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We are grateful to have the opportunity to provide you this valuable information via our monthly e-newsletter and our unparalleled forensic accounting and fraud investigative services.
The goal of this e-newsletter is to provide you critical, inside information that will help you "follow the money" in business disputes, divorce cases, fraud cases, estate matters, corporate embezzlement and to prevail when defending an IRS criminal case. We will do this by sharing the knowledge we have from our 25+ years of experience as an IRS Special Agent and 15 years as a private investigator / forensic accountant.
We take special care to ensure the information we provide you in "The Beacon" is the latest and most current information available.
In this edition, we share where IRS matters and divorce intersect.
We want to write about topics
that
will assist you in prevailing with criminal IRS cases
. Please e-mail us your topics of interest to
Thebeacon@sageinvestigations.com
We encourage you to share our e-newsletter with others in your sphere of influence.
Sincerely,
Edmond J. Martin
Principal, Chief Investigator
Certified Fraud Examiner (CFE)
Texas Certified Investigator (TCI)
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Where IRS Matters and Divorce Intersect
 A husband and wife operated a productive business (S Corporation) teaching cheerleading and gymnastics to young people and generating significant funds in cash, checks, and credit cards. They did not have children of their own. They were married 10 years.
The wife was contemplating divorce for several years and, over a five-year period, embezzled $550,000 from the business. The wife kept the books and had the banking relationship and diverted cash receipts of the business to herself which she held in a safe deposit box. The wife invested in the purchase of a building and real estate in the town.
The wife began suspecting that her husband was having affairs with other women. She had a surveillance team follow the husband around town for weeks and observed him having various liaisons with cheerleader moms.
Finally, the wife made the move and filed for divorce, thinking she had the goods on the husband and she would benefit from the observations. The husband's attorney hired a private investigator that was also a forensic accountant to review the books and records and determine the value of the business. The forensic accountant was allowed access to the accounting software records, the business records, and the bank accounts. The review found that gross receipts on the books did not match the receipts that were deposited to the bank accounts. The S Corp tax returns were reviewed, and it was determined that the returns reported the money deposited as taxable income and there was unreported income totaling $550,000. An employee in the accounting department was interviewed and explained the skimming of cash and corroborated the findings of the forensic accountant.
The husband's attorney shared the forensic accountant's findings with the wife's attorney. At first, it was denied but later amended returns were prepared and filed for the S Corp and K-1s were reissued showing that unreported income on the wife's K-1s and amended individual income tax returns were filed correcting the understatement. The wife paid for the amended returns (business and personal), the income tax deficiencies and the penalties.
During testimony in the divorce proceeding, the fact of the embezzlement and understated income was brought to the attention of the judge through testimony. Further testimony was offered about the value of the cheerleading and gymnastic business, and the real estate. The Judge ordered the division of the assets and the wife received the business and building and the husband received their home, his motorcycle, the real estate, and a pile of cash. He received 57% of the marital estate and no part of the income tax deficiencies.
The Husband was happy with the results.
If your client is involved in a business or is a professional (doctor or lawyer), consider using a forensic accountant to evaluate the value of the business or practice, and review the books, records, and returns. It may be beneficial to your client to find any discrepancies before an IRS audit determines that tax returns are incorrect, and your client becomes liable for something unknown at the time. Also, if separate property existed before or is presented during the marriage it may be beneficial to your client to trace the separate property and be able to document the separate and community nature of the asset through an expert witness.
Contact Chief Investigator Edmond Martin of Sage Investigations, LLC at 512-659-3179, email: edmartin@sageinvestigations.com. Let his 26 years as an IRS Special Agent and 16 years of forensic accounting and Private Investigation benefit your client. View his CV.
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About Us
Serving your needs is our priority.  At Sage Investigations we are dedicated to serving our clients nationally, to help them navigate the difficulties of dealing with the IRS, and other complex (forensic) financial fraud investigations both civil and criminal. By narrowing our focus to our primary strength of following the money, we steer our knowledge, efforts, and experience to financial issues. We help our clients propel their cases forward by assisting in the review, acquisition, and organization of financial records, evaluating the elements of their cases, and helping create winning strategies. Through the use of our proprietary advanced financial investigative technology we analyze complex financial data quickly, easily and efficiently, saving our client's time and money. Sage handles all cases with altruism, professionalism, honesty, integrity, passion and respect. When you hire Sage, you hire a team of professionals with skill and knowledge that helps you have more effective solutions. We are innovative with our DIO cutting edge technology, and perform every investigation in an orderly and organized manner to develop a clear investigative roadmap and deliver a quality work product. The compass that guides us is strong leadership and accountability. Learn more... Contact Us
P.O. Box 160161
Austin, TX 78716 Phone: 512-659-3179 Fax: 512-328-6878 Email: info@SageInvestigations.com www.sageinvestigations.com Texas License #A10803 |
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