Lebau & Neuworth partner attorney Richard Neuworth was recently given the honor of making a presentation on October 5 during a conference hosted by the Maryland State Bar Association, Labor & Employment Section, at the University of  Baltimore Law School. Richard spoke on "Taxes and Employment Law, " including the topic of "Civil Damages for Filing a Fraudulant Return."

Specifically, Richard addressed:

• Wages and Possible Causes of Action concerning Taxes;
• Health Insurance and Possible Causes of Action concerning Taxes; and
• Retirement Plans and Possible Causes of Action concerning Taxes.

He noted that under 26 U.S.C. Section 7434, an employer and an individual that prepares a fraudulent information return can be a defendant in a civil tax case. Section 7434 stipulates:

• If any person willfully files a fraudulent information return with respect to payments purported to be made to any other person, such other person may bring a civil action for damages against the person so filing the return.
• In any action brought upon a finding of liability on the part of the defendant , the defendant shall be liable to the plaintiff in an amount equal to the greater of $5,000 or the sum of any actual damages sustained by the plaintiff as a proximate result of the filing of the fraudulent information return.
• The costs of the action , and in the court’s discretion, reasonable attorneys fees.

In his presentation, Richard further examined several relevant topics:

• What constitutes a fraudulent return under Section 7434;
• What type of employers are potential targets of actions under 26 U.S.C. 7434;
• Attorney use of Section 7434;
• Case law interpreting Section 7434;
• Lost Social Security benefits and Unemployment benefits;
• Whistleblower claims under 26 U.S.C. 7623 (a) or (b);
• Actions under Section 7623 (a) and (b);
• Awards under Section 7623;
• Statute of Limitations issues;
• State remedies (Maryland has no qui tam or other whistleblower action for tax fraud);
• Health Insurance and taxes;
• How employers fit the definition of 50 employees;
• Tax penalties for not offering health insurance;
• And more.

View Richard's presentation

For more information, contact Lebau & Neuworth at (410) 296-3030 or lebauneuworth.com/contact-us.

Lebau & Neuworth partner attorney Richard Neuworth recently had the honor of addressing the American Bar Association Committee on Taxation. His presentation in Washington, D.C., on May 10, 2019, focused on Taxes and Employment Law and specifically addressed two of his own specialties, the Internal Revenue Code and State Causes of Action.

Richard focused his address on Wages, Health Insurance and  Retirement Plans and possible Causes of Action concerning taxes for each topic. He went into detail in targeting the "perfect storm factors" concerning tax fraud and highlighted the consequences of those perfect-storm factors.

Regarding Wages and Taxes, civil damages can be filed for a fraudulent return. If any person willfully files a fraudulent information return with respect to payments purported to be made to any other person, that other person may bring a civil action for damages against the person who filed the return.

A fraudulent information return may be any of the following:

• W-2;
• 1099;
• Any other tax form filed with the Internal Revenue Service;
• A paycheck is not a fraudulent information return but may lead to a fraudulent information return if it is not reported on a W-2 or 1099; and
• A cash payment is not a fraudulent information return but may lead to a fraudulent information return if it is not reported on a W-2 or 1099.

While many employers are law-abiding, certain categories of employers seem to be targets of these type of actions, such as:

• Private employers that hire illegal immigrants or immigrants that do not speak English as their first language;
• Small private employers that have less than 100 employees;
• Private employers  that receive sums of cash from third parties;
• Employers in the construction, infrastructure, service businesses and landscape businesses or other highly competitive businesses; and
• Employers that are financially distressed.

Possible solutions to any tax nightmare can include:

• Congressional Action in the form of several different bills may be enacted before the end of the year;
• Settling other claims and attribute all settlement proceeds and attorneys fees attributable to claims other than for sexual harassment;
• Backloading of settlement proceeds and attorneys fees over multiple years to reduce any tax liability; and
• Purchase of other benefits such as health insurance policies, life insurance policies or other products that are not taxable.

Lebau & Neuworth specializes in Taxes and Employment Law. If you are in need of legal representation because of a possible tax or employee-rights claim, our attorneys may be able to help. For more information, contact us at (410) 296-3030 or lebauneuworth.com/contact-us.