Getting an audit notice is never anyone's idea of fun. But getting
audited isn't always the disaster it might seem. In fact, for fiscal
2012, 107,820 lucky winners got refunds after their audits. Granted, that's still shy of seven percent of everyone audited that year. But it proves you can walk away from the IRS a winner.
Here's a clever strategy one taxpayer used to walk away from the IRS
with a windfall. But you might want to be careful before you try it
William Berroyer owned an HVAC contracting company on Long Island. On
July 3, 2008, he met with the IRS at their Hauppauge office to discuss a
$60,000 payroll tax bill he owed on behalf of his business. The agent
in charge of his case directed Berroyer to a conference table, where he
nervously worked out a payment plan. As he stood up to leave, he twisted
his foot in about 15 feet of telephone cord, spun around, hit a metal
file cabinet, and landed flat on the floor.
At first he said he felt fine — he just wanted to get out of that
conference room and back to his office. But then he called the auditor
from the parking lot to say he had lost feeling in his lower leg. He
made it back to his shop alright, but soon felt even worse and headed
for the hospital. Berroyer wound up spending seven days in the emergency
room and 10 days in rehab. Five years after the accident, he spends
most of his time in a wheelchair and can't walk more than a few feet
without canes. His injuries have interfered with all aspects of his
life, including his work, his boating, his golf game, and even his
no-longer-twice-weekly "special time" with Mrs. Berroyer.
(You already know where we're headed, don't you?) Naturally, Bennoyer sued. For $10 million.
There wasn't much argument over liability. The real contest focused on the extent of the injury. (Translation — was he just faking it?)
Hospital records reported his diagnosis as "acute paraplegia,
psychogenic in origin." Another doctor noted "Neuro exam and MRI
findings not consistent with subjective complaints . . . . Affect is
somewhat inappropriately bright." At trial, the government's medical
expert conceded Berroyer had probably bruised his spinal cord, but that
mild injury should long since have passed. Asked directly if Berroyer
was faking or malingering, he replied "I don't use the terms faking or
malingering. I use the term nonphysiological." (And really, doesn't
"nonphysiological" sound so much better than "faking"?)
Judge Arthur Spatt ultimately ruled that the IRS's negligence had caused
a "mild spinal cord injury." He awarded Berroyer $112,000 in medical
expenses, plus $350,000 for past pain and suffering, plus another $250,000 for future
pain and suffering. Oh, and he threw in another $150,000 for Mrs.
Berroyer's "loss of services." And the best part . . .? Internal Revenue
Code Section 104 says that compensation for injuries and sickness are
nontaxable. That means the Berroyers get to keep all $862,000!
So, what do you think? An easy way to earn nearly a million bucks? Or
would you rather skip the physical therapy and take advantage of easier
strategies, like choosing the right entity for your business, the right
plan for your retirement, and the right benefits for your family? We're
sorry to confess we can't help you with a loose phone cord. But we can help you with the plan you need to pay the least tax allowed by law. So call us if you want to save tax — but don't want to wheel yourself into a courtroom to do it!