It seems kind of dumb, right?
How do you get sued for following the law?
I mean… how can a lawyer come knocking on your door… serve you… and you end up in court owing thousands (maybe millions) of dollars to some schmuck in a fake Versace suit who (oddly enough) drives a $150,000 Ferrari?
Well, it can happen.
Let me tell you how:
Every year, I bytch and moan and carry on like a 2 year old because I have to file my taxes.
… something that I think should be made permanently illegal (the taxes, not my whining).
This year was SUPER special — I got to file jointly with my shiny new wife.
And because I’m a stubborn man with an even more stubborner-er attitude toward tax preparers, I keep flogging myself every year with tax software.
And the thing of it is… as I’m clicking and clicking and clicking and wishing I could reach through the screen and choke the person responsible for this special torture, I think to myself… “at least I’m not being sued for doing this.”
And yet, many other people are (even people who do their own taxes… ESPECIALLY people who do their own taxes OR hand them off to a CPA).
And the insanity of it all is called a “tax patent.”
Some idiot got the idea that it would be fun and cute to file for a patent on tax-saving strategies… and the U.S. government granted the rights to this person.
Which emboldened MORE people to do the same f*cked up thing.
Did you know there are over 200 tax patents out there floating around?
And not all of them patent complicated strategies.
Some of them patent well-known tax reduction strategies, like using a trust to transfer assets to your heirs.
Or… a patent on a certain specific calculation for determining whether it makes sense to dump your traditional IRA for a Roth IRA… (one of MANY reasons to ditch government favors and tax schemes, eh?)
The CEO of Aetna (the insurance company) was sued for using one of these strategies on his own personal tax return…. and lost (actually, I think they settled out of court… same difference).
The way patent law is written:
“An infringer is liable for damages even if he was not aware of the patent. Trebled damage can be assessed if the infringer was aware of the patent.”
Oh great. Remain ignorant and you can be sued for $1,000. LEARN about the patents and you can be sued for $3,000 (sorry).
This is fish in a barrel for lawyers. All they have to do is go fishing and find someone they want to make an example of.
And with today’s economy where it’s at, expect more lawsuits because… easy money.
If you think you are immune to these (or that it’s unlikely you’ll ever be targeted by lawyers for using them)… go stick your head back in the sand.
For the rest of us, the obvious solution (for now) is to avoid using patented strategies.
Speaking of which, I (and my minions) steer clear of all that jazz by explicitly avoiding tax strategies and gimmicks (the fact that my glutenous ways are VERY tax efficient is a nice bonus) and instead focus on fundamental principles of finance (not patentable) and simple financial products to implement those principles.
Stay classy and stay out of the courtroom boys and ghouls.