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Financial Impropriety Of Staff Or Agents Falls Back To The Family Employer

A wealthy real estate developer and his wife, both television reality stars, face charges for a number of financial crimes. According to a U.S. attorney, the couple are charged with defrauding banks by fraudulently obtaining millions of dollars in loans and with actively evading paying federal taxes on the money they earned.

Beginning in 2007, the couple allegedly provided false information and fabricated bank statements when applying for the millions of dollars in loans they received from banks. The couple also allegedly hid their income from the Internal Revenue Service (IRS) and failed to pay federal income tax for four years.

A grand jury recently indicted the couple for tax evasion, bank fraud, wire fraud, and multiple counts of conspiracy.

The couple deny the allegations. The husband posted a statement on Instagram saying they discovered in 2012 that a trusted employee had been stealing from them, falsifying documents, and forging signatures. He claims the employee contacted the U.S. Attorney's Office with false accusations against the couple after they terminated and then sued the employee. 

A special agent with the IRS said that the IRS and the Department of Justice are dedicated to finding and prosecuting individuals who conspire with others to hide their income and lie to federal agents when confronted. Catherine Thorbecke "[…] charged with tax evasion" (Aug. 13, 2019).

Commentary and Checklist

Family employers can be held responsible for errors or falsifications made by their financial managers, accountants, and other staff, especially on official documents.

For example, according to the U.S. Internal Revenue Service, "Taxpayers are legally responsible for what's on their tax return even if it is prepared by someone else."

If a staff member or third-party professional is in charge of submitting financial documents to banks for loans or otherwise dealing with your family business financial paperwork, always look over the documents before they are submitted to make sure they are accurate and have not been altered.

Ask any questions you need in order to be able to understand the entries. Hire an outside auditor to routinely review your financial documents for signs of fraud or obtain a second independent review.

Select your tax preparer with care. Follow these tips from the IRS for selecting a trustworthy tax preparer:

  • Check the preparer's qualifications, making sure he or she has a Preparer Tax Identification Number (PTIN). Ask if the preparer is a member of a professional organization and pursues continuing education.
  • Research the preparer through the Better Business Bureau to check if he or she has a history of any questionable returns. Also, look for disciplinary actions and licensure status with the state board of accountancy for certified public accountants, the state bar association for attorneys, or the IRS Office of Enrollment for enrolled agents.
  • If considering a preparer who is not a CPA, enrolled agent, or attorney, make sure he or she has passed the IRS's minimal competency test and is a Registered Tax Return Preparer. However, it is best practice to select a CPA, enrolled agent, or attorney. 
  • Do not choose a preparer who calculates his or her service fee as a percentage of your refund. Also, avoid preparers who claim they can get you a larger refund than anyone else. 
  • Make sure that the preparer sets up your refund to go into an account in your name. Never use a preparer who deposits all or part of your refund in an account in his or her name.
  • Select a professional who offers electronic filing with the IRS.
  • Choose someone who is accessible year-round in case you have problems or concerns.
  • Use a preparer who asks to see your records and receipts and asks you multiple questions about your finances. 
  • Never use a preparer who asks you to sign a blank tax form.
  • Always look over your tax return and ask about anything that is suspect before you sign the form.
  • Make sure your preparer signs your tax return, enters his or her PTIN, and provides you with a copy of the document.

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