The Forensic Accountants Role in Litigation

When people hear the term “forensic science,” they usually think “CSI.” What comes to mind when you hear the term “forensic accounting”? Similar to forensic scientists offering opinions about scientific matters, forensic accountants may be called on to investigate and serve as financial experts in commercial litigation. Here’s how. Who forensic accountants are Forensic accountants specialize in conducting fraud audits and investigations to detect irregularities and troubling trends, looking for both telltale and subtle signs of white collar crime. Certified fraud examiners (CFEs) are specially trained in fraud discovery, recognition, documentation and prevention. They’re also generally knowledgeable about human behavioral factors and motivations that contribute to the commission of fraud, such as the ability to rationalize fraudulent conduct. Often, forensic accountants are retained to detect misrepresentations of financial...

TCJA Limits Casualty Loss Deductions

Unforeseen disasters happen all the time and they may cause damage to your home or personal property. Before the Tax Cuts and Jobs Act (TCJA), eligible casualty loss victims could claim a deduction on their tax returns. But there are new restrictions that make these casualty loss deductions much more difficult to take. What’s considered a casualty for tax purposes? It’s a sudden, unexpected or unusual event, such as a hurricane, tornado, flood, earthquake, or fire; an accident or act of vandalism; or even a terrorist attack. Unfavorable changes for casualty loss deductions TCJA made changes for losses incurred in 2018 through 2025.  Generally eliminated are personal casualty loss deductions, except for losses due to federally declared disasters. During 2019, there were presidential declarations of major disasters in...

Preventing Fraud in Auto Dealerships

Preventing fraud in auto dealerships requires a strong internal control system.  This will serve to prevent occupational fraud from cutting into your auto dealership’s profits and generating negative publicity. And effective controls start with current and accurate financial statements. Preventing fraud in auto dealerships starts in accounting One sign of weak internal controls is an accounting department that fails to generate financials until two or more weeks after month’s end. Accounting should post transactions daily, including new and used vehicle sales, repair orders, invoice payments, payroll and cash receipts. By 1 p.m. on any given day, you should have access to real-time checkbook balances and other accounting information effective as of 5 p.m. the day before. That way, you might be able to catch the first signs of...

Tax Treatment of New Business Expenses

Have you recently started a new business? Or are you contemplating starting one? Launching a new venture is a hectic, exciting time. Before you even open the doors, you generally have to spend a lot of money on new business expenses. You may have to train workers and pay for rent, utilities, marketing and more. Entrepreneurs are often unaware that many expenses incurred by start-ups can’t be deducted right away. The way you handle some of your initial expenses can make a large difference in your tax bill. Key points on how new business expenses are handled When starting or planning a new enterprise, keep these factors in mind: Start-up costs include those incurred or paid while creating an active trade or business — or investigating the creation...

College Plan as Part of Your Estate Plan

The staggering cost of college makes it critical for families to plan carefully for this major expense.  In many cases grandparents want to play a role. As you examine the many financing options for your grandchildren, be sure to consider college financing in your estate plan. Make direct payments A simple, but effective, technique is to make tuition payments on behalf of your grandchild. So long as you make the payments directly to the college, they avoid gift and generation-skipping transfer (GST) tax without using up any of your $11.4 million gift or GST tax exemptions or your $15,000 annual gift tax exclusion. Threr's a disadvantage of direct payments though. If your grandchild is young, you have to wait until the student has tuition bills to pay. So there’s...

Executive Occupational Fraud

In its 2018 Report to the Nations on Occupational Fraud and Abuse, the Association of Certified Fraud Examiners (ACFE) reported that owners and executives accounted for only 19% of all fraud cases. Yet they caused a median loss of $850,000, vs. a median of $100,000 for rank-and-file employees.  As such, they post the greatest occupational fraud risk. Executive thieves get away with more because they have greater access to assets and can more easily override internal controls. Their schemes also tend to continue for longer periods before detection — an average of two years vs. one year for non-manager employee schemes. So it’s critical to spot the signs of executive occupational fraud risk and nab these high-placed thieves. Occupational Fraud Risk: Greater authority = greater damage Traditional preventive...

Spendthrift Language

Protecting assets from creditors is a critical aspect of estate planning.  However, you need to think about more than just your own creditors. You also need to consider your heirs’ creditors. Adding spendthrift language to a trust benefiting your heirs can help safeguard assets. Spendthrift language explained Despite its name, the purpose of a spendthrift trust isn’t just to protect profligate heirs from themselves. True, that’s one use for this trust type.  Even the most financially responsible heirs can be exposed to frivolous lawsuits, dishonest business partners or unscrupulous creditors. A properly designed spendthrift trust can protect assets against such attacks. It can also protect your loved ones in the event of relationship changes. If one of your children divorces, your child’s spouse generally can’t claim a share...

Deducting Business Meals

In the course of operating your business, you probably spend time and money “wining and dining” current or potential customers, vendors and employees. Is deducting business meals still possible? The rules changed under the Tax Cuts and Jobs Act (TCJA), but you can still claim some valuable write-offs. No more entertainment deductions One of the biggest changes is that you can no longer deduct most business-related entertainment expenses. Beginning in 2018, the TCJA disallows deductions for entertainment expenses, including those for sports events, theater productions, golf outings and fishing trips. Deducting business meals still allowed You can still deduct 50% of the cost of food and beverages for meals conducted with business associates. However, you need to follow three basic rules in order to prove that your expenses are...

Deducting Medicare Premiums

Americans who are 65 and older qualify for basic Medicare insurance.  However, to get the level of coverage they desire, they may need to pay additional premiums. The premiums can be expensive, especially if you’re married and both you and your spouse are paying them. But one aspect of paying premiums might be positive. If you qualify, deducting Medicare premiums may help lower your tax bill. Medicare premium tax deductions Premiums for Medicare health insurance can be combined with other qualifying health care expenses.  Collectively, they allow you to claim an itemized deduction for medical expenses on your individual tax return. This includes amounts for “Medigap” insurance and Medicare Advantage plans. Some people buy Medigap policies because Medicare Parts A and B don’t cover all their health...

Questions

Alright . . . you've successfully filed your 2018 return with the IRS.  But now, you find that you've may still have some 1040 questions after you've filed. Here are brief answers to three questions that we’re frequently asked at this time of year. 1040 Questions #1: What tax records can I throw away now? At a minimum, keep tax records related to your return for as long as the IRS can audit your return or assess additional taxes. In general, the statute of limitations is three years after you file your return. So you can generally get rid of most records related to tax returns for 2015 and earlier years. (If you filed an extension for your 2015 return, hold on to your records until...