By Fraud Expert, Ed Martin

From www.irs.gov

I. The Voluntary Nature of the Federal Income Tax System

A. Contention: The filing of a tax return is voluntary

B. Contention: Payment of tax is voluntary

C. Contention: The IRS must prepare federal tax returns for a person who fails to file

by Fraud Expert, Ed Martin

When do people embezzle or abuse the company? Generally, three things have to be present before someone commits fraud or embezzles: need, opportunity, and rationalization. This is known as the “triangle of fraud.”

Need – Direct need is stealing to fund cash needs and is often driven by an addiction – drugs, alcohol, gambling, or an extramarital affair.  Therefore, the next time someone brags about an affair, a warning flags should go up if the handle your company funds.

by  Fraud Expert, Ed Martin

If you are unfortunate enough to have IRS Criminal Investigation (CI) target you and execute a search warrant on your residence, cars, and small business here is what to expect. An IRS Special Agent with information sufficient to establish probable cause for a search warrant has filed an affidavit with a US Magistrate and obtains a search warrant.

The affidavit will be “sealed” to prevent access to the contents.  The agent (armed with guns, bullet proof vests and badges)

by Fraud Expert, Ed Martin

6 Tips to minimize fraud risk:

1. Protect your money:  Have company bank statements sent to the home of the business owner, not directly to the office, to demonstrate that you are paying attention to the company finances.
2. Review the statement and ask questions about several items on the statements to ensure the employee knows you are watching, which will reduce the opportunity and increase the risk of being caught.  Require monthly reconciliations and review them monthly looking for checks that cleared and those outstanding. 
3. Have a third party, perhaps an accountant, or forensic accountant review internal controls, segregation of duties, and suggest changes.