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You should immediately consult with a trust litigation attorney. The accountant's obligations are important, but your primary concern should be protecting the remaining trust assets ASAP. In my experience, once a trustee starts misappropriating funds, they rarely stop voluntarily. Your attorney can seek a temporary restraining order to freeze the trust accounts while the investigation proceeds. Also, document EVERYTHING from this point forward - every conversation, email, and phone call related to the trust. Keep copies of all statements and documents you receive. This documentation will be crucial for any legal proceedings.
What kind of attorney should I look for specifically? Is there a certain specialty that deals with trustee misconduct? And roughly what should I expect this to cost? I'm worried about spending a ton on legal fees when the trust assets have already been diminished.
You want an attorney who specializes in trust and estate litigation specifically - not just any estate planning attorney. Many estate planners focus primarily on creating trusts and wills but have limited experience with litigation when things go wrong. Look for terms like "trust litigation," "fiduciary litigation," or "trust disputes" on their website or firm description. Ideally, find someone who has experience specifically with trustee removal cases and financial misconduct. Regarding costs, most trust litigation attorneys work on an hourly basis, typically $300-$500 per hour depending on your location and the attorney's experience. Many states allow for attorney fees to be paid from the trust itself when the litigation benefits the trust (like removing a dishonest trustee), but this usually happens after the case concludes. You might need to pay upfront and seek reimbursement later.
Has anyone considered criminal charges? When my cousin stole from our family trust, we initially just tried to remove her as trustee. But our attorney explained that trustee theft over certain amounts is actually felony embezzlement in most states. Filing a police report created a lot more pressure and ultimately led to a much better settlement because she wanted to avoid prosecution. Just something to consider alongside the civil remedies.
This is an important point. My family went through something similar, and we found that once we filed a police report, the trustee suddenly became much more cooperative with returning funds. The district attorney in our county had a financial crimes unit that took it quite seriously.
One thing nobody's mentioned is that you need to consider the penalties and interest that continue to accrue while you're in a payment plan. The IRS charges about 3% interest plus a 0.25% late payment penalty each month. I've been on a payment plan for about 2 years now, and I wish I had put more toward the principal early on. If you can possibly afford to pay more than the minimum monthly payment, especially in the beginning, you'll save a lot in the long run.
Do penalties continue to stack up forever? At what point would they stop adding more penalties?
The failure-to-pay penalty stops when it reaches 25% of the unpaid tax. So if you owe $5,000 in tax, the maximum penalty would be $1,250. However, interest continues indefinitely until the debt is fully paid. One thing I learned through my payment plan is that the IRS applies payments to penalties first, then interest, then the tax principal. This means if you're only making minimum payments, a larger portion goes to penalties and interest rather than reducing your actual tax debt.
Has anyone here had success with an Offer in Compromise? My accountant mentioned it might be an option for my situation, but it sounds complicated.
You don't need to match expenses to specific 1099s unless they are for completely different types of businesses. The IRS wants you to file one Schedule C per business type, not one per client. For example, if you got three 1099-NECs for graphic design work from different clients, that's ONE Schedule C with all three 1099s added together as income, and ALL related expenses listed. But if you got a 1099-NEC for graphic design and another for tutoring, those would be TWO different Schedule Cs because they're different business types. In FreeTax, after you enter all income, look for "Business Expenses" or "Schedule C Expenses" section - that's where you'll add ALL expenses for that business type.
This was confusing me too. So if I drive for both Uber and Lyft, that's one Schedule C total? But if I drive for Uber and also do web design, that's two different ones?
Exactly right! Uber and Lyft would be considered the same business type (driving/transportation services), so you'd file one Schedule C combining that income and all related car expenses, phone expenses, etc. But if you drive for Uber and also do web design, those are completely different businesses, so you'd file two separate Schedule Cs - one for the driving income/expenses and another for the web design income/expenses.
I had a similar issue with FreeTax. The solution for me was to complete the ENTIRE income section first (all W-2s, 1099s, etc.) before the expense page became available. Don't look for expense options while entering each 1099-NEC. Instead, after entering all income sources, look for a section called "Business Expenses" or "Self-Employment Deductions" in the main menu. Also, make sure you correctly answered the question about whether these 1099s are for the same business or different businesses. If you indicated different businesses, FreeTax should give you separate expense sections for each.
Just want to add something nobody's mentioned - if you're audited for those gambling losses, the IRS will want to see that you had the financial means to sustain those losses. So if you're claiming $13,000 in gambling losses but your income for the year was only $40,000, they might question how you afforded to lose that much gambling. Make sure you can demonstrate that you had access to the funds that you supposedly lost. Bank withdrawals near casino locations are helpful for this. Otherwise, they might disallow some of your loss deductions if the amounts seem unreasonable compared to your income and other expenses.
That's a really good point I hadn't considered. I make about $65,000 a year, and I've probably lost around $9,000 gambling this year (sadly). Would that raise red flags? Most of those losses were small amounts over many casino visits throughout the year.
That level of losses relative to your income likely wouldn't raise immediate red flags, especially since it's spread out over multiple visits rather than a few large losses. The IRS understands that people don't typically lose their entire gambling budget in one session. Just make sure you've got some supporting evidence beyond just the losing tickets - bank withdrawals at casino ATMs, credit card statements showing charges at gambling establishments, etc. The more documentation you have connecting your financial activity to your claimed gambling losses, the stronger your position would be if questioned. And remember, you're only claiming these losses to offset the winnings you already reported - you're not trying to generate a tax loss beyond that.
I work at a casino and here's a tip many people don't know: if you're a regular gambler, ALWAYS use a player's card when you gamble. Not only do you get comps, but most casinos can provide you with an annual win/loss statement if you request it. This is GOLD for tax purposes! Way better than trying to recreate a gambling log after the fact.
Andre Moreau
Another option is using a mileage tracking app like MileIQ or Everlance throughout the year. They automatically track your trips using GPS and let you swipe left/right to categorize as business or personal. At tax time, you can just export a summary report for your records and enter the total in TurboTax as one line item. Much easier than spreadsheets!
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Nia Harris
ā¢Do those apps create reports that would satisfy the IRS if I got audited? My spreadsheet has columns for date, client name, property address, and miles, plus notes about the appraisal job.
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Andre Moreau
ā¢Yes, the reports from these apps include all the information the IRS requires for documentation. They capture the date, starting point, destination, purpose of the trip, and mileage. Many even include maps of the routes taken which adds another layer of documentation. The IRS wants to see that you're tracking the date, mileage, destination, and business purpose - which these apps record automatically. Some even let you add notes or categorize by client, which sounds similar to what you're already doing manually in your spreadsheet.
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Zoe Stavros
Has anyone had experience getting audited specifically for mileage deductions? I'm always paranoid about claiming too much even though I drive a ton for my job.
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Jamal Harris
ā¢I actually went through an audit last year where they questioned my mileage (I'm a visiting nurse). They just wanted to see my log which had dates, patient addresses (no names due to HIPAA), and miles. I had about 22,000 business miles and they didn't question a single entry once they saw my detailed records. Don't be afraid to claim what you're legitimately entitled to!
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