“It’s déjà vu all over again!” -Yogi Berra

Last week, I was reading headnotes of just-released Tax Court cases and I ran across one that was eerily familiar. Says I to myself: “I have already blogged about this case.” I reviewed my old blogs and found that I had written about a very similar Tax Court case on September 17, 2014. Do people never learn?

Like Patricia Diane Ross in the 2014 Tax Court case, John H. Fisher and Lisa M. Fisher, in the years in question, were busy people. The two attorneys claimed that their three children were legitimately employed in Mrs. Fisher’s legal practice. In 2008, the last of three consecutive years being considered by the Tax Court, the court pointed out that all three offspring were less than nine years old. So, remember, in the first year being considered, all were less than seven years old.

Ms. Fisher said that, since “day care was cost-prohibitive,” she had the children work for her in her office. Ms. Fisher said that they shredded waste, “mailed things,” answered telephones, photocopied documents, greeted clients, and escorted clients to the office library or other waiting areas in the office complex. Ah, yes. If I were looking for legal representation in 2006, I would take great comfort in knowing that Ms. Fisher’s legal assistants averaged no more than six years old.

Ms. Fisher deducted wages on her tax return for her pint-sized administrative staff. However, she did not issue W-2 Forms to them, had no payroll records for them, and made no Federal withholding payments with respect to their “wages.” She said she didn’t have those sorts of bothersome records; she paid them by contributing to their Section 529 college funds and giving them cash, which they found handier than cumbersome checks.

One more thing. When she took them on trips (staff retreats, I guess), such as a trip to Disney World, she deducted the costs of the trip. She purportedly was engaged in the writing of children’s travel guides with a profit motive. You guessed it; she never published a book, hired a literary agent, or offered her books to the public. She said she did sell four (4) books to friends.

Well, I’ll bet you already know what happened: the IRS beat the Fishers like a drum. Also, the Tax Court upheld the accuracy-related penalty assessed by the IRS.

The Fishers must have been playing the audit lottery. They lost. They deserved to lose.

VKM