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JP Morgan Chase Settles Robo-Signing Charges For $50 Million, Tax Deductible

forbes.com | March 6, 2015

By Robert W. Wood

The U.S. Trustee struck a $50 million deal over charges JPMorgan Chase ‘robo-signed’ mortgage documents to numerous bankruptcy courts. The bank must pay more than 25,000 homeowners in the remedial deal. As a result, there appears to be no restriction on the bank’s ability to write off the entire amount on its taxes. Speaking of taxes, the case and its subject matter contains important reminders for everyone at tax time.

The robo-signing in question involved bank employees who affixed electronic signatures–under penalties of perjury–without reviewing the accuracy of the notices. Sound familiar? At tax time, with virtually everything electronic, it can be tempting not to print out a tax return and not to read every line. If your preparer gave it to you and he or she has your records, you might think there’s no need.

Be careful. You would have better luck with Tim Geithner’s TurboTax defense. The robo-signer defense goes something like this: “I didn’t read my tax return—I just signed it.” After all, more than half of all tax returns are prepared by someone else. Even members of Congress who write the tax laws don’t prepare their own. But before you sign under penalties of perjury, review it carefully.

In simple mechanics, there is marked contrast between the mechanics of paper vs. electronic filing. A taxpayer with a traditional paper filing at least must sign the return before mailing, and that imports a certain amount of due diligence. But with e-filing, the taxpayer may not even see the return.

The taxpayer should review the return, and the return preparer should ask the client to verify that all figures are correct, the correct boxes are checked, and so on. The lack of a signature in the traditional ‘affix your John Hancock’ sense makes it easier for mistakes to occur. In the old days, at least the return had to be printed out and the taxpayer had to actually sign it.

Now, the authorization form may be signed days before, and the final return as submitted may be significantly different from what the client saw. The client may be able to say with a straight face—like the bank execs signing foreclosure docs—“who knew?” But the IRS says electronically filing counts as a signature. See Signing Your Electronic Tax Return.

Our tax law has been around since 1913, and the “I didn’t read it” defense has been tried before. But courts have consistently ruled that taxpayers have a duty to read their returns to ensure that all income is included. Since 1928, courts have held that even if all data is furnished to the return preparer, the taxpayer still has a duty to read the return. See Mackay v. Commissioner (1928).

 

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CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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