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Civil Tax Fraud – Episode 151
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Civil Tax Fraud – Belk on Business – Episode 151
As we begin to see a trend with the law passed this week which has funding for the IRS for increased enforcement action, business owners can use the common areas the IRS as a learning tool to make sure their manner of action, bookkeeping and record keeping is handled in a way to improve the probability of a properly prepared tax return. The tax code in 1955 was 929 pages and today it is over 6,600 pages.
Following are some of the most common, not all, of the areas the IRS generally reviews when looking for fraudulent intent:
1) Dealing in cash - Have a good point of sale system in place, invoices, sequential receipts and always reconcile cash to receipts. Never pay employees, contractors, or vendors in cash
2) Failure to file tax returns – file every year in a timely manner
3) Filing false documents including false tax returns - properly record and report income and expenses and properly issue W-2s, 1099s, etc.
4) Understating income – keep books, invoice clients, document intercompany transactions
5) Keeping inadequate records – understand what the IRS requires as far as record keeping. Keep all receipts, bank statements, credit card statements and make sure receipts are documented correctly. Keep meeting minutes.
6) Giving implausible or inconsistent explanations of behavior – business activities should align with the business purpose
7) Concealing income or assets – using offshore accounts, fictitious names, diverting income to personal accounts instead of into the business account.
8) Engaging in illegal activities
9) Supplying incomplete or misleading information to a tax return preparer – a tax return is the responsibility of the taxpayer, not the professional.
10) Providing testimony that lacks credibility
11) Failing to cooperate with tax authorities
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