Ed. note: Warning, there's some offensive language contained in this post.
Today in potential career limiting moves, we have a prospective PwC intern being accused of creating a bunch of “sock puppet” Twitter accounts to hurl bigoted tweets at high school football recruits.
If you had recently been convicted of a $100 billion tax fraud and it were the day of your sentencing, how would you spend those last hours of freedom? Visiting with friends and family, perhaps? Taking one last tumble in the sack with your beloved? Walking your dog? Eating at your favorite restaurant? Squeezing in […]
You know, I often joke that my cats Buck and Cash are interns, assistants, accountants, and CEOs of the fictional company that is my home office. But this guy clearly took that too far when he used his pets to avoid taxes: [Scientist Mathew] Zuckerman's tax-avoidance schemes included naming his dog and cat as directors […]
The Marketplace Fairness Act is back in the news again, as The Hill reports that some Republicans — Texas Senator Ted Cruz to be precise — are saying that a generational gap is largely the reason that younger GOP Senators opposed the bill. Never mind that four out of the five oldest GOP Senators voted […]
If you are currently thinking about engaging in any tax fraud, you should know that if the IRS is gracious enough to inform you that your actions — like, say, claiming ownership of a treasury bond that it is most likely fake and requesting a large, bogus refund — could result in prison time, calling […]
Note: teaser image is not this clown's mugshot. Florida, naturally: Ruth C. Amen, a longtime office manager of Gulf to Bay Realty, a Boca Grande business, is now facing embezzlement charges after a surprise birthday party for her boss backfired into a paper trail of fraudulent transactions, according to a news release from the Lee […]
For God's sake, get a good education.
If you and some cohorts are fed up with walking the straight and narrow, be advised that a recent study by Ernst & Young discovered something that may help assist you in making your future fraudulent endeavor a wild success: Phrases such as “nobody will find out”, “cover up” and “off the books” are […]
As we've witnessed, perpetrators of tax fraud oftentimes utilize very simple methods. Slapping a dead person's name, birthdate, social security number, isn't terribly difficult once the data is obtained; throw some minors on there as dependents and you've got yourself a nice little refund at the expense of some grieving family members. Not complicated. You […]
Everyone knows that the IRS makes silly mistakes from time to time, but presuming that the Service employees who look at these tax returns won't be fooled by a 1040 from "First Name: Mr." and "Last Name: Bojangles" seems a little reckless: According to an indictment obtained by CBS4, Mathew and Sandra Zuckerman are accused […]
Like when you've been telling people that you also have a computer science degree, when in fact, you don't have a computer science degree (at least in the traditional sense) and then someone – in this case, Third Point founder Dan Loeb – sorta notices: May 3, 2012 Board of Directors Yahoo! Inc. 701 First Avenue Sunnyvale, […]
When impersonating an auditor, there are certain distinguishing features and mannerisms that you must employ to successfully dupe your mark. A person rocking banal business casual threads, schlepping a backpack, wearing sensible spectacles, and a tidy haircut works in way of appearance. As far as behavior is concerned, generally speaking, you should always try to […]
Alright, folks, we have a problem. I'm going to waste precious space here (not to mention my time) explaining how to get the most out of the GC tip box since it seems many of you have never interacted with human beings before and don't get how this works. First: let me kick this off […]
With less than two weeks to go until the tax filing deadline, some people (myself included) are starting to think, "Oh, right! My tax return! I should really get on that." Yes! You and I should! Personally, I just file an extension and forget about it for another month or so. For those people who […]
Omaha accountant, Clarence "Fred" Weber appears to have a problem. First off, he was sending sexts to a 14 year-old and 13 year-old girl, "request[ing] naked photos of the girls, […] pictures of the girls partially clothed, [and] others centered on sexual activities." This, obviously, is disturbing, illegal, and completely unacceptable but secondly good God, […]
Thomas Sitzler swears that he didn't mean any harm, can't even make a bomb, and this is all came about due to a little liquid courage. A Birmingham area man, charged with making a phone threat to blow up an Internal Revenue Service building in Austin, Texas, has entered a plea agreement with federal prosecutors […]
Yesterday afternoon, a couple dozen people occupied the lobby at PwC's Washington, D.C. office for around 30 minutes. Things didn't get too exciting, as police were on the scene quickly and "nudged the protesters back onto the sidewalk," but the building did go on lockdown for a couple of hours which is NBD unless you're […]
Since it's the first day back and many of you have spent the last week or so in alcohol and food-induced stupor (and are, therefore, unable to email us anything of interest), you won't mind that we throw out this little story from a few days ago. As you may have heard, eventual-GOP-presidential-candidate-that-no-one-wants Mitt Romney […]
Thomas Sitzler really wanted the IRS Contact Rep to remember what he had to say, so he insisted (s)he write it down: "I'm gonna make Waco, Oklahoma City and nine eleven (9/11) look like a fire drill. I have paid in over one point five million dollars ($1.5 million) in federal taxes while illegals reap […]
Are you a jobless loser? Is your significant other driving you batty? Not sure how to vent your frustrations? One man found himself in such a predicament an acted in the best way he knew how:
An unemployed man who smashed the window of a Burton accountancy firm during a heated row with his girlfriend has been ordered to pay £750 compensation.
Luckily, Craig’s Guy moment of rage resulted in some poetic justice for Mom and Pop accounting firms everywhere:
The 28-year-old, of Balfour Street, Horninglow, was left with a ‘substantial injury’ to his wrist after he punched and shattered the 10ft by 5ft window on Monday evening. Emma Thompson, prosecuting, told magistrates: “It was 6pm when two witnesses saw the defendant put his fist through the window. Police were called and they traced him 45 minutes later in Evershed Way. He was found to be bleeding heavily. “He made full and frank admissions straight away and said he’d had a heated row with his partner,” Ms Thompson said. “He told officers he punched the nearest thing to him and he accepts it was a stupid thing to do.
[via Burton Mail]
Let’s open with, “If I don’t see [so and so], I will blow this place up.” That’s a definite no-no. Also to be avoided would be statements such as, “You’re gone. You’re all [redacted but I’m guessing it was “fucking”] gone. You’re gonners.” And yet that’s what 48 year-old Paul Weber did in La Crosse, Wisconsin. What’s especially odd is that Weber didn’t make these statements in immediate succession. He first asked for “Kevin” then made the threat, bolted the office only to return and make the second threat. I guess Weber felt like returning in order to take a stand. Which is more than we can say for the Democrats in Madison.
[via La Crosse Tribune]
Saffron Armstrong tried to explain that he had gone into a looted computer store because he was inquisitive – and a freelance journalist.
This drew sniggers from the press bench, but not from district judge Elizabeth Roscoe, who told him he faced a prison sentence. The 22-year-old pleaded guilty to burglary after being arrested in a PC World store in Colliers Wood, south London, the day after it was hit by looters. The accounting student from Mitcham, who also worked for Marks and Spencer, was remorseful and admitted his intentions had “not been for the best”. [BBC via AWEBUK]
So this happened:
An Ohio hotel has been fending off angry phone calls because a broken rope on its flagpole led some to think the business was mourning the death of Osama bin Laden. The rope left the U.S. flag stuck at half-staff outside a Hampton Inn in Springfield in western Ohio two days before bin Laden was killed, its assistant general manager Connie Smith told msnbc.com. However, people started noticing the flag and assuming its position was in honor of bin Laden on Tuesday. The hotel and its company received dozens of calls from people who were either upset or angry. One threatened to run the hoteliers out of town.
Today in doing a disservice to accountants everywhere, Matthew Benjamin Mundy, a double-entry maven in Australia, was fined $500 for accidentally hitting an off-duty federal police officer with an egg.
Apparently MBM was attempting to hit his friend with the ellipsoidal embryo container, missed, and hit the officer who was sitting at a café. Accidents happen but Mundy’s employer better hope his professional misfires are far less material. [ABC]
Amiright? Apparently, this guy in Sarasota, Florida was just messing with everyone but, of course, that still doesn’t go over very well with the local authorities.
“About 11:45 a.m. a 59-year-old man walked into the center with a briefcase and a box,” said Sarasota County Sheriff’s Office Capt. Paul Richard. “He placed it on what’s been described to me as a counter top and told personnel there that he had a bomb,” Richard said. IRS security personnel at the office managed to subdue the man and then hand him over to deputies. The office houses 60 employees, who were evacuated during the episode. The sheriff’s office bomb squad later confirmed there was no explosive or destructive device in either the box or the briefcase.
Allegedly! Knowing the city of Lincoln, Nebraska like we do, it’s entirely possible that these two bros were simply still not over the Husker football team’s dismal display in the last two games of the season and this shitty refund was simply the kernel that busted the storage bin.
Lincoln police said one man was arrested after he refused to leave H&R Block when he became upset with his tax refund. And the man’s brother is accused of stealing an employee’s vehicle, according to police.
Authorities were called when Joshua Brown, 26, refused to leave the H&R Block on O Street. They said he was upset with his refund and insisted on talking with all the tax professionals in the building. Officers said they removed him from the property and cited him for trespassing and fail to disperse.
A half-hour later, officers said they were called back to the same business regarding a stolen Ford Explorer. An employee found her car and keys missing, police said.
Officers said Brown was inside the business with his brother, 31-year-old Michael Medina. Police said they found the Ford Explorer in the parking lot across from the brothers’ apartment on 10th Street. Police said Medina was arrested on auto theft charges.
The snatch and grab and burn technique isn’t the most sophisticated plan we’ve read about but we are talking about a man who is an accountant first (we’re guessing a very bad one) and an extremely dimwitted criminal second:
An accountant faces seven years in jail after a court convicted him yesterday of deliberately setting fire to Dh250,000 in cash and stealing a similar amount from the taxi company where he worked.
Why this particular accountant-cum-thief decided half the money wasn’t worth his trouble is unclear but what is CRYSTAL is that setting the remainder on fire was the equivalent of writing “I’M EMBEZZLING FUNDS” with a Sharpie™ across the cash ledger.
According to the arraignment sheet, prosecutors said [the accused] deliberately set fire to the money bag which contained Dh500,000. He burned Dh250,000 and stole the rest.
He was also charged with causing intentional damage and financial loss to the company. The company’s Indian manager testified that one of the employees informed him over the phone that the accounting office was on fire.
“I rushed to the company’s premises to check what happened. We had left nearly half a million dirhams in a money bag which we kept inside a wooden cupboard. The money was our drivers’ daily revenues. I discovered that half of the money got stolen and the remaining half was burned,” the manager told prosecutors.
But to be fair to our asshat accountant du jour, “a money bag which we kept inside a wooden cupboard” isn’t the most secure internal control procedure we’ve ever heard of. Let this be a lesson.
Everyone agrees that the 1099 requirement in the healthcare overhaul sucks. It’s so unpopular that Max Baucus has taken it upon himself to ride in on the Senate chamber on a horse clad in shining armor with an amendment that will repeal the requirement pronto and single-handedly save small businesses everywhere.
But in the meantime, area man-cum-national fruitcake Glenn Beck thought he needed to warn all the eBay junkies out there that if don’t hock their stuff this year, they’ll be subject to the requirement next year:
Of course this is bullshit. Despite what GB might think about the national media, if this were in fact true, every outlet on the planet would have reported it already. The headlines would have screamed “WAR ON EBAY” and Meg Whitman could have campaigned on that (but probably still would’ve lost).
Anyhooo, just for good measure, The Hill’s Healthwatch also points out that Beck’s “exemption” claim is also false:
Beck also told his viewers on Tuesday’s show that “at least 111 companies have been declared exempt from having to use Obamacare.” In fact, the firms he refers to have been granted a one-year waiver from the requirement that their annual limit on coverage be at least $750,000.
“Exempt” versus “a one-year waiver.” Yeah, that’s almost the same thing.
In the Old Empire, if you’re busted driving over 100 mph, you’re supposed to lose your license. Apparently there is an unwritten exception to this rule that says if you’re soon-to-be married and the bride WILL NOT STAND FOR IT, you get a pass.
Exhibit A: Christopher Bidgood, 32 an accountant from “Martham near Great Yarmouth” was stopped after going 110 and “weaving in and out of traffic.” Not the first time he had a run-in over his lead foot:
Bidgood of Martham near Great Yarmouth had faced a driving ban of up to 56 days after he admitted breaking the 70mph limit at 7.47pm on September 3.
Right, then. Bidgood’s attorney, knowing full well that his client is dumber than a sack of hammers, pulled the only card he thought he could play:
Tim Carey, defending, said Bidgood, had already faced the “displeasure” of his bride Amanda due to the risk of a ban ruining their honeymoon.
Describing his client’s behaviour behind the wheel, Mr Carey told the bench: “Sir, he has been a complete idiot – an idiot of the first order.”
But a “hardworking and honest” idiot, according to his co-workers, which may have helped his case as well.
So some Democrats thought it would be a cute to try and turn the tables on their Republican opponents by insinuating that by supporting the Fair Tax, the GOP was raising taxes on middle class Americans.
Love or hate the Fair Tax, anyone that takes more than 30 seconds to research the idea knows that if implemented, the Fair Tax would abolish the income tax.
In some recent ads, a few Democratic nominees left that part out entirely:
Research supplied by FairTax.org shows that Democrats in 16 districts have run at least 31 ads blasting Republicans for supporting the tax. But many of these ads neglect to mention the levy is essentially a national sales tax that would replace the current federal tax system.
FactCheck.org recently slammed the Democratic Congressional Campaign Committee (DCCC) for running ads that omitted this fact.
“Democrats are accusing Republicans of supporting a 23 percent sales tax on everything, which would be on top of all existing taxes… it’s misrepresenting by omission of the FairTax idea,” FactCheck.org director Brooks Jackson told The Hill.
The motivation behind this strategy could be due to a number of factors:
1) The Democrats who ran the ads feel that most Americans are gullible enough to believe anything they see on TV.
2) The Democrats who ran the ads don’t understand how the Fair Tax policy would work on its most basic level, thus meeting the intelligence level to serve in Congress.
3) Democrats simply suck at accusing Republicans for trying to raise taxes.
It wouldn’t be a surprise if the first two played a part but come on. Leave the “he/she wants to raise your taxes” to the experts you fools and stick with the lowbrow stuff.
Dem ads against GOP not accurate on crux of FairTax proposal [On The Money]
“If it weren’t for the immigration bust by the Obama administration, the company would have been OK this year.”
~ “[A] source close to American Apparel” quoted in the Post obviously isn’t familiar with the company’s debt position.
Presumably, because the IRS wouldn’t possibly think to question liens taken out against government employees:
Thanh Viet Jeremy Cao, 28, of Rancho Santa Margarita and Las Vegas, is accused of taking out 22 false liens ranging from $25 million to $300 million against employees of the Securities and Exchange Commission, the U.S. Attorney’s Office, the Secret Service and the Internal Revenue Service, as well as false liens against four federal judges, the Department of Justice announced Wednesday.
Young Mr Cao wasn’t just doing this out of spite. Oh my lord, no. He had a theory behind his request for $20 billion in refunds:
Cao, whose business was Phoenix Financial Management Group in Lake Forest, filed fraudulent forms with the IRS on behalf of six clients “that grossly overstate his customers income and withholding to get grossly inflated tax refund checks,” according to a complaint filed Tuesday in U.S. District Court in Los Angeles.
Cao used a theory called “redemption” or “commercial redemption” – which prosecutors called a “rejected tax defier theory.” This theory claims that the U.S. Treasury keeps millions in a secret treasury account for each taxpayer. The secret account can be used to pay a taxpayer’s debts and tax liabilities if a taxpayer sends the IRS and banks certain documents, the theory goes.
“Cao’s theory is complete fiction,” the complaint reads.
Jesus, man. Not even an original crackpot theory. Spend some of those 223 possible years working on developing something new.
Man accused of $20 billion tax fraud [OC Register]
California Man Indicted in Las Vegas for Filing False Liens Against Federal Employees & Filing False Tax Forms [DOJ]
Give It Up Tax Protesters, You’re Just Screwing Yourselves
We don’t mean to crush anyone’s dreams of walk-offs or eating disorders but sometimes when you’re not sure if things are working out in your modeling career, you have to be able to recognize the signs when they appear.
One sure sign that you won’t be America’s Next Top Model (or the person fetching ANTM’s rice crackers) is that you find yourself claiming to have earned $550,000 working for an “environmental group” and then requesting a $200,000 refund for that “work”:
Nyemah Johnson, who models under the name Nyemah Marxx, falsely claimed he made $550,000 working for an environmental group and was entitled to the six-figure refund, prosecutors said.
He was one of five people arrested last week in a $1.1 million tax scheme that prosecutors said was led by Queens accountant Diana Rabin.
The bright side, of course, is that there is no such thing as bad publicity and assuming Mr Marxx has access to something a step above a public defender, he’ll manage to stay out of jail for too long and maybe then he’ll be able to land the “shirtless bro” gig outside the A&F.
Wait! You mean we have to pay taxes if we receive cash? When the hell did this happen? What if you’re part of the “self-reliant nonconformists who don’t pay much heed to everyday rules and regulations” community? Does that earn you a pass?
The AP reported on some workers on the Gulf Coast who are simply not aware of the notion of income taxes and would very much like to keep it that way:
Out-of-work Gulf Coast shrimper Todd Pellegal spent his first $2,500 check from BP quickly, paying off bills and buying groceries for his family.
He never even considered putting some of it away for taxes.
Now he’s among the people up and down the Gulf Coast reeling from the oil spill disaster who are surprised — and frustrated — to find out the Internal Revenue Service may take a chunk of the payments BP PLC is providing to help them stay afloat.
Many were already angry about how long the oil giant took to cut the checks. So when they got the money — generally about a few thousand dollars each so far — they spent it fast.
“If they’re going to pay you a lump sum, like for a year, then bam, take the taxes out of the check,” said Pellegal, of Boothville, La. “But a little bit at a time, they shouldn’t.”
Right, because withholding taxes from a paycheck isn’t how it works for every other person in the country who pays income taxes. Whoever heard of “net pay”?? But don’t bother suggesting planning for such a phenomenon as being paid by check:
“They should do a projection of their taxable income and determine if there is going to be a tax liability and have enough to cover that,” said Crystal Faulkner, a partner in the Cincinnati-based accounting firm of Cooney Faulkner & Stevens LLC.
That doesn’t sit well with Cherie Edwards, who is now only working one day a week at her job booking charter fishing trips at Zeke’s Landing in Orange Beach, Ala. The lost hours due to the oil spill are costing her about $270 week.
She said she got her claim number from BP on Thursday and plans to file an application in the coming day. So far, she said, no one has mentioned to her about a potential tax liability.
“I haven’t even thought about taxes. Wow. That makes me mad,” said Edwards, who has one child in college and another in high school. “I’m already losing money, and now I’ve got to figure out how to hold back money to pay taxes?”
Jesus lady, you’re right. Getting used to the $0 tax liability and then all of a sudden learning that you are required by law to pay them would piss off just about anyone.
Regardless of how easy it is for accountants to steal money (access, signatory responsibilities and such) one would think that if you intended on getting away with it that you might go to a wee bit of trouble to cover your tracks. Shamelessly making photocopies for personal matters is one thing, cutting checks to yourself are entirely another:
Between October 2, 2003 and September 20, 2007, [Todd Newman], a Certified Public Accountant with offices in Yonkers and New York City, was the Secretary/Treasurer and a signatory on the payroll of B. Schoenberg and Company, a recycler of plastics and engineering resins located in Yorktown Heights, N.Y.
He stole in excess of $1,900,000.00 (1.9 million dollars) from his employer by writing checks to himself.
Newman also failed to file Personal Income Tax returns with the State of New York for the years 2005, 2006 and 2007, for a total tax liability of $133,158.
Christ man! Set up a phony LLC, open some bank accounts, get a P.O. Box. Something.
Oregon attorney Micaela Renee Dutson and her husband Tony Dutson were convicted of defrauding the U.S. Government of over $7 million but not before doing their damnedest to stave off the IRS and DOJ investigating them.
The Dutsons were a creative couple, selling “pure trust” packages to their clients who were told that their income would be tax free if it were placed in trust. They sold these products despite “several warning letters from the IRS, articles in the Oregonian newspaper warning the public against tax shelter scams, and a compl stice Department on behalf of the IRS in an effort to stop them from selling their tax shelters.”
The IRS started auditing the Dutsons’ clients who, prior to engaging the dynamic tax duo, were seemingly compliant taxpayers. The IRS informed these clients that the “trusts” were actually illegal tax shelters and that they were being bamboozled.
This was, of course, unacceptable to the Mr and Mrs and they went on a serious offensive:
[T]he Dutsons began a campaign to obstruct the IRS’s audits and investigation, and to harass and intimidate the individual IRS employees who were auditing or investigating them. First, they created and presented dozens of fictitious financial instruments to the IRS purporting to pay off back taxes for themselves and a number of their clients.
Even though they knew the bogus instruments had no financial value and had never been accepted by a creditor, they continued to sell them to their clients with false promises they would pay off their tax liability. The Dutsons also advised clients to use them to pay off commercial debts, including mortgages and court-ordered obligations. Together, the Dutsons and their clients presented over $44 million worth of these bogus financial instruments over a four-and-a-half-year period.
To further obstruct the IRS, and harass and intimidate its employees, the Dutsons advised clients to file frivolous lawsuits against the IRS employees. The Dutsons charged their clients $3,500 each to prepare court documents and help their clients file them. They continued to advise clients to file these lawsuits — even after a federal court had dismissed the first of these suits as frivolous and without merit — without telling their clients about the dismissal.
After the Justice Department filed the complaint for a permanent injunction, and IRS special agents had notified the Dutsons in person that they were under criminal investigation, the Dutsons filed a $1 trillion lien in California against several IRS employees who had attempted to audit or investigate the Dutsons, as well as the DOJ attorneys who filed the complaint. A federal court later ruled that the lien was null, void and without legal basis, but one week later, the Dutsons prepared a $108 million lien for a client against John Snow, who was then Secretary of the Treasury.
The Dutson probably figured the jig was up and since $1 trillion is a nice round number the figured “why the hell not?!?” Back in the early ’00s a trillion was fantastical number (for the most part), not tossed willy-nilly like it is these days. The Dutsons could have filed the lien for $1 gabizillion and it would have made as much sense.
Oh and while they were at it, just file another one against the Secretary of the Treasury. If it was Tim Geithner, sure we can see that happening for a whole host of reasons but John Snow? Wasn’t he one of the most harmless cabinet members of the Bush Administration? If they would have filed the lien against Dick Cheney they could have garnered a little popular support at least.
[caption id="attachment_12661" align="alignright" width="260" caption="Does this get you hot?"][/caption]
In what amounts to either coordinated efforts by some lunatics or a giant coincidence, envelopes with white powder were sent to eight federal buildings including an IRS office in Bellevue, Washington yesterday. CNN reports that the building in Bellevue was evacuated after “an employee opened a letter and the white powder ‘poofed out.’ ”
Other envelopes were sent to FBI buildings in Seattle, Spokane, Salt Lake City, Pocatello and Coeur d’Alene, Idaho as well as U.S. Attorney’s offices in Boise and Coeur d’Alene.
While this latest IRS powder package incident seems to have caused no harm, one has to wonder what the motivation is behind such spineless actions. Does someone out there a major beef with the IRS and have a Hazmat fetish? Has that been diagnosed yet?
If you find yourself in a bit of tax trouble, the IRS is more than happy to work with you. They gave all those UBS tax evaders all the chances one could ask for. They are giving small nonprofits a break on submitting their 990s. Hell, they are opening regularly on Saturdays.
The best thing to do if you find yourself in a pinch is call them, explain the sitch and we’ll bet you dollars to vegan donuts that Doug Shulman and Co. will work it out with you.
Having said all that, it’s extremely unlikely that the Service will work with you if, say, you attempt to obtain a couple million in bogus refunds to pay off your gambling debts. You do this under the assumption that the U.S. Government will gladly take an IOU until you get around to scraping it together. Who hasn’t gotten a little careless during football season a time or two and needed to commit a federal crime to make things, amiright?
Federal authorities this week arrested a former Los Angeles County worker who allegedly used the personal information of more than 150 welfare applicants to file nearly $2 million in fraudulent claims for tax refunds.
Trang Van Dinh, a 62-year-old resident of Glendale, worked for the county for a decade and filed the returns in a desperate attempt to pay gambling debts, county auditors said.
His arrest comes months after Dinh was fired from his county job after acknowledging wrongdoing in an interview with county investigators, said Guy Zelenski, chief investigator for the county auditor-controller. County officials spoke to Dinh after IRS investigators notified them of their suspicions.
“He thought he could pay the IRS back and he would have no problems,” Zelenski said.
No problems, like facing 220 years in FPMITA prison problems?
Fired L.A. County worker arrested in tax fraud case [Los Angeles Times]
That accountant is Ren Carlton, CPA, CSMC and “native Michigander.” Although Ren is hesitant to broach the subject because, “this information can be abused to defraud investors and cheat on taxes.” Who knew?!?
Despite that caveat, Ren has decided that sharing this information is too critical to be kept to himself, “I have decided that lega s is a critical skill for attracting investors and lenders, as well as satisfying the occasional customer or vendor requests.”
Okay then! So if we understand correctly, the rationale here is that cooking the books is sort of like drinking alcohol. In moderation, it’s fine and sometimes even the right thing to do but if you abuse it, you start making an ass out of yourself and probably some bad decisions that could lead to, ya know, jail.
But wait, do you really even know what “cook the books” means? You may be under the cockamamie notion that it’s a bad thing. Well, it’s not and Ren explains it for us:
Cooking the books (also known as creative accounting and earnings management) are euphemisms referring to accounting practices that may follow the letter of the rules of standard accounting practices, but certainly deviate from the spirit of those rules. They are characterized by excessive complication and the use of novel ways of characterizing income, assets, or liabilities and the intent to influence readers toward the interpretations desired by the authors. The terms “innovative” or “aggressive” are also sometimes used.
See? Cooking the books just doesn’t follow the “spirit of those rules,” it’s not breaking the rules. Strangely enough, Ren’s definition is strangely similar to this Wikipedia entry for creative accounting:
Creative accounting and earnings management are euphemisms referring to accounting practices that may follow the letter of the rules of standard accounting practices, but certainly deviate from the spirit of those rules. They are characterized by excessive complication and the use of novel ways of characterizing income, assets, or liabilities and the intent to influence readers towards the interpretations desired by the authors. The terms “innovative” or “aggressive” are also sometimes used.
Cooking the books, creative accounting – they’re the same right? Close enough, anyway. Now that the semantics are out of the way, what other words of wisdom can we get from Ren? How about an example of acceptable book cooking? Say, revenue recognition:
One example of cooking the books is acceleration of revenue recognition. This tactic is used to recognize revenue before it is considered earned by GAAP (Generally Accepted Accounting Principles). Methods for accelerating revenue include recognizing sales that are not yet earned or complete. Another method is to book sales that are actually earned in another period (e.g., recognizing January 2011 sales on your 2010 income statement). Flagrant abuse of the Revenue Recognition Principle includes backdating sales and fabricating fictitious sales.
How are you going to impress that bank with your revenue numbers if you ram in some revenue from a future period? What if you need another investor to help you reach the next stage of your business? It’s your God-given right to present them with phony numbers in order to get them on board. This is America, people. Don’t let the spirit of GAAP hold you back!
Proposed Overhaul of Accounting Standards Contains Mark-to-Market Rule [NYT]
The FASB has rolled out MTM 2.0 and while the usual suspects have already started belly-aching, Bob Herz insisted that “The financial crisis reinforced the need for better accounting in this area.”
The new rule will require loans and loan-related instruments to be valued at their market value immediately, thus accelerating any losses that might occur. Losses will either be booked as a hit to earnings or as a reduction in the value of the asset. The Times quotes Jack T. Ciesielski of Accounting Analyst Observer, who reassures, “It will messier to read, but if you know what you are doing you can figure it out.”
The comment period (which should yield some interesting thoughts) will run through the end of September, after which the FASB will hold roundtables discussing the rule and then make any final changes. Institutions with greater than $1 billion in assets will be required to adopt the rule in 2013 while those with less than $1 billion will have until 2017.
The Property Tax: Unsung Hero [TaxVox]
States have their property tax revenues to thank for their budgets not being in an even bigger mess than they already are, according to TaxVox. “[P]roperty tax revenues have yet to fall both because the levy tends to be backward-looking (it takes a while for assessed values to catch up with reality on both the upside and the downside) and because local governments can raise rates. The strength of the property tax was the main driver of the small positive growth in overall state and local taxes for the fourth quarter of 2009.”
If states are lucky, by the time property tax rates adjust to the reduced home values, sales and income tax revenue may be on their way to recovery. However, it’s unlikely that tax revenues will return to their previous levels which means governments may have to continue (or maybe start?) to – God forbid – cut spending.
“I Didn’t Know What ‘$’ Means” Fails as Tax Defense [TaxProf Blog]
Who let this guy out of the lab? “I am unaware of the meaning of this symbol.”
Yahoo CFO Sees Annual Revenue Growth Of 7%-10% From 2011-2013 [WSJ]
Contrary to what some might believe, Yahoo is still in business and doing quite well, thankyouverymuch. CFO Tim Morse expects things to brighten up with revenue increasing 7-10% from 2011-2013, due mostly to increased advertising business. Yahoo’s partnership with Microsoft and Zynga (they make Farmville) are seen as key to the search engine competing with Google.
Survey finds tax departments more concerned with getting it right than aggressive tax planning [GT Press Release]
Grant Thornton’s latest CFO survey finds that they are more concerned with getting their taxes right than with paying less. Obviously the latter is a goal but considering the regulatory environment (i.e. Democrats are running things), it’s not the priority, despite what those people running for re-election might tell you.
Mysterious letter rattles E&Y’s Iraq ambitions [Accountancy Age]
Ernst & Young has been trying to get its audit on in Iraq shortly after Saddam Hussein’s party ended in 2004. The firm has been providing services there, however not yet been approved to perform auditing services. E&Y has been claiming that it was making headway, “on the verge of obtaining an accounting license” but now a letter from somewhere within the dense Iraqi bureaucracy seems to have delayed those plans.
It came as a shock when the firm learned of a letter sent to the Iraqi Supreme Court, the Central Bank of Iraq, the Commission of Integrity gistrar and the Iraqi Banks Union, among other senior institutions, from the Iraq Union of Accountants and Auditors, which claimed the firm had been banned.
“It has been decided to forbid the accreditation of any financial statements audited by Ernst & Young (E&Y) company and forbid its operations in accountancy and auditing for governmental and private sectors in Iraq,” the letter stated.
The letter, in Arabic and signed by the Union Secretary Dr Rafed Obaid Al Nawwas, said the union reserved the right to go to “legal authorities to stop non-Iraqis from conducting audit and accountancy in Iraq”.
So in case you missed it, E&Y did not actually receive this purported letter but heard of it second-hand and then responded that the Iraq Union of Accountants and Auditors has no authority on the matter, since it’s just an “association of Iraqi accountants.” So it sounds like the AICPA of Iraq basically tried to tell the Iraqi version of the SEC, PCAOB, et al. that E&Y was not fit to be in country (if you’ve got another idea, by all means).
Iraq’s chief accounting regulator claims to not knowing about the letter and that E&Y is “just about to obtain its license” so this may be a nuisance more than anything else.
How Stanford is worse than Madoff [Fortune]
Mostly because CDs are the basic financial instrument that is usually held by little old ladies and other common folk. Not Kevin Bacon.
Unenrolled Tax Preparer: Preparer Regulation is a CPA Plot to Put Me Out of Business [Tax Lawyer’s Blog]
Naturally, there are some unlicensed tax preparers that are taking the IRS’ proposed regulations a little personally. Peter Pappas at TLB tells us about one unlicensed preparer who did some bellyaching to the Service. This sage of taxes challenges anyone to question his expertise:
1. “I prepare my returns accurately and would challenge anyone to find errors.”
2. “I have seen numerous returns prepared by CPAs and other similar preparers that were incorrect. [the man strives for perfection]”
3. “I am willing to take some courses or some certification, but to become an enrolled agent or CPA would cause an undo burden on my business. [i.e. require me to work more than 8 hours a day]”
And that’s just a sampling. Mr Pappas kindly debunks all of these (and more):
1. “A self-serving declaration by an unenrolled tax preparer that the returns he prepares are 100% accurate is about as valuable as an NBA player announcing that nobody can guard him.”
2. “This is utterly irrelevant and, if anything, an argument for more regulation, not less…[This] is dumber than texting while driving.”
3. “Becoming an enrolled [preparer] would force Mr. Jamieson to make expenditures of time and money he does not wish to make, therefore, because he is not prepared to make those sacrifices he believes that people who have made them should get no benefit from it whatsoever.”
Barry Minkow Gives Medifast the Middle Finger [White Collar Fraud]
At this point we’re assuming it’s only the figurative bird, by way of a report that states that Medifast’s business model is effectively a multi-level marketing scheme.
It’s been far too long since we’ve heard about violent and/or completely irrational behavior as it relates to taxes, hasn’t it?
Thank God for Ohio, where bulldozers are commonly used to show disdain for pretty much anything. This time it’s firearms.
Police said a man opened fire on a woman after she apparently made a mistake on his taxes. Officers said the man threatened to get revenge on the H & R Block employee because he was audited by the IRS. Dayton police said they [sic] shooter fired several shots into the tax worker’s car. However, she managed to dodge the bullets.
There are lots of things that might conjure up murderous rage but a mistake on a tax return prepared by a H&R Block employee? The good news is that this lunatic is still on the loose somewhere.
Police: Shots Fired At Tax Worker [WHIOTV]
Dear Ms. Van Buren:
Your response to “Phobic” about her boyfriend’s tax returns contained a significant error. You characterized enrolled agents as “the only tax specialists licensed to practice before the IRS,” which is not true. The fact is, certified public accountants and attorneys are federally authorized to represent clients before the IRS.
The CPA has long been synonymous with reliable, objective tax preparation and ranks as the preferred tax professional among millions of U.S. taxpayers.
On behalf of the many CPAs who prepare tax returns every year, we would be appreciative if you would print a correction in your column.
One day after it was reported that fraud detecting superman Harry Markopolos called the Commissioners “idiots” and Mary Schapiro “coldly polite” (that’s a compliment, isn’t it?) the SEC is charging another Madoff associate.
Today the Commission brought charges of “conspiracy, securities fraud, falsifying books and records of a broker-dealer, false filings with the U.S. Securities and Exchange Commission and filing false federal tax returns,” against Daniel Bonventre, according to several reports.
Bonventre was the master of making the internal accounting look legit, as opposed to lying to peoples’ faces directly. He was responsible for accounting entries that “[hid] the scope of the investment advisory operations and understating Madoff liabilities by billions of dollars.”
The Commission also brought civil charges against Bonventre, “alleging he helped disguise Madoff’s fraud and financial losses at Madoff’s firm by misusing and improperly recording investor money to create the false appearance of legitimate income.”
While the rest of the media focuses on the who, the what and the how long will that person be spending in FPMITA prison, “Dirty Diapers” Markopolos probably just wanted remind everyone that A) the SEC missed this by ignoring him several times and B) he still doesn’t think too highly of them. Oh, and he has a book coming out.
DOJ, SEC Announce Charges Against Madoff Exec Bonventre [Dow Jones via WSJ]
Madoff Aide Bonventre Becomes Sixth Charged in Fraud [Bloomberg BusinessWeek]
Madoff Whistleblower Slams Obama’s SEC: ‘They’re A Bunch Of Idiots There’ [HuffPo]