workplace fraud
IRS abates penalties
Monday, April 4th, 2011 | tax | No Comments
In a payroll tax case we have been working on for over a year, the IRS has agreed to abate penalties, saving the taxpayer over $200,000. This is a very unusual decision for the IRS, which considers non-payment of payroll taxes to be an unauthorized loan of government funds.
Employers are required to withhold income tax, Social Security tax, and Medicare tax from their workers’ wages and deposit these funds regularly. At the same time, employers pay their share of Social Security and Medicare taxes. Penalties mount rapidly if an employer falls behind on these deposits.
The circumstances of this taxpayer’s case were unique. Their office manager/bookkeeper had let the company get behind on their payroll tax deposits, but she had told the owners that everything was fine. She had gained unauthorized access to the company’s post office box so she could intercept the IRS notices before the owners saw them. Her ruse unraveled when she was absent one day. The owners received one of the notices in the mail and called us.
Our investigation revealed how serious the situation was, with a delinquent tax liability in the mid-six figures, plus penalties and interest. The owners amassed enough funds to get the back taxes paid. We organized the documentation, interviewed the owners, and fashioned a compelling narrative describing the course of events that led to the late deposits. Through a series of letters, conversations, and meetings, we were able to persuade the IRS to abate the penalties. If the decision had gone the other way, the burden of paying the penalties on top of the back taxes probably would have put the company out of business.
We consider this a big win against the odds for our client. Not all of our engagements with the tax authorities end this well, but this is one example in which our willingness to stand toe-to-toe with the IRS on behalf of the taxpayer turned a potentially catastrophic situation into a more manageable one. As a result, the owners can now turn their focus back to managing their company through the recession.
Do you have an IRS story you’d like to share? How can we advocate for you?
Fraud protection resource
Monday, June 21st, 2010 | consulting | 1 Comment
When times get tough, more people try imaginative (and illegal) ways to outsmart the system or take advantage of others. We’ve seen it during this recession in Ponzi schemes (e.g., Madoff and Bolze), unemployment insurance fraud, bank fraud, mortgage fraud, and more. Recently, the Federal government set up the interagency Financial Fraud Enforcement Tax Force to improve enforcement actions and to help us protect ourselves from fraud. They launched the website StopFraud.gov as a central point for news and information on financial fraud.
As consumers and as business owners, we need protective measures to reduce our risk of becoming fraud victims. You may find some useful information on this website. For more specific help in boosting your fraud protection, please feel free to contact us.
Fraud and Embezzlement
Tuesday, May 25th, 2010 | consulting | No Comments
Workplace fraud is an age-old problem in all types of businesses. Whether it takes the form of financial statement fraud, corruption, or misappropriation of company assets, the cost to businesses is estimated at seven percent of annual revenues, according to the Association of Certified Fraud Examiners (ACFE). Their new report, to be released June 2, indicates that almost 90% of workplace fraud consists of misappropriation of assets. This may range from pilfering office supplies to complicated large scale schemes. Frauds may continue for years before they are detected. In forty percent of cases, the fraud is revealed by a tip. This report shows a snapshot of workplace fraud and how it is detected.
Small businesses are especially vulnerable to occupational fraud because internal controls often are not robust enough and because various duties must be combined and carried out by the smaller staff.
We are presenting at a small business seminar in Morristown, TN on June 8 sponsored by First Tennessee Bank. We will show how workplace fraud and embezzlement can happen right under the owner’s nose. We will also give attendees some practical ways to improve their companies’ internal controls.
In another presentation that day, we will talk about the increase in IRS audits and what business owners can do to make sure their books and records will withstand IRS scrutiny.