The U.S. Tax Court ruled against South African golfer Retief Goosen in a case last week involving the two-time U.S. Open champion’s royalty income, disagreeing with his claim that only 7 percent of it came from U.S. sources.

Goosen had endorsement agreements with a variety of sponsors, including Acushnet, TaylorMade, Izod, Upper Deck, Electronic Arts and Rolex. They were allowed to use his name, face and likeness in advertising and marketing campaigns worldwide, and he was paid a base endorsement fee by all the sponsors.

Acushnet, TaylorMade and Izod also pro-rated the base endorsement fee if he did not annually play in a specific number of golf tournaments, the court noted. The three companies also paid him a bonus if he achieved a specific finish in a PGA or European Tour tournament, or reached a specific spot on the World Golf Rankings.

Goosen characterized the endorsement fees and bonuses from Acushnet, TaylorMade and Izod as 50 percent services income and 50 percent royalty income on his nonresident federal income tax returns for 2002 and 2003. The endorsement fees from Upper Deck, Electronic Arts and Rolex were characterized as 100 percent royalty income.

The golfer reported approximately 7 percent of the total endorsement income as U.S. source income. The IRS, however, determined that he should have characterized the endorsement fees and bonuses from Acushnet, TaylorMade and Izod as 100 percent personal services income. The IRS also re-allocated a larger percentage of his endorsement fees as U.S. source income.

The Tax Court ruled on June 9 that the endorsement fees and bonuses Goosen had received from Acushnet, TaylorMade and Izod should be allocated 50 percent to personal services income and 50 percent to royalty income, and that the royalty income he had received from Acushnet, TaylorMade and Izod was 50 percent U.S.-source income effectively connected with a U.S. trade or business. The court also held that the royalty income he had received from Rolex was 50 percent U.S.-source income not effectively connected with a U.S. trade or business.

However, the royalty income he had received from Upper Deck was considered by the court to be 92 percent U.S.- source income not effectively connected with a U.S. trade or business. In addition, the royalty he received from Electronic Arts was deemed 70 percent U.S.-source income not effectively connected with a U.S. trade or business.

On top of that, the court ruled that Goosen should not benefit from any provision under either the 1975 or the 2001 income tax treaty between the United States and the United Kingdom.

Washington, D.C. (November 10, 2011)
By Michael Cohn, Accounting Today The Internal Revenue Service has issued a revenue ruling permitting an employer that is using an accrual method of accounting to take a deduction in the current year for a fixed amount of bonuses payable to a group of employees, even though the employer does not know which of the employees will receive a bonus or the amount of any particular bonus until after the end of the taxable year.

Under Revenue Ruling 2011-29, employers could take a deduction on the bonuses, whether or not the employees has determined who will receive the bonus.

“In other words, the entire amount of the bonus pool will be paid to members of the group of employees in the following year, but at the end of the current year the employer doesn’t yet know which particular employees will receive any bonus or how much,” the IRS said when issuing the revenue ruling Wednesday.

The revenue ruling could prove helpful in particular to financial firms that typically award year-end bonuses to high-performing employees. Wall Street banks are expected to pay lower year-end bonuses this year as a result of the trading volatility this past year. Other types of companies could also benefit. In the revenue ruling, the IRS cited court precedents involving the Washington Post Company and casino operator Hughes Properties

IRS Commissioner Shulman Clamps Down on Secret Foreign Bank Accounts November 18, 2011
By Roger Russell, Senior Editor, Accounting Today

A 2008 Senate report estimated the costs of non-compliance by taxpayers using offshore bank accounts to be at least $100 billion annually.
Doug Shulman

To combat this, the Internal Revenue Service has initiated several voluntary compliance programs in addition to negotiating the release of information from a number of banks.

The 2009 and 2011 offshore voluntary disclosure initiative programs were hugely successful, both in terms of the number of people coming forward and the amount of dollars collected. However, some suggested that this was only the tip of the iceberg, and that there are thousands more waiting to be discovered. In a recent conversation with IRS Commissioner Doug Shulman, I asked him if he believes there are a significant number that haven’t yet come forward, and whether he has the plans and the resources to pursue them. His answer is instructive, and reflects the success of the program not only in initial amounts that it collects, but in changing the long-term behavior of those who otherwise might be tempted to cheat.

“A major focus of mine has been making sure we’re up to the task of tax administration in a global economy and a global world. One of the key components has been combating offshore tax evasion,” he said.

“We’ve been very successful in our enforcement activities, piercing the veil of bank secrecy for the first time in some key jurisdictions,” he added. “We’ve been getting better and better over the last several years at finding people who are hiding assets overseas, and pursuing banks, promoters and advisors who facilitate evasion. We’ve had very close cooperation with foreign governments, and have increased the flow of information and communication to help crack down globally on offshore tax evasion. As you mentioned, while we were cracking down we also gave people a chance who wanted to come in, pay their back taxes, pay a very stiff penalty but avoid going to jail. And the numbers are now well over 30,000 people who have come in.”

“For me the big deal about this effort isn’t about those 30,000 people or the successful enforcement effort, it’s about changing the risk calculus for the long term,” Shulman continued.

“I think individuals who would have thought about hiding assets overseas really understand today that that’s not a wise thing to do,” he noted. “Advisers are much less willing to facilitate it, banks are much less willing to take deposits, and so I think we’ve changed the risk calculus, which leads to long-term compliance which is our goal. Your specific question about are there other people, of course there are others out there, but I would tell you I don’t think it’s very wise for them to be out there because their chances of getting caught are exponentially higher today than they were just several years ago.”

New York (November 18, 2011)
By Michael Cohn, Accounting Today

Small businesses and nonprofit organizations often overlook the warning signs of employee fraud, especially by senior managers, according to accounting firm Marks Paneth & Shron.

The firm advises management and board members to recognize the red flags and act early to stop fraud.

“Organizations pay a high price for fraud,” said Sareena Malik Sawhney, a forensic accountant who serves as a director in the Litigation and Corporate Financial Advisory Services Group at the New York-based accounting firm. "The damage can be particularly severe at small organizations where losses can be extremely threatening. These organizations often do not have the systems in place to detect fraud and prevent or limit their losses."

According to the Association of Fraud Examiners 2010 Report to the Nations on Occupational Fraud and Abuse, the typical organization loses 5 percent of its annual revenues to fraud. Frauds last a median of 18 months before being detected.

The report found that frauds committed by senior executives or owners were more than three times as costly as frauds committed by managers, and more than nine times as costly as employee frauds. Executive-level frauds also took much longer to detect.

“There are warning signs for the most common types of fraud,” said Sawhney. “If management and board members recognize them, they will be better able to detect fraud early and prevent or minimize the losses.”

She warned of signs of fraud such as shrinking inventories. "Skimming is defined as diverting funds before they get recorded into an organization's books,” she noted. “For example, employees often skim funds by pocketing customers' checks and trying to cash them, but customers will complain if they don't receive their goods, so the employee ships them. The result is that goods disappear from inventory, but no sale has been recorded. Inventory comparisons can reveal the fraud, as can analytical procedures such as gross profit analysis."

Bank deposits that don't match cash receipt records are another telltale sign. “Cash larceny involves diverting funds after they're on the books—it's clearly outright theft,” she said. “An example might be an employee who steals checks or cash before they can be deposited at the bank. The best detection method is to compare receipt records to deposits. Data analysis software can help an organization check for this kind of fraud.”

Checks made payable to an employee, an unknown person, an unapproved vendor, or “cash,” are another warning flag "Any of these are signs of a kind of check fraud known as a 'forged maker scheme' where an employee intercepts, forges or alters one of the organization's own checks,” said Sawhney. “Usually, the check is made out to the employee, but it might be made out to an accomplice, an unknown vendor, or simply to cash. Strange endorsements can also be a sign of fraud, as can missing checks or missing disbursement documentation."

She said organizations should also beware of payroll fluctuations—or poorly documented employees on the payroll. "In a payroll scheme, fictitious employees are added to the company's payroll. If you find unusual fluctuations in payroll, or employees with minimal or no personnel records, or employees with missing social security numbers receiving payroll checks, you should suspect payroll fraud,” said Sawhney. “High overtime for a particular job category can be a red flag, as can discrepancies between net payroll and payroll checks issued."

Changes—or unusual patterns—in employees' expenses are another red flag. “It's common for employees to commit fraud by inflating their expenses or submitting fictitious expense reports,” warned Sawhney. “Look for unusual fluctuations or changes in patterns in employees' expenses. Also watch for expenses that end in round numbers, recurring expenses for the same amount, and expenses that fall just below the reimbursement limit. This is another area where data analysis software can reveal the patterns and help detect the fraud.”

2011 is just about OVER, VisionQwest Accountancy Group is offering a early sign up for tax appointments for this 2011/2012 Tax Season.  

2010 was the first year we used our on-line automated appointment system.  The system worked so well that this year we decided to let our clients schedule their tax appointments starting November 1, 2011. 

Follow the link below and schedule your appointment.
TAX APPOINTMENTS 2012

To start preparing for next year the new tax organizer is located at:
2012 TAX FORMS

Our phone is:  818.547.0497 Ext 3
Fax:  818.547.0449

VisionQwest Accountancy Group
A Professional Accountancy Corporation
500 N Central, Suite 740
Glendale  CA  91203

By Jim Buttonow, Accounting Today 
 
Meet the new IRS—the kinder, gentler IRS. It's an agency with processes that are fast becoming structured, streamlined—and strangely quiet.

 Quiet, that is, except on paper.

More Internal Revenue Service notices are going out to taxpayers than ever before. In fact, since 2001, notice volume has increased 670 percent, to 201 million sent in 2009. This is the IRS being smarter about tackling what it considers to be a big problem.

In 2001, the IRS conducted a study to identify the amount of taxes that goes  unpaid each year. The result: a $345 billion tax gap - stemming mainly from a complicated and changing Tax Code, often vulnerable to fraud. The IRS quickly made plans to close this gap while maintaining itself as a customer service organization. The result: improved technology and information systems that  isolate compliance areas - and a dramatic increase in IRS notices.

For accounting firms, this means more work and more contact with the IRS, because two thirds of taxpayers rely on their accountant each year for compliance. While this sounds like a potential problem, it can represent a tremendous opportunity to enhance client service and further strengthen the client-accountant relationship.

 A SHIFT IN STRATEGY

While the IRS still conducts audits and face-to-face meetings, its compliance strategy for the 21st century is shifting. The agency has realized that it must leverage its channels, such as tax preparers and IRS information systems, to close the tax gap.

This year, the IRS started regulating tax preparers by requiring registration and competency standards, a strategy that may have also reduced the number of preparers. There were more than 1.2 million registered preparers before IRS regulation; now there are less than 700,000. The IRS will continue to work with tax professionals so that preparers will assist with compliance.

 In the 1990s, the IRS approached compliance through traditional methods such as audits and in-person tax collection. During the past 10 years, however, the IRS has improved its ability to target potential noncompliance through technology. The rate of e-filed returns is fast approaching the IRS target of 80 percent, and improved information systems have automated matching techniques and specialized, issue-focused notices - all aimed at narrowing the tax gap. The IRS reported the following results:

For the more than 4.3 million information-matching notice discrepancy audits, the average return on investment for the IRS is $1,670 per return, with little involvement by IRS personnel.

The IRS mail audit program, responsible for 78 percent of all IRS audits in 2010, averages almost $6,600 in additional taxes owed per audit.

With enhancements in notice and information systems, the IRS also improved
its compliance practices and reduced personnel by 6 percent during the past 10 years.

In a recent speech, IRS Commissioner Doug Shulman indicated that the IRS is also looking ahead, analyzing taxpayer compliance data to recognize trends and improve compliance practices. He explained that the agency created an office of compliance data analytics that helps create hypotheses for compliance improvement, launches pilots to test hypotheses, and then implements enhancements if pilots are successful. The ultimate goal, Shulman said, is to take advantage of technology to modernize IRS processes.

Shulman also described an upgrade to its Customer Account Data Engine to take effect for the 2012 tax filing season. The agency's core account database, which holds basic taxpayer information such as current account balance and payments, will move its batch processing cycle from a weekly or bi-weekly basis to a daily basis, he said. For practitioners, the upgrade means faster refunds for clients, and dealing with IRS agents who have up-to-date information, he explained.

 Among IRS efforts to improve compliance through technology, the most striking statistics involve changes to the notice system. In 2001, the IRS issued about 30 million notices. From 2001 to 2009, volume increased 670 percent to 201million notices. In that same time period, the number of individual and business taxpayers increased by only 10 percent, from 141 million to 155 million.

This year, it's likely that the IRS will exceed the 201 million notices issued in 2009. For practitioners and their clients, this means more contact with the IRS.

NOTICES FOR EVERY SEASON

Where the IRS is concerned, there is no defined busy season. IRS compliance
systems and staff work year-round on tax compliance issues, consistently monitoring activity and issuing notices.

The IRS sends certain types of notices throughout the year. For example, in May and June, practitioners can expect notices related to the tax returns they filed for their clients before the April 18, 2011, deadline. The following is a sampling of such notices.

CP23/24, Estimated Tax Discrepancies. Retirees, small-business owners, or investors who make estimated tax payments may receive this notice when estimated payments reported on their return were incorrect. Practitioners should review payments their clients made to the IRS to see whether the payments were posted correctly. If so, practitioners can facilitate payment of the balance or help dispute the account discrepancy.

CP14, Balance Due. Clients who did not pay an outstanding balance when they filed their return will receive this notice. Practitioners can help their
clients make arrangements to satisfy the balance with the IRS.

CP2000, Underreported Income Adjustment. Investors, small businesses or taxpayers filing for early refunds may receive this notice when income was not reported on their return (most likely from 2009). Practitioners may need to reconcile the discrepancy and respond to the IRS, or investigate whether the income reported is their client's income. It may have resulted from identity theft or an incorrectly filed information statement.

CP88, Refund Hold Due to Missing Tax Return. Clients may receive this notice when the IRS has not received their tax return. This is more common for returns filed by paper or for e-filed returns that the IRS rejected with no follow-up. 

Practitioners should immediately file the return. If there is a balance due, practitioners can consider submitting a penalty abatement request with the return if there is reasonable cause or if the return was filed but not recorded by the IRS.

Letter 3850/1-B, Appointment Letters for Employment Tax Audit for the IRS National Research Program. Employers receive this notice when they are selected  for an IRS audit to determine whether their contractors are actually employees.
 
Practitioners should review their clients' use of independent contractors.

CP12/CP13, Math Error Notices (IRS adjusted a filed return due to a miscalculation, changing the refund). Form 1040 filers may receive this notice when the IRS recalculates their return. Practitioners should recheck the return for accuracy, and if they dispute the adjustment, contact the IRS to correct the error.

CP11 series. Clients may receive these notices when they take new IRS credits or the Earned Income Credit, or when the IRS adjusts the return due to a discrepancy. The IRS thinks there was an error on the return, resulting in a balance due. Practitioners may need to prove a credit to the IRS or help their client make arrangements for the unpaid balances.

It's clear that the IRS has turned to technology to boost compliance. And with more than 200 million notices on the way again this year, practitioners can expect more clients to look to them for support.

 To provide value all year long, firms need to manage their clients' post-filing activity. For most, that means reacting to notices. While it's  necessary, it's hardly proactive. And many clients either don't provide all of  the notices they receive or provide them with inadequate time for practitioners to prepare a response before IRS deadlines.

 Tax firms can prepare now for increasing IRS activity. By managing their
clients' post-filing activity and using best practices to address any issues or
notices that arise, practitioners can respond quickly, monitor progress, and
stay current on shifting IRS practices.

Jim Buttonow, CPA, is a 19-year IRS veteran and co-founder and vice president of product development at New River Innovation, as well as chief architect of Beyond415, a Web-based application that enables tax professionals to manage their clients’ post-filing compliance. Reach him at jbuttonow@newriverinnovation.com.

The problem with boxing is that Promoters and Managers make up their own rules as they go along that affect the Boxer. However, there are federal and state laws that protect the boxer from the Promoter and Manager. But you will never hear anything about them because probably they don't want you to know. In boxing it is all about how the Promoter can control the boxer and the boxer gets sucked in because there is a lot of money being thrown around.
 
The Muhammad Ali Boxing Reform Act is a federal law enacted in the United States that provides for various legal protections to boxers as well as assisting states in regulating boxing as a sport. The legistlation was enacted due to boxing's unique position in American sports, not having any organized league or rule-making body to ensure appropriate business practices, and due to the lact of protection offered to boxers from the various sanctioning bodies (e.g., the WBO, WBC, IBF and others).

In general, the act restricts the types of contract that a boxer may be required to sign in order to box at an event. The boxer cannot, for example, be required to give away future promotional rights as a requirement of competing in a fight that is a mandatory bout under the rules of a sanctioning organization. The act alwo requires sanctioning bodies to reveal to state commissions various information about matches that are held, fees charged to boxers for the sanctioning body to sanction a match, as well as any payment or compensation received from the body for affiliating itself with the promoter. It also requires promoters to disclose a large amount of the financial information about bouts to the state commissions, as well as to the boxers they promote.

Make sure that your Attorney and your Accountant know the federal law that governs boxing, make sure they know the State rules that follow the federal law. It is important that your Legal and Accounting team know these rules so that they can protect you from Promoters that have their own agenda that benefits them. 

If your legal and accounting team do not know the law then it is time to find ones that do. This is vital for the financial and legal stability of the boxer. You take control, there are rules to protect you.

If you would like to know more about H.R. 1832 - Muhammad Ali Boxing Reform Act. just send me an e-mail at mlodge@vqrginc.com and I will send you a copy.

I had an individual come into my office wanting $1 million dollars for him to invest in the stock market. High returns of 34 - 40 %. And he could turn it around and start paying us big returns in ten days. Too good to be true? If it is - run in the other direction and get away from them. Never put your money at risk on people giving you high returns and stories that are just too good to be true. If you feel you have been scamed, let us know. Or if you know of anyone trying to pull a scam send an e-mail to: mlodge@vqrginc.com

Let's look at what a Ponzi scheme is really all about. Let's see what the United States Securities and Exchange Commission has described it:

 A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors and to use for personal expenses, instead of engaging in any legitimate investment activity.

Why do Ponzi schemes collapse?

With little or no legitimate earnings, the schemes require a consistent flow of money from new investors to continue. Ponzi schemes tend to collapse when it becomes difficult to recruit new investors or when a large number of investors ask to cash out.

How did Ponzi schemes get their name?

The schemes are named after Charles Ponzi, who duped thousands of New England residents into investing in a postage stamp speculation scheme back in the 1920s. At a time when the annual interest rate for bank accounts was five percent, Ponzi promised investors that he could provide a 50% return in just 90 days. Ponzi initially bought a small number of international mail coupons in support of his scheme, but quickly switched to using incoming funds to pay off earlier investors.

Does the SEC investigate Ponzi schemes?

The SEC investigates and prosecutes many Ponzi scheme cases each year both to prevent new victims from being harmed and to maximize the recovery of assets to investors. The majority of such cases are brought as emergency actions, which often seek a temporary restraining order and an asset freeze.

During FY 2010, the SEC filed 47 enforcement actions involving Ponzi schemes or Ponzi-like payments.

Who is Bernie Madoff?

Bernard L. Madoff, who is currently serving a 150-year sentence in federal prison, orchestrated a multi-billion dollar Ponzi scheme that swindled money from thousands of investors. Unlike the promoters of many Ponzi schemes, Madoff did not promise spectacular short-term investment returns. Instead, his investors’ phony account statements showed moderate, but consistently positive returns — even during turbulent market conditions.

In December 2008, the SEC charged Bernard Madoff and his investment firm, Bernard L. Madoff Investment Securities LLC, with securities fraud for the multi-billion dollar Ponzi scheme he perpetrated on advisory clients of his firm for many years. The SEC filed emergency motions to freeze assets and appoint a receiver, and worked to return as much money as possible to harmed investors.

Madoff had been a prominent member of the securities industry throughout his career. He served as vice chairman of the NASD, a member of its board of governors, and chairman of its New York region. He was also a member of NASDAQ Stock Market’s board of governors and its executive committee and served as chairman of its trading committee. Madoff founded his investment advisory firm in 1960.

How is the SEC responding to its Office of Inspector General’s reports on the Madoff fraud?

In August and September 2009, the SEC’s Office of Inspector General issued three reports on the Madoff fraud, including one entitled Investigation of Failure of the SEC to Uncover Bernard Madoff’s Ponzi Scheme. The SEC has closely analyzed the reports.

Even before the release of these reports, major efforts were underway to make improvements and address the shortcomings that were identified in the reports. A list of decisive and comprehensive steps the SEC is taking to reduce the chances that similar frauds will occur or be undetected in the future is available on the SEC’s Post-Madoff Reforms web page.

What are some Ponzi scheme “red flags”?

Many Ponzi schemes share common characteristics. Look for these warning signs:

High investment returns with little or no risk. Every investment carries some degree of risk, and investments yielding higher returns typically involve more risk. Be highly suspicious of any “guaranteed” investment opportunity.

Overly consistent returns. Investments tend to go up and down over time, especially those seeking high returns. Be suspect of an investment that continues to generate regular, positive returns regardless of overall market conditions.

• Unregistered investments. Ponzi schemes typically involve investments that have not been registered with the SEC or with state regulators. Registration is important because it provides investors with access to key information about the company’s management, products, services, and finances.
• Unlicensed sellers. Federal and state securities laws require investment professionals and their firms to be licensed or registered. Most Ponzi schemes involve unlicensed individuals or unregistered firms.
• Secretive and/or complex strategies. Avoiding investments you don’t understand or for which you can’t get complete information is a good rule of thumb.
• Issues with paperwork. Ignore excuses regarding why you can’t review information about an investment in writing, and always read an investment’s prospectus or disclosure statement carefully before you invest. Also, account statement errors may be a sign that funds are not being invested as promised.
• Difficulty receiving payments. Be suspicious if you don’t receive a payment or have difficulty cashing out your investment. Keep in mind that Ponzi scheme promoters sometimes encourage participants to “roll over” promised payments by offering even higher investment returns.

If you are aware of an investment opportunity that might be a Ponzi scheme, contact the SEC by phone at (800) 732-0330 or online at http://www.sec.gov/complaint.shtml.What steps can I take to avoid Ponzi schemes and other investment frauds?

Whether you’re a first-time investor or have been investing for many years, there are some basic questions you should always ask before you commit your hard-earned money to an investment.

The SEC sees too many investors who might have avoided trouble and losses if they had asked questions from the start and verified the answers with information from independent sources.

When you consider your next investment opportunity, start with these five questions:

Is the seller licensed?

• Is the investment registered?
• How do the risks compare with the potential rewards?
• Do I understand the investment?
• Where can I turn for help?

For more information, read Investing Smart from the Start: Five Questions to Ask Before You Invest.What are some of the similarities and differences between Ponzi and pyramid schemes?

Ponzi and pyramid schemes are closely related because they both involve paying longer-standing members with money from new participants, instead of actual profits from investing or selling products to the public. Here are some common differences:

 Pyramid Scheme

Ponzi Scheme

Typical “hook” Earn high profits by making one payment and finding a set number of others to become distributors of a product. The scheme typically does not involve a genuine product. The purported product may not exist or it may only be “sold” within the pyramid scheme. Earn high investment returns with little or no risk by simply handing over your money; the investment typically does not exist.

Payments/profits Must recruit new distributors to receive payments. No recruiting necessary to receive payments. Interaction with original promoter Sometimes none. New participants may enter scheme at a different level. Promoter generally acts directly with all participants.

Source of payments From new participants – always disclosed. From new participants – never disclosed.

Collapse Fast. An exponential increase in the number of participants is required at each level. May be relatively slow if existing participants reinvest money.

Treasury Inspector General for Tax Administration (Press Release)



TIGTA: IRS is Warning Taxpayers of its intent to Issue Levies

 Washington-The Internal Revenue Service (IRS) is following its statutory requirement of providing taxpayers with advance notice of its intent to issue levies, according to a new report publicly released by the Treasury Inspector General for Tax Administration (TIGTA)

 When taxpayers do not pay delinquent taxes, the IRS has the authority to work directly with financial institutions and other 3rd parties to seize taxpayers' assets. This action is commonly refereed to as a "Levy." (They can be very unprofessional and aggressive)

 The IRS Restructuring and Reform Act of 1998 (RRA 98) requires the IRS to no give at least a 30 calendar day warning. This allows the taxpayer to formally appeal the proposed levy or start the Offer In Compromise (OIC) process.

We are currently conducting a fraud audit for a client. Where an employee / Officer of the company skimmed cash from the corporation and cheated out his partners. What is skimming?

Examples

• A skimming crime may be simple tax evasion: the owner of a business may fail to "ring up" a transaction and pocket the cash, thus converting a customer's payment directly to the owner's personal use without accounting for the profit, thereby the owner avoids paying either business or personal income taxes on it. A famous example of this crime occurred at Studio 54 discotheque[2], which was forced to close as a result.

• Skimming may additionally be the direct theft of the cash; in addition to hiding it from tax authorities, the perpetrator hides the taking from an employer, business partners, or shareholders. A large scale such allegation has been leveled at Satyam Computer Services concerning the billion dollars missing from the company's coffers.[3]

• Skimming may be necessitated by a third crime; for example, an otherwise honest businessman who pays taxes and does not cheat his partners might still be forced to skim some cash from the business and use it to give to an extortionist in the form of a bribe, kickback, or payment to a protection racket or loan shark or even a blackmailer.

• Other related usages can include things such as corrupt government officials in a poor country "skimming" cash received as foreign aid[4]

So fraud happens in a lot of businesses right under the nose of many individuals. It is one of the biggest criminal acts that happens a lot within small comapnies where the controls are not tight enough to make sure that everything is accounted for. Anything skimmed over $500 is a felony and could be time served in jail.

If you feel you don't have tight enough controls, consult VisionQwest Accountancy Group or your own personal accountant.

If you suspect there is skimming and want our firm to look at your concerns, just let us know. Contact me at mlodge@vqrginc.com

VisionQwest Accountancy Group

mlodge@vqrginc.com