In chapter 8, page 240, discusses LLC and stealing from the LLCs. How an entity is set up, EINs and where the financial information is reported continues to be a source of fraud in the tax field. The IRS looks for ways to increase transparency in this area through double reporting. The individual and the entity often have to report the same information to provide a checks and balances. For example, all W2s and 1099 have to be issued to the governing authority and to the individual. All banking transactions over $10,000.00 are double reported as cash in and cash out. This is to ensure checks and balances as well as transparency.

Concealment is still an issue in the above scenario. For example, the timing of the reports still allow for errors and misreporting, if a calendar year and the fiscal years are different. K-1 are issued after the fiscal year end and if that year ends after the the individual due date then it is best for the individual to request an extension to file that year return until 10-15 of that due year. The extension does not stop the interest from accruing so do keep that in mind. Some taxpayers conceal information by not filing the tax returns at all. Particularly if the information is for cash only operations or unreported information. Uber, Lift and Grub Hub are emerging industries with such issues.

The best practices for investigating concealment are:

Get documentary evidence

Keeping the original document/ evidence

Witness testimony through subpoenas

Data analysis and expert industry analysis

DQ 8: What are accounting anomalies and describe one?