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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10117
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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If I filed taxes in 2013, working as a Medicare Contractor.

Customer Question

If I filed taxes in 2013,
working as a Medicare Contractor.
And I was meant to pay 10,000 for that calendar year THAT I HAVE NOT BEEN ABLE to pay as of yet.
But a judgement rendered in 2015 states that I fraudulently billed Medicare and should pay restitution for all the monies I billed Medicare.
And I have been paying this restitution for 8 months now.
Am I still meant to pay the 10,000 Tax ??
As I'm under the belief that having been asked to REPAY all monies to Medicare means I didn't make any money.
How do I approach this matter ??
Submitted: 11 months ago.
Category: Tax
Expert:  Lane replied 11 months ago.

Hi,

...

I hold a JD (Juris Doctorate, a doctoral degree in the law), concentration in Tax Law & Corporate law, an MBA (specialization in finance & tax), and BBA from Stetson School of Business and Economics, as well as CFP and CRPS designations.

I can help here

...

What you have (better said, WILL HAVE, once you've paid everything back) is a claim of right issue.

...

From IRS Rev. Rul. 2004-29:

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"Section 1341 (“Computation of tax where taxpayer restores substantial amount held under claim of right ”) of the Internal Revenue Code applies only when a taxpayer properly reports an amount of income in one taxable year and later repays all or a portion of that same amount in a later taxable year because the taxpayer, in fact, did not have an unrestricted right to that income."

...

This allows a person who was taxed on something, that ended up having to be paid back, to file a tax credit for the year repaid, based on the recalculated return from the year received.

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This is complicated, however, by the fact that you have not yet paid everything back, so the statement, "I didn't make any money," is not YET true.

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This is a "first things first" issue. What you'll need to do is (1) pay back the entire amount, and then (2) address what, at THAT time, will be an overpayment.

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The way the section 1341 tax credit works (conceptually - we may have to make adjustments because of the not totally paid back issue) is the following:

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(1) re-figure the 2013 return without that income as a part of the return

(2) subtract the resulting tax liability on that return from the tax liability on the return as it WAS filed, and

(3) Show the credit against the tax for the year of repayment in the credits section (page 2 of the 1040).

...

Now, because you have (I'm assuming here, based on what you've said) not repaid EVERYTHING, the credit that can be taken will only be for the amount paid back in the current tax year.

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So you will have to go through this process for each year that you are still repaying ... using only that year's repaid amount to re-figure the 2013 taxes to get the change in tax liability.

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I've handled several of these successfully for clients ... I can tell you that one possible issue here is that claim of right assumes that you truly believed that you have a right to that income ... the fraud issue may complicate things, (as fraud has as one of it's elements, intent, sometimes called willfulness, sometimes called with knowledge or purpose)

...

Let me know what questions you have from here

...

Lane

..

Expert:  Lane replied 11 months ago.

Hi,

...

..just checking back in to see if you saw my answer.

...

Several aspects exist here. If you'd like we can discuss this confidentially (and probably more efficiently) by speaking over the phone.

Expert:  Lane replied 11 months ago.

I've mad what JUSTANSWER.COM calls an additional Services offer, which provides a private link so the was can exchange contact Information confidentially.

...

Only accept if you'd like to discuss your options further.

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Otherwise, we can continue here.

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If this HAS given you enough, (and if you DON'T have additional questions) I would appreciate a positive rating, using those stars on your screen - That's the only way the experts here will be credited for the work.

...

Thank you,

Lane

..

Expert:  Lane replied 11 months ago.

Did you see my answer ?

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