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Fraud

Fraud. 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. Intent.

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Fraud

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Presentation Transcript

  1. Fraud • 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.

  2. Intent • Mental desire and will to act in a particular way, including wishing not to participate. • Synonymous with willfulness • Two elements • Knowledge • Specific intent

  3. 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.

  4. Intentional An attempt to cover or hide actions Usually due to lack of knowledge or negligence No attempt to cover up Fraud vs Error

  5. Indicators 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.

  6. 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%.

  7. When do I begin to gather evidence? • At the beginning of any audit

  8. Why should I gather evidence? • To support your assertions regarding the tax returns.

  9. Subpoenas • 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

  10. 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.

  11. The End

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