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Judgment Debtor Tax Returns

April 07, 2012 | Comments: 0 | Views: 212

I am not a lawyer, I am a Judgment Broker. This article is my opinion, and not legal advice, based on my experience in California, and laws vary in each state. If you ever need any legal advice or a strategy to use, please contact a lawyer.

In judgment enforcement, many times one has to subpoena records from third-parties, such as banks for banking records, to discover where the judgment debtor's money is coming from and where it goes.

Ideally, you could ask the judgment debtor directly, for a copy of their tax return(s) for your inspection. Unless you are in bankruptcy court, this can be a problem, because the judgment debtor's tax returns are usually exempt, even if you have a subpoena served on the judgment debtor, that requested them with a demand for the production of documents.

Not everyone puts the truth on their tax return. The IRS wants everyone to put the truth on tax returns, and says tax returns "should not be subject to subpoena, or else people will lie on their tax forms to avoid creditors".

Nothing stops you from requesting tax returns at a judgment debtor examination, and if your judgment debtor brings them, they are fair game for you to inspect and copy. However if the judgment debtor or their attorney says "that is privileged information, you can't have it", you will have to work around this problem.

The first workaround is requesting alternate information, such as paycheck stubs and W-2s; or getting your debtor to voluntarily sign a 4506-T form. The 4506-T form allows you to get a copy of someone else's tax return. One way to get your judgment debtor to sign a 4506-T form, is if you can make it a condition of entering into a payment agreement, or some other kind of settlement.

If you manage to get a signed 4506-T, it is always much faster to order a transcript (summary) of their tax return, than to try to get an actual copy of their return. And if their return was e-filed, only a transcript of the tax return will be available.

What if your judgment debtor used an accountant to do their tax return? My non-legal opinion is that the tax preparer's worksheet and notes are discoverable in a post judgment proceeding. I also assert that the accountant's copy of the judgment debtor's tax return is discoverable, because of The Internal Revenue Service Restructuring and Reform Bill of 1998 (HR 2676). This bill introduced a very limited confidentiality privilege to non-attorneys. Internal Revenue Code Section 7525(a)(1) 26 USC §7216, includes section (B): "pursuant to an order of a court". That requirement for an order of the court (in my opinion) is satisfied by serving a court-scheduled judgment debtor examination that includes a document request for a return. (See ).

If your judgment debtor or their third-party accountant, or their lawyer(s) objects - showing the judge a print out of the cites above, may not work, however it is worth a try.

If these workarounds do not work, perhaps you can find a copy of the debtor's tax return by subpoenaing records from another creditor, such as a mortgage lender or a vehicle or large equipment dealer. Their files sometimes include previously requested copies of your judgment debtor's income tax returns.

Some "clever" individuals minimize their claimed income on returns submitted to the IRS, in hopes of paying less taxes, and then includes everything on financial disclosures submitted to lenders, in hopes of obtaining the loans they want. Learning this gives you a more accurate road map to their actual assets (such as unreported cash income, non-interest bearing accounts, etc.) If you encounter this kind of situation, you are also probably uncovering tax fraud and/or bank or mortgage fraud. There is a chance that discovering this, and asking your judgment debtor about this in court, will get their attention, and might lead to a settlement. - Judgment Enforcement. Nationwide free judgment referrals. The easiest, fastest, and best way to get the most money for your judgment.

Mark Shapiro, the free judgment matchmaker. We pay for judgment leads, and have the best quality free judgment referral leads for enforcers, collection agencies and contingency collection attorneys.

Source: EzineArticles
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