come to an end.  Some more notable deductions that are being… well… deducted are:

  • Deductions pertaining to employee expenses which are unreimbursed;
  • Moving expense deductions;
  • Alimony deductions;
  • Personal exemptions (an exemption that allows taxpayers to subtract $4050 from their personal income for each dependent).

It is up to you to make sure you are getting the biggest tax return possible, but taxes can be confusing.  If you need help because you owe the IRS, contact Elias Dsouza of Dsouza and Strachan Lawgroup.  Elias has the knowledge and expertise to help you navigate these complex issues.

Did You File for Bankruptcy in 2018? Here Is How It Affects Your Tax Return

So, you made the decision to reclaim your life from financial trouble in 2018 and file for bankruptcy.  When you file, you basically separate from your estate.  You can think of your estate as a separate person.  This can create some complexities during tax season.  To add more into the mix, the chapter under which you file can change things!  Read on to learn more about the fun of taxes after bankruptcy!

Taxes After Chapter 7

If you utilize bankruptcy under chapter 7, you will face certain limitations with regard to tax debt.  For example, you can only discharge income tax.  You cannot discharge tax debt that is more than three years old.  Also, the tax return associated with the debt cannot have been filed more than two years before the bankruptcy.  In addition to the afore mentioned stipulations:

  • The tax return must not have been filed by the IRS. This is what is called a “substitute return” and debt created by this return cannot be forgiven during bankruptcy;
  • Only taxes that were assessed within 240 days of bankruptcy can be forgiven;
  • The debtor cannot have a previous conviction of tax evasion or fraud.

Taxes After Chapter 11

A bankruptcy court will take a look at your current tax situation as well as the situation you will be in for the foreseeable future.  If the court does not believe you can handle your tax situation, they will reject your bankruptcy filing under chapter 11 and force you to convert to chapter 7.  In addition to this tax consideration, those who file under chapter 11 must be able to shoulder the burden of capital gains resulting from property sold.

Taxes After Chapter 13

Remember, people who file under chapter 13 must forward all disposable income into an account meant to pay off debt and controlled by a trustee.  If your tax return was not figured into the calculations done when filing for bankruptcy, the refund is considered disposable and must be forwarded to the trustee.  If your expenses have changed, you can petition the court to give you all or part of you refund to put toward the new expenses.  This process is called “excusing a refund”.  To do this, you must:

  • Tell the court how much you need;
  • Inform the court of which refund you are petitioning to excuse;
  • Specify why you need the refund excused (wholly or partially).

Taxes are confusing without the addition of bankruptcy, but sometimes a complex problem requires a complex solution.  If you are considering bankruptcy, contact Elias Dsouza.  He has the knowledge and experience to guide you through bankruptcy.

How the New Bankruptcy Bill Affects Small Businesses

There are many reasons a business looks at bankruptcy as an option.  Competition, economic climate, lawsuits, and many more situations can create an unsustainable environment.  Believe it or not, some businesses cannot afford to declare bankruptcy so they just close.  The new bankruptcy bill was inevitable.  Support for small businesses similar to that of chapters 12 and 13 is long overdue.  It shortens the amount of time it takes to file, allows small businesses to file at a cheaper rate, and allows the business to maintain more control during the process.

Back in the Day

Life before the Small Business Reorganization Act of 2018 was pretty grim for a failing business.  A business that was considering bankruptcy almost certainly had to follow the rules of chapter 11.  They had to file within 120 days of declaration, were forced to notify and plan with creditors, and the process was very expensive.  So expensive, in fact, that many businesses chose to close instead of potentially saving their business through bankruptcy.

The New Bill

The Small Business Reorganization Act of 2018 gives struggling businesses with less than $2.5 million in debt, the opportunity to file for bankruptcy in a way that mimics chapter 13.  For example, under the new bill, a small business will not be expected to pay over $25,000 to a creditor in the first 90 days of bankruptcy.  Bankruptcy under the new sub-chapters will greatly reduce the cost of the process which can be around $300,000. 

What Is Required to Declare Bankruptcy Under the New Sub-Chapter V?

Of course, there are still requirements for a small business if they wish to take advantage of this new opportunity.  Under sub-chapter V, a small business must:

  • Give a brief history of the business which is declaring bankruptcy;
  • Provide data to support the execution of the repayment plan proposed by the debtor;
  • Offer a detailed description of the business’s ability to liquidate;
  • Put a system in place to allow for the funneling of all future earnings to the designated trustee to support payment to creditors.

Bankruptcy is often thought of as a negative outcome for a business, but this does not have to be the case.  New laws are making it more possible for a business to declare bankruptcy and stay open.  If your small business is struggling and you need help understanding your options, contact Dsouza and Strachan Lawgroup Group for a free consultation.  Elias has been helping businesses with their financial troubles for over 15 years.

The Number One Reason People Declare Bankruptcy

Every year, over 1.5 million bankruptcies are filed.  About 97% of them are filed by individuals.  Bankruptcy is an extremely important tool and can be life-changing if used correctly.  People who file for bankruptcy are normal, everyday citizens usually over age 45.  They are married with families and plans for their lives.  Sometimes things happen that are beyond our control. Amongst these things are medical problems.

Bankruptcies Related to Medical Expenses

This may or may not surprise you, but medical expenses are the number one cause of bankruptcy in the United States. Here are some quick facts:

  • 4 out of 5 people that declare bankruptcy because of medical bills have health insurance.
  • 1 in 10 adult Americans delay medical care because they cannot afford it.
  • Just under 10% of adults struggling to pay their medical bills have declared bankruptcy.
  • Roughly half of all collections accounts on American’s credit reports are medical bills.

Clearly, medical bills are a problem for millions of Americans every year.  What can you do to avoid overwhelming medical expenses?

Tips to Avoid a Pile Up of Medical Bills

Healthcare expenses are tough to deal with and there is no getting around that.  However, there are ways to protect yourself from an insurmountable situation.

  • Talk to the billing department of the provider. They may be able to offer insight on private insurance, public coverage, and charities available to you.
  • Take a very close look at your bills. Billing and coding errors happen all the time.  Disputing a bill is a perfectly valid practice.  Healthcare is a product just like anything else.
  • Consider using a credit card to pay your medical bills. While you should still be sure to pay at least the minimum balance every month, you may be able to buy yourself some time.

What Can You Do If You Have Unmanageable Medical Bills?

Opening that envelope when you know a nasty medical bill inside is never fun, but before you pay it there are some things you can try.

  • Talk to the billing department and negotiate your bill. The first bill they send is often an offer.  If you have extenuating circumstances, you can use that to your advantage.
  • Ask the hospital or other provider if they can offer a 0% interest payment plan. Many times, you do not even have to qualify.  This option is preferable to a hospital because it saves them from having to sell the bad debt to a collection company for a fraction of the cost.

If you are buried in medical bills and have exhausted your options, you need help.  Bankruptcy can be a wonderful tool for people in this situation.  Medical bills are an unsecured debt and can be drastically reduced or eliminated altogether in bankruptcy.  Contact Elias Dsouza for a free bankruptcy consultation.