FraudFraud

The intentional use of deceit, a trick or some dishonest means to deprive another of his money, property or a legal right

The most important step in proving fraud is to establish that the action or lack of action was INTENTIONAL.

The intentional use of deceit, a trick or some dishonest means to deprive another of his money, property or a legal right

The most important step in proving fraud is to establish that the action or lack of action was INTENTIONAL.

IntentIntent

Mental desire and will to act in a particular way, including wishing not to participate.

Synonymous with willfulnessTwo elements

KnowledgeSpecific intent

Mental desire and will to act in a particular way, including wishing not to participate.

Synonymous with willfulnessTwo elements

KnowledgeSpecific intent

How do you prove intent?How do you prove intent?

Intent is a person’s state of mind and you can not prove what a person is thinking.

The best way to prove intent is to look at the person’s actions, what was going on at the time the actions took place, what has been the person’s subsequent actions.

Intent is a person’s state of mind and you can not prove what a person is thinking.

The best way to prove intent is to look at the person’s actions, what was going on at the time the actions took place, what has been the person’s subsequent actions.

Fraud vs ErrorFraud vs Error

Intentional An attempt to

cover or hide actions

Intentional An attempt to

cover or hide actions

Usually due to lack of knowledge or negligence

No attempt to cover up

Usually due to lack of knowledge or negligence

No attempt to cover up

Indicators of FraudIndicators of Fraud

Substantial excess of expenditures over available sources of funds.

Failing to keep books. Unnumbered or irregularly numbered invoices. Although the taxpayer has a good knowledge

of taxes and business practices, numerous questionable items appear on the return.

Pattern of consistent failure to fully report income over a period of years.

Repeated delinquencies in the past, especially when coupled with the taxpayer’s ability to pay.

Substantial excess of expenditures over available sources of funds.

Failing to keep books. Unnumbered or irregularly numbered invoices. Although the taxpayer has a good knowledge

of taxes and business practices, numerous questionable items appear on the return.

Pattern of consistent failure to fully report income over a period of years.

Repeated delinquencies in the past, especially when coupled with the taxpayer’s ability to pay.

How much evidence is enough?

How much evidence is enough?

In a civil matter it is “the preponderance of the evidence” or 51% or more.

In a criminal matter it is “beyond a reasonable doubt” or 100%.

In a civil matter it is “the preponderance of the evidence” or 51% or more.

In a criminal matter it is “beyond a reasonable doubt” or 100%.

When do I begin to gather evidence?

When do I begin to gather evidence?

At the beginning of any auditAt the beginning of any audit

Why should I gather evidence?

Why should I gather evidence?

To support your assertions regarding the tax returns.

To support your assertions regarding the tax returns.

SubpoenasSubpoenas

Can not be used to compel and individual to provide information

Can be used to compel LLCs, corporations and third parties to provide information

Can be used to acquire records or testimony

Can be served by any authorized agent of the Commissioner of Revenue

Can be served in person or via certified mail

Can not be used to compel and individual to provide information

Can be used to compel LLCs, corporations and third parties to provide information

Can be used to acquire records or testimony

Can be served by any authorized agent of the Commissioner of Revenue

Can be served in person or via certified mail

Basic Evidence to Gather for any Audit

Basic Evidence to Gather for any Audit

Review the tax returns and prepare your interview questions before you ever contact the taxpayer

Always ask for every record that you think you may need at the beginning of the audit

Drive by the taxpayer’s home or place of business and compare what you see to what is on the returns

Always compare the income tax returns to the sales tax and IFTA returns.

Review the tax returns and prepare your interview questions before you ever contact the taxpayer

Always ask for every record that you think you may need at the beginning of the audit

Drive by the taxpayer’s home or place of business and compare what you see to what is on the returns

Always compare the income tax returns to the sales tax and IFTA returns.

The EndThe End