If this has happened to your business, or you simply want to be better prepared for tax season, you need a forensic accountant. A forensic accountant is a bit like a forensic scientist, criminologist, or pathologist. He or she uses accounting facts and investigative techniques to look behind the numbers and see what’s really going on in your business. His or her presence can save you and your company plenty of pain.

Litigation Support

One of the most important services a forensic accountant can provide is litigation support. If you are audited or accused of shady business dealings, he or she can help you form a case in your defense. The forensic accountant will make an initial case assessment and tell you what areas of potential loss exist. He or she will help you anticipate questions you may be asked during an audit or hearing and form calm, intelligent responses. A forensic accountant will also help you gather and maintain the documentation you need to support or refute a claim. Once your case is established, he or she will be a key player in settlements and negotiations.

Access to Professionals

Many times, business owners get into trouble because they try to handle all their accounting, including taxes, themselves. However, they may not have the necessary experience, leading to audits and even accusations of fraud or embezzlement. A forensic accountant can help you avoid these accusations and the consequences that come with them. The accountant will find evidence of fraudulent activity early, and point you to suspicious oversights or errors in your bookkeeping that may lead to fraud. Such thorough investigating also makes your forensic accountant an expert witness in court, should you find yourself under suspicion.

Business Validation

You don’t have to be under investigation or up for an audit to need a forensic accountant, either. Sometimes forensic accountants are called in for business validation. This refers to how much your business is worth and how viable it is. Your accountant helps you find weak areas in your financials, including areas such as expense reports and payroll. He or she can use the information found to pull your company out of financial trouble. He or she may advise you to update your bookkeeping system, trim expenses in certain areas, or change payroll to fit new employee needs.

Business validation also refers to the people that work for you. Remember, forensic accountants look behind the books to give you a full “diagnosis,” just like a doctor takes note of internal and external symptoms. For example, you and your business partner might want to dissolve your partnership, but may not be sure how or if to divide the business. A forensic accountant can give you advice based on what he or she sees in all the facets of your business.

We do this! Learn more about our Forensic Accounting service, and submit our contact form if you have questions.

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In addition to statistical differences known as DIF scoring, the IRS may also contact you if another company paid you for services or products. They will contact you to verify that these payments were recorded. Proper income reporting for employees could also trigger an audit. When IRS agents audit your records, they will generally not look back more than 3 years, per the statute of limitations. In some cases, the statute will be extended.

If the IRS does contact you, they will never do so through the internet initially. Anything you receive that way is likely a scam and should be immediately reported. They will contact you via phone or snail mail. Audits can be conducted remotely through correspondence and telephone. Other times, audits will take place at a local office or on your own property.

To decrease the likelihood that the IRS will contact you for an audit:

• Keep payroll records for 4 years.
• Use an outside company for financial management. Outside companies understand what the IRS will be looking for if they call, and they can help small businesses stay on top of their record keeping requirements.
• Record every business transaction and its source when it happens.
• Consult a financial manager regarding deductions. If an item does not directly work towards profit, you may not be able to claim it on your return.

Always cooperate fully when the IRS calls. They only audit a very small portion of businesses every year. Take the proactive steps to ensure your business is in good standing, and consult an outside professional to protect your business and your rights.

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