Wednesday, April 28, 2010

Freedoms Hang in Balance in this Clash of Titans: Google vs. China, Part 3

Mr. McGrath will be running a series of blog posts regarding the dispute between Google and China, primarily because, whether we realize it or not, both of these entities influence billions of people on a daily basis and are locked in a battle over money and control - and, ultimately, freedom and civil rights. Part 1 dealt with the background of Google and other internet search engine companies entering China. We left off in Part 2 after Google had officially launched inside China in 2006 after compromising with the Chinese Government.

This is Part 3 - Google's Chinese Growing Pains, 2007 - 2009.

In January, 2007 - one year into its official China presence - Google had a 19% market share.  This was compared to the regional leader, a Chinese search engine company called "Baidu", which had 63% of the market.  As discussed in Part 1 of this series, Google had as high as 25% of the market share earlier in the decade (before it was "officially" in China, and before Baidu was a true competitor).  In an effort to expand its business, Google began to offer mobile content in China in conjunction with "China Mobile", the government-controlled telecom entity.

The same month, Google admitted it was already second-guessing its decision to agree to censorship in cooperation with the Chinese government. Co-founder Sergey Brin was quoted as saying . "On a business level, that decision to censor was a net negative." Google was also suffering from repeated cyber attacks in China.

In August, 2008 Google offered free music downloads to its Chinese users, in order to further compete with Baidu.[1] In January, 2009, China criticizes Google and other search engine companies for failing to do enough to block access to pornography. In an effort to be fair, we must acknowledge that much of what China seeks to censor is content which many others in the world censor - or want to. How many millions of Americans, for example, would like to have online pornography censored completely due to their own moral beliefs?

On March 24, 2009, China blocked access to after a video of Chinese police officers beating Tibetan protesters appeared on it. The block was lifted four days later. For those of you who did not know, Google acquired YouTube in October, 2006. One part of is, which is described by Google as being used primarily "to shine a light on issues that need more exposure; to drive action around causes they care about; and to create connections between people and organizations that share their desire to make a difference."

In June, 2009, Google's Chinese search engine and GMail in China were temporarily blocked.  Chinese authorities indicated that it was because Google was assisting in the spreading of obscene material. Perhaps spreading "obscene material" was helpful in Google's Chinese market share rising to 30% for the first time (in July, 2009).

Kai-Fu Lee, the Taiwan-Chinese who was named head of Google's China operations during the planning phases in 2005, resigned in September, 2009. This was big news for various reasons, including the high opinion held of Dr. Lee by many young adult Chinese.  The speculation was that he had grown weary of the pressure constantly applied by the Chinese government. Interestingly, while Google's self-authored "Timeline" contains an entry regarding the hiring of Dr. Lee (which came after legal battles between Google/Dr. Lee and Dr. Lee's former employer Microsoft), it does not mention his resignation, nor does it mention the putting in place of his replacement.

In October, 2009, a group of Chinese authors filed lawsuits against Google, claiming violation of copyrights regarding digital book downloads. See the footnote to appreciate the irony of this.

Throughout the incidents of increased censorship and interference, Google did not make much in the way of public response, although we can presume that intense discussions occurred behind the scenes. Its market share in China slowly rose between 2007 and 2009, and the instances of direct interference from Chinese authorities was not as bad as perhaps feared.  Nevertheless, we know that the censorship imposed by China continued to be a bitter pill to swallow for the founders and leaders of Google, whose very lives have focused on accessing and distributing information around the world.  Even so, few knew that a huge shift in Google's approach to and  relationship with China was about undergo a dramatic change.

Part 4 in this series to follow on May 4.

[1] Let me offer some brief background and commentary here on a related point. One of the issues with regard to China which frustrates and worries many in the international community is that the Chinese government is not always willing to enforce protection of copyrights, patents, etc. from other nations (including rights to music and other intellectual property). From the Chinese perspective, and in the short-term, it might make sense: "We will allow our citizens to have, for free, anything (not censored) they can get their hands on; this may improve their lives and contentment yet cost them and us nothing." Also, the Chinese Government and its associated companies have long been known to engage in industrial espionage, even more enthusiastically than most other countries.

Monday, April 26, 2010

Religious Beliefs vs. Right to a Fair Trial: Which Wins Out?

Earlier this year, a criminal prosecutor in Iowa attended a lunchtime mass on Ash Wednesday. He did so during a break in the attempted murder jury trial he was prosecuting on behalf of the State.  Upon his return, the criminal defense attorney noticed the ashes on opposing counsel's forehead.

After considering the issue, the defense attorney made an objection to the trial going forward with ashes remaining on the prosecutor's forehead. He informed the judge that he was concerned the religious symbolism might inappropriately influence the members of the jury.  As a general rule, religion and religious symbols are not allowed to be referenced or displayed during jury trials, especially criminal ones.

The judge presiding over the case informed the prosecutor that he tended to agree with the defense lawyer, and that the wiser course of action might be to remove the ashes. Upon hearing the judge's position, the prosecutor did so.  He was later quoted as saying that he understood the reason for the objection and the judge's position, and that he wasn't offended by the situation.


As a former prosecutor who also handled violent felonies, I would have to say that, from a legal perspective, the situation was dealt with appropriately. While a different prosecutor may have refused to remove the ashes out of principal or religious conviction, all reasonable prosecutors worry about some issue not relevant to the evidence allowing the defendant to successfully appeal a conviction.

Because the right to freedom is so fundamentally important, our legal system allows criminal defendants to almost always get the "benefit of the doubt."  For example, let us suppose that the trial continued with the ashes intact, and the result was a conviction by the jury. An appeal would almost certainly follow.  If the lawyers arguing the appeal on behalf of the criminal defendant were able to show that the religiously significant ashes on the prosecutor's forehead might have influenced even one member of the jury, the conviction could be vacated. At that point, the case would be sent back down to the trial court, to be started all over again as if the conviction never happened.

The prosecutor in this case explained that, "in an abundance of caution", he agreed to remove the ashes. Whatever our personal beliefs are, a prosecutor is sworn to uphold the law and to prosecute fairly - this includes fairness toward even the most malicious of defendants. While most lawyers have a duty to "zealously defend" their clients, a prosecutor has a higher, more strict duty, both from an ethical standpoint and a practical one.

I have not been able to discover what the outcome of the trial was.

Friday, April 23, 2010

Small Businesses, Taxes Impacted by Healthcare Reform: Key Points

How will President Obama's healthcare legislation impact small businesses and self-employed folks? What parts of his plan are going to be smiled upon by small businesses, and which are going to elicit resentment? Let's take a look at some of the key provisions, focusing on how they will impact small businesses and the self-employed.

Increased Medicare Taxes on the Moderately Wealthy:  As of January, 2013, if an individual makes over $200,000 ($250,000 for a family), his/her Medicare tax rate will increase from 1.45% to 2.35%.

Have Coverage or be Fined:  Businesses with more than 50 employees will be required to provide coverage to their employees or be fined by the government, starting in 2014.

Smallest Businesses Exempted from Mandatory Requirements:  The smallest businesses (fewer than 50 employees) will be exempt from minimum federal requirements with regard to healthcare plans - including the requirement directly above to provide healthcare to employees or be fined.

Have Coverage or be Fined, Part 2: As of 2014, individuals who don't have health insurance will be fined by the government - unless buying the cheapest plan available to you would take up 8% or more of your income.

Tax credit:  Starting in 2010, small businesses (fewer than 25 employees) which pay at least half of their employees' healthcare premiums qualify for a tax credit of up to 35% of those premiums. The exact amount of the tax credit will depend on the number of employees and their average wage.

Small Business Health Options Programs (SHOPs):  Starting in 2014, small businesses (up to 100 employees) can pool together to purchase healthcare plans - theoretically giving these groups greater bargaining and purchasing power.

Subsidies for the Self-Employed:  Also starting in 2014, self-employed folks earning up to 400% of the poverty level will qualify for a federal subsidy which will help them to purchase healthcare. (In 2009, "poverty level" for one person was $10,830; for two people it was $14,570; and for a family of four, it was $22,050.)

Preventive Care Coverage to be Mandatory: As of September 2010, healthcare plans must cover basic preventive care.  Currently, some plans only cover catastrophic care.

Increased Taxes on Small Business Owners: Starting in 2013, small business owners who receive capital gains, dividend, or interest income will pay an additional 3.8% tax on that income.

Medicaid Coverage Expanded:  In 2014, a higher percentage of low income individuals and childless adults will be covered by Medicaid, which is the equivalent of a healthcare plan for the poor provided by the government.  This can impact small businesses in many ways, both positive and negative.

Wednesday, April 21, 2010

Freedoms Hang in Balance in this Clash of Titans: Google vs. China, Part 2

Mr. McGrath will be running a series of blog posts regarding the dispute between Google and China, primarily because, whether we realize it or not, both of these entities influence billions of people on a daily basis and are locked in a battle over money and control - and, ultimately, freedom and civil rights. We left off in Part I as Google was about to launch as a formal business inside Chinese borders in 2006. This is Part 2 - Google Jumps into a Hurricane.

Just a bit more crucial background needs to be communicated before we get into Google's actual launch inside China. In September, 2005, it came to light that Yahoo had provided the Chinese government with private information which allowed China to identify - and arrest - Shi Tao, who had used his otherwise anonymous Yahoo email account to spread inside information regarding China's efforts against a New York based Chinese democracy website.  Shi Tao was sentenced to 10 years in prison. In December, 2005, Microsoft agreed to a demand by China to delete internet writings by Zhao Jing, a Chinese blogger promoting freedom of speech.  (Zhao Jing had gained some measure of fame after being interviewed by a New York Times reporter.) Microsoft's blogging service had no servers inside China - it agreed to erase information stored on and broadcast from America.

At the end of 2005, as Google prepared to launch as a formal, sanctioned business inside China - and thus subject to censorship as demanded by the Chinese government - Google had to figure out what websites had to be blocked and how to present those blocks to its Chinese users.  While one would think that the Chinese government would have maintained an official "black list" and given Google the same, no such list was provided. Instead, what Google did was run web searches inside China using key words it suspected might be troublesome; if a site was blocked when they searched it, it went onto Google's list of sites to block.

Google also decided that its web search results pages would inform searchers inside China if websites had been removed from the search results. Google's decision to do this was not shared with Chinese officials before Google launched inside China on January 27, 2006. For example, let's suppose at the time that someone in China wanted to find out if ole Guns-N-Roses had made any progress on that long planned "Chinese Democracy" album, and used to search for the same. The search would have returned some results, but many other results would have been censored and not displayed.  The Google search results page would contain a disclaimer statement informing the searcher that some results could not be displayed due to Chinese law.

In light of the hurricanes of negative publicity suffered by both Yahoo and Microsoft when those two companies gave in to Chinese intimidation, Google made efforts in advance to protect private information and its Chinese users. A Google representative testified to the U.S. Congress in February 2006: "[For] protection of user privacy, we will not maintain on Chinese soil any services, like email, that involve personal or confidential data. This means that we will not, for example, host Gmail or Blogger, our email and blogging tools, in China."  Clearly, Google saw itself as taking reasonable measures to do better than its American competitors had in this regard. During that same Congressional hearing, Google admitted that formally entering China would compromise its two fundamental commitments, but pointed out that formally staying out of China was already doing the same.  (Those two fundamental commitments were stated to be: (a) a business commitment to satisfy the interests of users, and by doing so to build a leading company in a highly competitive industry; and (b) a policy conviction that expanding access to information to anyone who wants it will make our world a better, more informed, and freer place.)

Human rights activists, technology enthusiasts, members of the media, Chinese citizens, and even governments began to explore "" immediately. One popular search, of course, was "Tibet", while another was "Tiananmen Square".  Searches for "Tibet" returned mostly anti-Tibet sites, while those for "Tiananmen Square" failed to return websites referencing the historic anti-Chinese government events which took place there. was completely blocked.

On the other hand, we must consider another key fact, often overlooked, which speaks well of Google. Despite launching the formal search engine at "" inside China, Google did not take down its Chinese "" search engine.  Thus, for a period of time, someone in China could usually access the official and unofficial Google web search engines, with the unofficial results typically uncensored.

The same month as the Congressional hearings mentioned above (at which Google, Yahoo, and Microsoft were all hammered by U.S. Congressmen), The New York Times again met in Beijing with the by-then well known Chinese freedom of speech blogger, Zhao Jing. When asked about Google, Zhao had generally kind words and recognized that Google was seeking reasonable compromises.  With regard to Microsoft, Zhao had mixed feelings - perhaps generous, from an American perspective, given that Microsoft had deleted his freedom of speech blog at the demand of his oppressive government. As far as Yahoo, Zhao described the company as a "sellout" and commented that the Chinese people "hate  Yahoo".

The head of Google's China operation in 2006 was 44 year old Kai-Fu Lee, who was born in Taiwan*, educated in part at both Columbia and Carnegie-Mellon, and worked for Apple in California as well as Microsoft in China. He was already well-known in China. When Google hired him away from Microsoft in 2005, his personal website proclaimed, in Chinese, "Youth + Freedom + Equality + Bottom-up Innovation + User Focus + Don't Be Evil = The Miracle of Google." Yet when The N.Y. Times interviewed him several months later, he stated quite seriously that many Chinese do not hunger for "freedom" in the manner that Americans appear to think they do. Rather, Chinese tend to take the long view, be more patient than Americans, and accept the life around them as opposed to constantly thinking about changing it. In the years following its formal entry into China, Google would find out whether it could survive and thrive in China without violating its founding conviction of "Don't Be Evil".

Part 3 in this series to follow on April 28.

* As a reminder, Taiwan is the island just to the southeast of the Chinese mainland, and is not all that far north of the Philippines. Taiwan was more or less part of China until the late 1940s, when it became the last stronghold of the military dictator driven off the mainland by Mao.  Taiwan maintained its independence from the then-new People's Republic of China, but was never formally recognized as a separate nation by the world community due to opposition of this by China.  Taiwan transitioned to a democratic form of government in the 1990s, further aggravating China - which always held the position that Taiwan is part of China and should be directly ruled by Beijing. Taiwan continuously straddles the line between antagonizing the People's Republic of China and acting as an independent state. Most observers believe that China would have invaded Taiwan and forcefully returned it to full Beijing control if not for the support Taiwan has received from the United States, sometimes including the presence of U.S. Naval warships in the region.

Monday, April 19, 2010

Lawsuit Against Sorority President Who Commissioned Wax Statue of Herself

A lawsuit filed by the Alpha Kappa Alpha sorority last year claimed that its international president should be ousted because she spent hundreds of thousands of dollars of the group’s money on a wax statue of herself and other personal items.

International President Barbara McKinzie says that the statue cost less than $45,000. Her statute and the other she commissioned (one of an original sorority president) are supposedly to be  displayed in the National Great Blacks in Wax Museum.  She claims that the rest of the $900,000 at issue was put toward the sorority's 2009 national convention in Chicago. Yes, the National Great Blacks in Wax Museum (NGBIWM) is real; it states that it exists in part to "use great leaders as role models to motivate youth to achieve".  No word yet on who has promoted Ms. McKinzie to "great leader" status.

The sorority's suit alleged that McKinzie used the sorority’s American Express card to buy designer clothing, jewelry and lingerie, and she used credit-card awards points to buy a big-screen television and gym equipment, according to the stories. In all, the suit says, she spent almost $400,000 on personal expenses, the Chicago Sun-Times reported.

However, the Washington D.C. based Judge Natalia M. Combs-Greene did not accept those allegations and claimed the lawsuit was based on “hyperbolic allegations.”  Judge Combs-Greene recently dismissed the lawsuit. Interestingly, Judge Combs Greene, a Clinton appointee, is an African American female who attended law school at Howard University, where the Alpha Kappa Alpha sorority was founded.

Inquiries to the National Great Blacks in Wax Museum to find out the status of Ms. McKinzie's wax statue have not been responded to.

Saturday, April 17, 2010

Presidential Memorandum: Allow Hospital Patients Equal Rights, Regardless of Sexual Orientation, Religion, National Origin

It is entitled "Presidential Memorandum - Hospital Visitation: Memorandum for the Secretary of Health and Human Services".  The subject is "Respecting the Rights of Hospital Patients to Receive Visitors and to Designate Surrogate Decision Makers for Medical Emergencies." By its own language, it does not change the law or create any rights.  However, like almost everything any United States President does this century, it is sure to evoke various and passionate responses.

To summarize the changes raised by the Memorandum, it directs the Department of Health and Human Services (which directly or indirectly governs hospitals in the U.S.A.) to initiate changes in laws and administrative rules which allow all patients to designate visitors who have the right to visit, regardless of the legal relationship between the patient and visitor.  In other words, the "family only" restrictions will likely be removed in the next year or so. North Carolina recently changed its Patients' Bill of Rights law to allow the same.

The Memorandum also discusses how the laws and rules regarding "family-only" patient visitation may impact the role of those who are healthcare surrogates, health care proxies, or who have durable power of attorney. The Civil Lawyer Online provides services in this area. President Obama went out of his way to emphasize to the Secretary of Health and Human Services that rules and laws regarding healthcare surrogates and the like must be consistent and in harmony with new rules and laws regarding increased patient visitation rights.


Commentary by The Civil Lawyer Online:

On the one hand, the Memorandum seems to state the obvious:  hospital patients should have equal rights. One thing the Memorandum is sure to accomplish is to educate many in the United States (and around the world) as to the fact that, currently, hospital patients do not all have equal rights. For example, currently in some states, one's long time significant other or "life partner" may not be considered "family" entitled to full visitation rights - regardless of whether the couple is heterosexual or homosexual. Whoever you are, can you imagine that the people who mean the most to you in the world might not be allowed to see you, because - by random chance - you don't share the same gene pool?

As an attorney who has a great deal of experience with hospitals, doctors, nurses, patients, etc., this is clearly a positive development from a practical standpoint. Without getting into the politics and emotions of it, allowing patients to be comforted by those they care about - and those who care about them -  benefits all of us.  How, you ask?

This country has a nursing shortage and an "age-heavy" population. Our healthcare system is stretched thin. Our healthcare providers are overworked. In most situations, hospital-based healthcare providers are quite happy to have visitors with their patients.  Visitors often serve as another set of eyes and ears on the patient, which benefits the patient and the healthcare providers (especially nurses). Nurses can't be everywhere, all the time.  Almost no patients get direct care and monitoring (other than electronic) every minute of the day and night. If a caring visitor is with the patient, the result is usually a benefit to the patient and a benefit to the hospital staff.

We must also think of communication. Many hospital patients are not in a position to communicate effectively, if at all, whether due to age and infirmity, trauma, language barrier, or any other of a number of issues. We've all come across situations in which we couldn't understand someone - but a close friend or family member could. Communication is key to many things, often including patient treatment.  Perhaps you, as a patient, end up in a situation where someone close to you - but not a relative - is allowed increased involvement in your medical care and communicates information which helps you or saves your life, such as information about medications you take or allergic reactions you have.

I was glad to see that the Presidential Memorandum referenced some of these practical benefits. If we - and our elected officials - can keep our senses about us, perhaps this development can be seen as the positive progress it is, and not as another issue to divide our country.

Thursday, April 15, 2010

NC School Teacher Suspended over Facebook Postings; Freedoms of Speech, Religion Collide

These days, it's hard to tell what is more "in" - having your very personal photos and videos broadcast across the internet or getting into trouble over what you and others put on your Facebook and other social media pages. Melissa Hussain of Wake County, North Carolina chose the Facebook route.

Melissa Hussain was teaching 8th grade science at West Lake Middle School in Apex, North Carolina, where she started teaching in 2006. It recently came to light that, last December, a student anonymously left a Bible on her desk, reportedly with a note which said "Merry Christmas", with the "Christ" portion bolded and underlined. Supposedly, someone anonymously left a photo of Jesus on Ms. Hussain's desk, which she threw away. On other occasions, students read the Bible in her classroom, wore Jesus t-shirts, and sang "Jesus Loves Me".  Parents of students in the class said that Ms. Hussain sent students to the office when they asked about the role of God in the creation process during a lesson about evolution.

On her Facebook page, Ms. Hussain wrote that the bible incident amounted to a "hate crime" and that she wouldn't let it go unpunished. She couldn't "believe the cruelty and ignorance of people sometimes" and complained that her students were spreading rumors that she's a "Jesus hater".  Facebook friends of Ms. Hussain's commented regarding "ignorant southern rednecks" and someone suggested that she respond by bringing a picture of popular race car driver Dale Earnhardt Jr. to class with a swastika drawn on his forehead. To this, Ms. Hussain responded that, while she liked the idea, carrying through with it would cause her to lose her job.  She has since adjusted the settings on her Facebook page to make it more private.

Ms. Hussain's suspension - with pay - while the situation is investigated  is largely based on the Wake County School District's code of ethics which states that employees conduct "should be such as to protect both the person's integrity and/or the reputation and that of the school system".


We don't know what Ms. Hussain's religious preferences, if any, are - and that probably doesn't matter, other than the fact that her apparently not being Christian is center to this series of events. It sounds like some of the kids in her class were using religion as a way to taunt her, which is regrettable, especially since they were using the freedoms of religion and speech as both swords and shields to do so. On the other hand, Ms. Hussain responded inappropriately, likely out of frustration. (Let's face it, kids of that age can be quite frustrating.)

The parents would likely portray their children as God-fearing young persons who have a right to express their religious preferences. Ms. Hussain would likely portray the children, the parents, and perhaps the general environment as hostile to someone who believes differently than the majority.

Arguments can be made about the rights to freedom of speech and religion that both the students and the teacher should have. Debates can be held about where the line must be drawn, and what balance must be struck. In this situation, most involved acted less than admirably. It will be interesting to see what final decision the Wake County School District comes to in this case.

Wednesday, April 14, 2010

Freedoms Hang in Balance in this Clash of Titans: Google vs. China (Part I)

Mr. McGrath will be running a weekly series of blog posts regarding the dispute between Google and China, primarily because, whether we realize it or not, both of these entities influence billions of people on a daily basis and are locked in a battle over money and control - and, ultimately, freedom and civil rights. This is Part I:  Google in China - the Beginning.

Google was founded in 1998 by two friends who attended Stanford together.  Its informal motto was (and arguably is) "Do no evil". Google first began to operate in China in 2000 (Yahoo was the first "Western" internet giant with a real presence in China, 1 year earlier), when it developed its search engine which could understand and use Asian type languages such as Chinese, Japanese and Korean.

Like other Western based search engines, it was obvious to Chinese that Google's early products in China were Western in orientation.  This was attractive to certain segments of China's population (often young professionals interested in the West), but not others (who preferred "home grown" internet search engines and products).  By 2002, Google had easily surpassed Yahoo in usage in China, garnering approximately 25% of Chinese web search traffic. It must be kept in mind that, at the time, Google did not have any real physical presence in China; it was simply that internet users in China could virtually access Google the same way most of us in the USA can access websites and search engines "based" in other countries.

Without any general warning, the Chinese government blocked Google inside China on September 3, 2002. They did so using something that many of us have become familiar with - a firewall. Not surprisingly, it became known as the "Great Firewall of China". (Brief technical explanation: the flow of information that is the internet into China runs primarily through 3 massive fiber-optic pipelines.  These pipelines are modulated by routers - some of which are produced by the American company Cisco - and can be used to block certain internet traffic.)  This firewall, and the routers that make it possible, can prevent certain patterns of information or characters (such as those which make up words and phrases) from being accessed.  For example, if the term "human rights" was searched in China at the time, one might be able to see that websites discussing that concept existed, but one could not actually access the website - an error message would appear instead.  This blockage ended after a few weeks, but Google continued to experience occasional/partial blockages and delays.

For the next few years, Google continued to ponder its dilemma:  1) remain "outside" China and continuously experience signal interference and slowdowns; or 2) actually open offices in China (with government permission, subject to Chinese regulations and censorship) and not have to struggle to get its signal past the Chinese interference.  By 2005, the Chinese web search service called "Baidu" had taken almost half of the Chinese market share, with Google stuck at around 27% market share.  ("Baidu" is apparently a reference to a centuries-old Chinese poem, and means "searching hundreds of times" - searching for the ideal.)

One reason, of course, that Google had not officially taken up a physical presence in China was to avoid censoring itself, which would be required of any business officially practicing in China. Google had publicly expressed the philosophy that, by being present in China but only from the outside, it was helping to internally transform China by increasing access to otherwise restricted information, despite the partial blockages put in place. This goes back to a well known debate over whether to interact with problematic regimes/nations or to refuse to deal with them. For example, consider the USA's stance toward Cuba, with which the USA generally refuses to interact with. Then consider whether the opposite approach - influencing Cuba by flooding it with American marketing, products, and culture - would have been more effective in undermining the controlling authoritarian Castro regime and moving the people of that impoverished nation toward a more free life this last half-century.

As 2005 progressed, Google, lead by co-founder and head of government relations Sergey Brin, began to negotiate an official presence in the People's Republic of China, at the time led by President Hu Jintao and Prime Minister Wen Jiabao. Various interest groups and individuals monitored the situation closely, some with great optimism, others with dread. In January, 2006, Google officially opened in the People's Republic of China.

Part 2 in this series to follow on April 21.

Tuesday, April 13, 2010

Taxes: You're Probably Wrong (Like Wesley Snipes Was Wrong!)

The Tax code is fairly complicated - even for lawyers, accountants, and other tax "experts". As the tax deadline approaches, The Civil Lawyer Online continues this series of posts designed to provide helpful information.*

Common Beliefs About Taxes:  Probably True, or Probably False?

1.       Filing an extension gives you more time to pay - True or False?

False! If you owe, you owe what you owe on April 15. Failure to pay results in interest charged and sometimes financial penalties. If you have to file an extension, but think you will owe the IRS this year, you are supposed to pay an estimated amount by April 15, even if you don't file by that date.

2.       Filing an extension makes you more likely to be audited - True or False?

Probably false. Extensions are automatically granted by the filing of form 4868 by April 15.  Extensions are commonplace. Sloppy/inconsistent tax returns are more likely to result in audits, so an extension may actually decrease the chances of being audited if it allows you to file a more proper and organized tax return.

3.       E-filing your tax return (filing it electronically) increases your chances of being audited - True or False?

False, according to the IRS, which encourages you to E-file.  It appears that the overwhelming majority of "early filers" filed electronically. Mr. McGrath has filed electronically for years now, including with The Civil Lawyer Online for tax year 2009.

4.       Paying taxes is voluntary - True or False?

Well, true and false!  Paying taxes is voluntary in the sense that nobody can truly force you to do so.  In fact, the instruction book published by the IRS for Form 1040 used to say that the tax system is voluntary! Of course, the people who interpreted that to mean they do not have to pay taxes often end up in prison. According to the IRS, what that language was intended to mean is that citizens have the freedom to prepare their own tax returns and have some say in their own tax affairs, as opposed to the government sending a bill with a mandatory amount. The bottom line?  Pay your taxes, unless you want to risk being prosecuted.

5.     Wages aren't taxable income (the "Wesley Snipes Tax Approach") - True or False?

False! Section 861 of the tax code contains a comment which some have interpreted to mean that income of U.S. citizens earned from U.S. sources is not taxable. This is more recently known as the "Wesley Snipes Tax Approach". (Mr. Snipes decided not to pay taxes for 6 years, during which he earned almost $40 million; he was convicted in federal court in 2008 and sentenced to 3 years incarceration for failing to file those tax returns.  He is smiling in the photo above leaving court because he was acquitted on more serious tax fraud charges, and because he had not yet been sentenced to the 3 years incarceration.)

6.       A big tax refund is a good thing - True or False?

This has to be true, right?  Right?  Well, not really; it's generally false. If you are getting a large refund, this basically means that, during the year, you gave the government more money than you needed to.  So, instead of that money being yours to use (even if just to gain interest on it), you loaned it to the government for them to use and then pay you back by way of your tax refund. To help avoid this, you can go to and search the phrase "withholding allowances".  This will allow you to find assistance in adjusting your W-4 allowances, which can be done at any time during the year.

7.       If you're self-employed, you can deduct all of your expenses - True or False?

False! Many expenses are deductible, but not all of them. The very, very general rule is that expenses which are purely business related and not otherwise reimbursed are deductible. For example, while you may be able to deduct expenses related to using your personal vehicle for business trips if you aren't otherwise reimbursed for those costs, you can't deduct the portion of auto expenses which is incurred due to use of your car for personal reasons.

8.       Social security benefits are not taxable - True or False?

False!  Social security taxes might be taxable, if you bring in enough over all income. If social security is your only income, or the majority of your income, you likely don't have to pay taxes on your social security benefits. However, if you earn significant income above and beyond your social security, your benefits could be heavily taxed.  To learn more, go to

9.       You can claim your  A) grown child; B) elderly parent; or C) dog as a dependent - True or False?

A) usually false; B) usually false; C) always false. Once your child is 18 years old, it's harder to claim him or her as dependent. Once your child is older than 19, it's even harder. You may be able to claim your "adult" child as a dependent if (s)he is a student and truly financially dependent on you.  But be careful and see IRS Publication 501.

With regard to an elderly parent who depends on you, such a person may be a dependent for tax purposes if (s)he meets certain criteria. Part of that criteria is that you provide more than half of that parent's yearly support and that parent has very little income of their own.  Again, be careful and see IRS Publication 501.

With regard to claiming your dog as a dependent, only golden retrievers qualify.  (Guess what kind of dog Mr. and Mrs. McGrath own?)  Just kidding - no dogs can be claimed as dependents, not Lassie, not Old Yeller, not Spuds McKenzie, and certainly not those little dogs women carry around in their purses or push around in baby strollers.

10.     Those E-mails you get during tax season about your tax return are from the IRS - True or False?

False! Be careful in opening such emails, and be very careful about responding to one!  Some such emails are scams, some are intended to transfer a virus to your computer, and some are solicitations.

This year, Mr. McGrath investigated paying his taxes online, and registered to do so. At the end of the registration process, he was told that he'd receive information - including a PIN (personal identification number) - not immediately via the internet, but rather by way of US mail within 10 days, which would allow him to pay his taxes online. So, while the IRS allows electronic filing of tax returns and electronic transmittal of tax monies to and from taxpayers, it does not yet engage in emails related to your tax return, for security reasons.


Friday, April 2, 2010

Taxes: Properly Deduct Almost Any Documented Business Travel or Entertainment Expenses

It's that time of year again, and - like the rest of us - all of you business travelers out there need to make sure you keep as much of your money as legally possible. With regard to business travel expenses, almost any expense is deductible as long as it is properly supported.  The general rule of thumb is to document the following information for each expense deducted: 1) person; 2) place; 3) purpose; 4) price; and 5) date.  Formal receipts are not always necessary, though generally required for hotel stays, as well as for entertainment or meal expenses over $75.  Here is a brief summary of some general* rules on certain business expenses:

Expense TypeDeduction AvailableFormal Receipt ?
Hotel100% of reasonable totalYes
Business Meal (local)50% (of reasonable total, including tax + tip)If over $75
Business Meal (personal, while traveling)Daily meal allowance amount (was $39-$46 in most of USA)Preferred
Travel (air, auto, train)100% of reasonable totalPreferred
Entertainment50% of expenses "directly related or associated with work"Yes if over $75
Personal Car Mileage100% for work travel (generally can't include normal trip to office)No but must keep written log
Misc.100% of "ordinary and necessary expenses"Preferred

The bottom line is be truthful, be accurate, be reasonable - but also be well aware of the ins and outs of the parts of the tax code which can benefit you.

* This short article is not legal advice, and is not a substitute for consulting with a tax expert.  These rules are general in nature, and may not apply to your situation.