Opinion ID: 203130
Heading Depth: 2
Heading Rank: 1

Heading: The 2000 Tax Returns (Count One)

Text: For seven weeks in 2000, Hatch competed with sixteen other contestants on Survivor, a reality television show filmed on the island of Pulau Tiga. As the survivor of the competition, Hatch won a prize of one million dollars and a car. He additionally received $10,000 for appearing on the August 23, 2000 televised finale of the show. Survivor Entertainment Group (SEG), which produced the show, cut two checks to Hatch in these amounts. Hatch deposited the one-million-dollar check in his bank account. He endorsed the $10,000 check over to a construction company at work renovating his residence in Middletown, Rhode Island. Prior to the show, Hatch had signed a contract stating he was not an employee or agent of SEG and that he would be responsible for all taxes associated with any winnings: I shall pay all state and federal or other taxes on any prizes I win. After Hatch received his prize, in early 2001, SEG sent Hatch an IRS 1099 form reporting his receipt of $1,010,000 in income from SEG in 2000. Following his win, Hatch appeared December 7, 2000 on the pilot episode of a show called For Goodness Sake!, which focused on the charitable causes of celebrities. The show's producer, Chamber's Communication Corporation, paid Hatch's travel expenses and made a $25,000 donation to Horizon Bound, a charity Hatch had founded. Horizon Bound's ostensible object was to take disadvantaged teens on camping trips to build their self-esteem. Hatch attempted to deposit the $25,000 Horizon Bound check in his personal account at Newport Federal Savings Bank, but as the check was payable to a corporation, the bank refused the deposit. Hatch then deposited the check in his personal account at another bank, People's Credit Union. The payee of the deposited check was Horizon Bound/Richard Hatch, and there was conflicting testimony from Hatch and bank employees about alteration of the payee of the check. [2] Hatch subsequently used the money for gifts and the renovation of his home in Middletown, none of it going to Horizon Bound. Hatch's accountant, Daniel J. Urso, called as a defense witness, testified that Hatch's personal use of the funds was justified because Hatch had given other funds to the charity. Hatch also in 2000 received $18,708 in rent from the tenants on a property he owned in Newport. He often collected the rent himself. In March 2001, Hatch hired accountant Richard Plotkin to prepare his 2000 tax return. Hatch gave Plotkin the 1099 received from SEG showing his $1,010,000 in Survivor income, along with 1099s showing income from other sources, including a book deal and deals with Conde Nast and Reebok. Hatch gave Plotkin a copy of his own accounting of his income (which distinguished 1099 contractor income from W-2 employee income), in which he noted the Survivor income but did not list the $25,000 charity income and the $18,708 rental income. Hatch wrote on the accounting sheet that his Total Income was $1,166,626.10. In a second written summary, Hatch referred to the rental property but claimed, wrongly, that it had generated no rental income in 2000 because it was in renovation. Hatch later said he had received sixty days of rent in the sum of $4,000, and Plotkin's assistant accordingly crossed out no rental income and wrote $4,000 underneath it, but this was also a misrepresentation because he had received seven months of rent for a total of $18,708. Plotkin emphasized to Hatch that the Survivor income had to be reported to the IRS, and Hatch did not disagree. In November 2001, Plotkin showed Hatch the 2000 tax return Plotkin had prepared, which included the Survivor income but not the $25,000 charity income or the $18,708 rental income, of which Hatch had not informed him. Plotkin's draft 2000 tax return stated that Hatch owed $374,831 in taxes and $66,670 in interest and penalties for late filing. Hatch did not tell Plotkin that he disputed the inclusion of the Survivor income in the return. Hatch and Plotkin discussed various IRS payment options, and then Plotkin and Hatch signed the return. Plotkin offered to file the return, but Hatch said he would do it himself. Hatch never filed the return. Instead, in late 2001, Hatch hired a self-employed accountant and family friend, Jodi Rodrigues Wallis (Wallis), to prepare a new 2000 tax return. Hatch provided Wallis with a return for the year 1999 prepared by Plotkin, but not the return for 2000 Plotkin had prepared. When Wallis mentioned she wanted to contact Plotkin, Hatch indicated he preferred that she not be in contact with him because Hatch did not want any more to do with Plotkin's firm. There was conflicting testimony by the two accountants about whether they ever discussed Hatch with one another. Hatch did not give Wallis the 1099s reflecting his non-Survivor-related income for 2000 even though he had given those forms to Plotkin. Hatch told Wallis he had been so busy with Survivor he had not had time to earn other income that year. As he had once told Plotkin, Hatch again claimed his rental property had earned no income because it was under renovation. Hatch denied receiving any royalties from a book deal, although Wallis knew Hatch had written, a book. Hatch told Wallis he had disclosed all his sources of income for 2000. Hatch gave Wallis the 1099 furnished by SEG reflecting his Survivor income, as well as the original handwritten accounting sheet he had given Plotkin which stated there was no rental income. He did not give Wallis the other handwritten summary of his 1099 and W-2 income. Hatch also advised Wallis, incorrectly, that in connection with his receipt of the Survivor prize, he had paid twenty percent in commissions to an agent and a manager; that CBS had required him to retain an agent and manager in advance in order to claim the prize; and that the SEG contract had not contained any language warning him he would be responsible for paying taxes. Notwithstanding, Wallis told Hatch he was still required to pay taxes on the Survivor income, although he could deduct the purported commissions. On March 1, 2002, Wallis handed to Hatch a 2000 tax return she had prepared reflecting the Survivor winnings less deductions for the claimed $200,000 in commissions but omitting the $25,000 charity income, the $18,708 rental income, and the other 1099 income Hatch had divulged to Plotkin but not to Wallis. The return stated that Hatch owed $234,807 in taxes. Hatch left Wallis' house with the return in hand but he never filed it with the IRS. In July 2002, the IRS sent Hatch a letter telling him it had not received his 2000 tax return. The' IRS listed in that letter the 1099 income it knew. The IRS's letter did not include mention of the Survivor income but stated that its list might not be comprehensive. Hatch gave the IRS's notice to Wallis. Wallis advised Hatch he would need to file an amended tax return which included the 1099 income reflected on the IRS notice of which Hatch had not previously informed her. She told him that he was still required to pay taxes on the Survivor income even though the IRS's notice had not mentioned that income. Hatch did not follow this advice. In the fall of 2002, Hatch asked Wallis what his 2000 tax exposure would be if the Survivor income were wholly excluded from the tax assessment. Wallis offered to prepare a spreadsheet with that analysis, but Hatch wanted the information to be provided in the form of a completed tax return. Wallis accordingly prepared a hypothetical 2000 tax return which omitted the Survivor income and state that Hatch's income was negative $41,087 and that he was owed a $4,483 refund. On November 19, 2002, Wallis gave Hatch the hypothetical 2000 return she had prepared that omitted reporting the Survivor winnings. This document did not bear Wallis' name and signature as preparer. Hatch, orally and in a letter he signed in Wallis' presence, agreed the return was for informational purposes only and that he would not file it with the IRS. Wallis told Hatch she would lose her license if he filed the return. Hatch said he understood. Later that very same day, however, Hatch signed and mailed the return to the IRS. The draft return Hatch filed omitted three main sources of income discussed earlier: the Survivor income; the charity money Hatch had converted to personal income; and the rental income. As a result of these omissions on the filed return, Hatch received a $4,483 refund rather than paying any taxes. If Hatch had filed a return properly reflecting the income he received in the year 2000, including the Survivor and other income, he would have had to pay $375,652 in taxes.