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White Nelson Diehl Evans CPAs
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fraudulent activities that may be occurring in your business
16
Mar

Fraud Series: Red Flags that Fraud May Be Occurring in Your Business

Welcome to our WNDE 2017 Series on Fraud.

The Association of Certified Fraud Examiners (ACFE) publishes data on why employees commit fraud. According to the ACFE, employees may commit fraud if three elements are present:

  • requirements to have fraud occrMotive: The employee has an immediate need for money that cannot be satisfied by legitimate means. For example, the employee may have maxed-out his or her credit cards, borrowed money from relatives and friends and taken out short-term bank loans – and yet is still desperate to obtain additional funds.
  • Opportunity: The employee may have access to cash or other assets, and there is a lack of segregation of duties which would otherwise prevent a fraud. For instance, an employee may be in charge of the company’s general ledger, and also be authorized to prepare checks. The employee could prepare a check to a fictitious vendor, forge the check signature, deposit the check in his or her personal bank account, and make entries into the general ledger to cover up the fraud.
  • Rationalization: The employee justifies or excuses his or her conduct.

 

There are certain Red Flags that fraud may have occurred at your business:

  1. There may be an unusual or unexplained decrease in cash receipts or increase in cash disbursements.
  2. The conduct or personal circumstances of a company officer or employee may cause suspicion, such as:
  • know the signs of potential fraud in your business or companyA lifestyle that is well beyond what would be expected at his or her compensation level(expensive cars, expensive vacations, etc.)  
  • Heavy private debts
  • A drug addiction, alcohol addiction or gambling addiction problem
  • An employee that has grievances against the company.

    3. A “whistleblower” may come forward and alert management of an actual or suspected fraud. This person could be an officer, employee, informant, vendor, customer or other outside party. (Note: The Association of Certified Fraud Examiners has published statistics that almost 50% of fraud is discovered by tips.)

If any of these Red Flags are present, the company should consider performing a confidential fraud investigation under the direction of the company’s counsel. At White Nelson Diehl Evans, we provide advisory services to help clients implement internal controls best practices that help prevent fraudulent behavior, and can perform forensic accounting investigations. If you want to minimize the chance of fraud or suspect that fraud may have occurred, contact your WNDE partner today.

identity theft and taxes
27
Jan

Tax Tip: How Identity Theft Can Affect Your Taxes

Tax-related identity theft normally occurs when someone uses your stolen Social Security number to file a tax return claiming a fraudulent refund.  Many people first discover the fraud after they file their taxes.  It’s becoming a bigger and bigger problem every year, said Erin Johnson, a senior tax manager at White Nelson Diehl Evans.  She said, “In recent months we have seen a large amount of clients receiving letters either from the IRS or realizing from other channels that they are victim of identity theft.”
The IRS is working hard to stop identity theft with a strategy of prevention, detection and victim assistance. Here are nine key points:

  1. taxes security together awareness campaignTaxes. Security. Together. The IRS, the states and the tax industry need your help. We can’t fight identity theft alone. The Taxes. Security. Together. awareness campaign is an effort to better inform you about the need to protect your personal, tax and financial data online and at home.
  2. Protect your Records. Keep your Social Security card at home and not in your wallet or purse. Only provide your Social Security number if it’s absolutely necessary. Protect your personal information at home and protect your computers with anti-spam and anti-virus software. Routinely change passwords for internet accounts.  While people are becoming more aware of threats to security related to identity theft, most have not done enough, believes Johnson.  Noting hackers have broken into files of such large organizations as retailer Target and the IRS, she observed, “Unfortunately, in these instances there is not a lot you can do as a consumer.  However, ways you can help stop identity theft is having strong passwords on computers and mobile devices. You can also pay a monthly fee to have an identity theft monitoring system as well.”
  3. don't get scammed on your taxes Don’t Fall for Scams.  Criminals often try to impersonate your bank, your credit card company,even the IRS in order to steal your personal data. Learn to recognize and avoid those fake emails and texts. Also, the IRS will not call you threatening a lawsuit, arrest or to demand an immediate tax payment. Normal correspondence is a letter in the mail. Beware of threatening phone calls from someone claiming to be from the IRS.  In her years with the IRS, Johnson has seen repeated mail and refund fraud, and “even a client’s movers stealing their filing cabinet with all their personal information.”
  4. IRS Letters. If the IRS identifies a suspicious tax return with your SSN, it may send you a letter asking you to verify your identity by calling a special number or visiting a Taxpayer Assistance Center. This is to protect you from tax-related identity theft. This call will take approximately 30 minutes and your tax advisor can also be on the call to help assist with questions.
  5. Report Tax-Related ID Theft to the IRS. If you cannot e-file your return because a tax return already was filed using your SSN, consider the following steps: a)  File your taxes by paper and pay any taxes owed. b) File an IRS Form 14039 Identity Theft Affidavit and for California file Form 3552. Print the form and mail or fax it according to the instructions. It will also require you to mail a copy of identification such as a driver’s license, social security card, or passport. You may include it with your paper return. c) File a report with the Federal Trade Commission using the FTC Complaint Assistant; d) Contact one of the three credit bureaus so they can place a fraud alert or credit freeze on your account;
  6. IP PIN. If you are a confirmed ID theft victim, the IRS may issue an IP PIN. The IP PIN is a unique six-digit number that you will use to e-file your tax return. Each year, you will receive an IRS letter with a new IP PIN.
  7. Service Options. Information about tax-related identity theft is available online. There is a special section on IRS.gov devoted to identity theft and a phone number available for victims to obtain assistance.
  8. irs.gov to report suspicious tax activityCombating ID Theft.  In 2015, the IRS stopped 1.4 million confirmed ID theft returns and protected $8.7 billion. In the past couple of years, more than 2,000 people have been convicted of filing fraudulent ID theft returns.  Johnson noted that WNDE has protocols in place to secure its clients’ information, whether it be from sending encrypted emails to WNDE’s IT security systems sophistication.  She said, “We really view protecting our client’s personal information as priority number one.”
  9. Report Suspicious Activity. If you suspect or know of an individual or business that is committing tax fraud, you can visit IRS.gov and follow the chart on

Johnson concluded, “The threat is real and more and more people are becoming victims so protect your personal information as much as possible.”
For more on this Topic, see the Taxpayer Guide to Identity Theft.
IRS Tax Tips provide valuable information throughout the year. IRS.gov offers tax help and info on various topics including common tax scams, taxpayer rights and more.
Additional IRS Resources:

  • Publication 5027, Identity Theft Information for Taxpayers
  • Publication 5199, Tax Preparer Guide to Identity Theft
  • Publication 4524, Security Awareness-Identity Theft Flyer

IRS YouTube Videos:

  • IRS Identity Theft FAQ: Going After the Bad Guys – English | ASL
  • Phishing-Malware – English | ASL

Share this tip on social media — #IRStaxtip; How Identity Theft Can Affect Your #Taxes. http://go.usa.gov/xTc6J, #IRS

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