Accounting

Tax Fraud Blotter: Rampant self-dealing

Published

1 month ago

October 24, 2024

Makin’ a list; caught again; back to school; and other highlights of recent tax cases.

Washington, D.C.: Recent IRS Office of Professional Responsibility disciplinary sanctions include censure, suspension or disbarment from practice before the IRS. Individuals disciplined include (all dates this year):

California (all CPAs): Vincente Alvarez, Chatsworth, and Michael D. Robinson, San Francisco, indefinite from April 29; Grigor Demirchyan, Granada Hills, and Todd W. Beutel, Thousand Oaks, indefinite from May 8; and Tiffany C. Detinne, Carmichael, and Bernard Turk, West Hills, indefinite from May 28.
Florida: CPA Paul S. Mills, Key West, indefinite from May 8.
Massachusetts: Attorney Paul S. Hughes, Wellesley, indefinite from April 29.
Michigan: Attorney Brian P. McMahon, Ionia, indefinite from April 3.
Missouri: CPA Justin L. Strauser, Sullivan, indefinite from May 28.
New Jersey: Attorney James R. Lisa, Jersey City, indefinite from May 8.
Pennsylvania: CPA Daniel J. Carney, Shawnee on Delaware, indefinite from April 2.
Tennessee: CPA Richard T. Brown Jr., Brownsville, indefinite from May 8.
Texas: CPA David D. Renken, New Braunfels, indefinite from April 2; Attorney Pejman Maadani, Houston, indefinite from May 8.
Virginia: CPA Carol A. Jones, Ruckersville, indefinite from May 15.

Reinstated to practice before the IRS effective in April were CPA Robert S. Damiano, of Bridgewater, New Jersey, and attorney Charles E. Hammond III, of Katy, Texas.

San Francisco: Resident Dwayne Lorenzo Richardson has been found guilty of tax evasion.

Richardson evaded his personal income taxes for 2017 to 2019 by claiming to owe only some $28,496 in tax when he’d made more than $1.2 million as a software engineering manager. He declared more than $1.1 million in medical expenses, overstating those expenses by more than $945,000.

Richardson received tax refunds totaling over $165,000 for the three charged tax years, then lied to an IRS agent in two audit interviews, stating that the $1.1 million of medical expenses were related to an appendectomy. Richardson paid no more than a few hundred dollars for treatment related to the appendectomy, which took place in 2010.

As he explained to one of his representatives in the tax audit, Richardson deducted nonexistent medical expenses from his taxes for multiple years because he had not been “caught” the first time he did it.

Brick, New Jersey: Business owner Gerard Artz has pleaded guilty to failing to collect and pay over employee taxes.

Artz owned and operated a construction company in Brick and New York City. Beginning around 2016, his company withheld employment taxes from employees’ paychecks and did not remit those employment taxes to the IRS. From 2016 to 2020, Artz and his company failed to collect and pay over $937,943 in employment taxes.

He faces up to five years in prison and a $250,000 fine; Artz has agreed to pay $937,943 in restitution. Sentencing is Feb. 5.

Encino, California: Tax preparer Bijan Kohanzad, 63, of Calabasas, California, has been sentenced to three months in jail and ordered to pay a $40,000 fine for helping a client file a return that underreported income, according to published reports.

From mid-2015 and to May 2017, Kohanzad, who pleaded guilty earlier this year, reportedly helped and counseled a client to reduce taxable income by falsely increasing business expenses.

The two years’ federal tax loss that Kohanzad caused reportedly totaled some $401,436.

New York: Martin Handler, of Brooklyn, has been sentenced to 58 months in prison for defrauding the federal Head Start program, for stealing more than $1 million from his federally funded childcare company, and for tax evasion.

Between 2017 and August 2021, Handler secretly “owned” and exercised control over the nonprofit Project Social Care Head Start Inc. The U.S. Department of Health and Human Services, which administers the Head Start program, annually granted Project Social Care millions of dollars to be used exclusively on the program and from which earning a profit is prohibited. Handler conspired to submit multiple fictitious documents to HHS that fraudulently asserted Project Social Care had an independent board and had in place controls to guard against fraud, waste and abuse. In fact, it had neither an independent board nor sufficient controls in place, and Handler steered Head Start funding to his own for-profit companies through what authorities called rampant undisclosed self-dealing.

Between April 2019 and January 2023, as majority owner of New York City Early Learning Co., a for-profit that also received Head Start grants, Handler misapplied and misappropriated corporate treasury funds to, among other things, repay personal loans and finance the leasing of luxury vehicles for the benefit of two members of Early Learning’s Head Start board.

In 2021 and 2022, Handler falsely reported to the IRS $2 million in charitable contributions, evading taxes of at least $740,000.

Handler was also sentenced to three years of supervised release, ordered to pay a $200,000 fine and to forfeit $1,156,068.10, and to pay $1,156,068.10 in restitution to HHS and $740,000 in restitution to the IRS.

Miami: A U.S. district court has issued a permanent injunction against tax preparers and brothers George and Luis Brito and their businesses.

The injunction bars George Brito from preparing federal income tax returns, working for or having any ownership stake in any prep business, assisting others in preparing returns or setting up business as a preparer and transferring or assigning customer lists to any other person or entity. The court similarly enjoined Luis Brito from preparing income tax returns for individuals. The Britos consented to the injunction.

The complaint alleged that George and Luis Brito owned or controlled Brito and Brito Accounting USA Inc. and prepared returns for clients that claimed various false or fabricated deductions and credits, including fabricated residential energy credits, false and exaggerated itemized deductions, and fictitious and inflated business expenses.

The order requires Luis Brito to inform his clients that he has been permanently enjoined from preparing returns except for certain types of business forms, including those reporting payroll, unemployment and corporate income taxes. The IRS can make unscheduled and random visits to Luis Brito’s business; he must also complete at least 24 hours of tax prep education by Dec. 31.

Union, New Jersey: Tax preparer Emmanuel Amenyo, 59, admitted assisting in the preparation of fraudulent returns, resulting in improperly large refunds.

From 2018 through 2021, Amenyo ran a tax prep business in which he prepared and submitted individual federal returns for clients. He filed numerous false returns and subscribed to false returns with respect to his own taxes.

These returns falsely claimed charitable contributions, itemized deductions, child and dependent care expenses, and other qualified expenses to which Amenyo and his clients were not entitled, causing a tax loss of $250,466.

Amenyo faces up to three years in prison and a $250,000 fine. Sentencing is April 1.

Accounting

How to Mastering Accounts Receivable Management to Maximize Cash Flow

Published

7 hours ago

November 23, 2024

Business Finance News

Accounts Receivable Management for Maximum Cash Flow

Effective accounts receivable (AR) management is vital for maintaining a company’s cash flow, profitability, overall financial stability and is considered to be best practice for accounting management . By implementing strategic AR practices, businesses can reduce payment delays, minimize financial risks, and improve relationships with customers. Below are in-depth strategies for enhancing AR performance, ensuring financial health, and maintaining strong client relationships.

Establishing Formal Policies and Procedures

A well-defined set of policies and procedures is the foundation of effective accounts receivable management. Clear guidelines ensure consistency across the entire order-to-cash cycle, from invoicing to collection. These guidelines should outline the specific steps involved in generating invoices, tracking payments, and handling overdue accounts. Clearly defined roles and responsibilities for team members contribute to accountability, while setting payment terms and due dates helps streamline the process.

Creating a documented standard operating procedure (SOP) that employees can refer to ensures that everyone follows the same approach, minimizing errors and reducing confusion. Policies should also specify the consequences for late payments, including any penalties or fees. Establishing escalation protocols—such as follow-up reminders, late payment notices, and legal actions if necessary—keeps the collection process organized and efficient.

Leveraging Advanced Technology for Efficiency

Incorporating technology into accounts receivable management can significantly enhance efficiency. Advanced AR software platforms offer a range of features designed to automate and optimize the process, reducing the manual workload and minimizing errors. These platforms often include automated invoicing, payment tracking, customer communication, and collections management.

Automated systems can send reminders for upcoming payments and follow up on overdue accounts without human intervention. This automation saves time and ensures consistency in communication with clients. Many platforms also offer integrated billing systems that sync with existing account receivable software, providing a seamless flow of information across financial operations. Customer portals allow clients to access statements, make payments online, and review their payment history, fostering a more convenient and user-friendly experience. Some of the best account receivable software are: QuickBooks Online, Xero, Sage Intacct and NetSuite ERP.

Implementing Regular Accounts Receivable Reviews and Aging Analyses

Regular reviews of accounts receivable are essential to maintain a healthy cash flow. Implementing a schedule for periodic AR reviews allows businesses to monitor the status of outstanding balances and identify potential problems early. Aging analyses categorize receivables based on how long they have been outstanding—30, 60, or 90+ days—highlighting overdue accounts that require immediate action. These reports are valuable tools for assessing the health of cash flow and making informed decisions about which accounts to prioritize for follow-up.

Analyzing AR data helps identify patterns and trends that may indicate broader issues, such as recurring late payments from specific clients or seasonal fluctuations in cash flow. Businesses can use this data to refine their credit policies and improve collection strategies. A disciplined review process also enables organizations to proactively address cash flow challenges before they escalate, ensuring financial stability.

Strengthening Customer Relationships for Improved Collections

Maintaining positive relationships with customers is a crucial aspect of effective AR management. Accurate and up-to-date customer information, including contact details and payment histories, enables personalized service and facilitates smoother transactions. Keeping comprehensive customer profiles with relevant data helps businesses address issues quickly and negotiate payment plans when necessary.

Clear and transparent communication builds trust with clients, making them more likely to prioritize timely payments. Sending invoices promptly, following up with friendly reminders, and providing clear payment instructions are all practices that enhance client relationships. By understanding customers’ payment behaviors and preferences, businesses can tailor their approach to improve cash flow without jeopardizing long-term partnerships.

Implementing Credit Risk Management Strategies

For companies that extend credit to customers, managing credit risk is a critical part of AR management. Implementing structured credit assessment processes allows businesses to evaluate the risk associated with each customer before offering credit terms. Conducting thorough credit checks and setting credit limits based on each client’s financial history and creditworthiness can significantly reduce the likelihood of non-payment.

Businesses should regularly review credit terms and limits to ensure they remain aligned with evolving market conditions and customer circumstances. Implementing dynamic credit policies that adapt to changes in a customer’s payment behavior or overall economic environment helps minimize risks and protect cash flow. A well-executed credit management strategy reduces the impact of late payments and uncollected debts on the company’s finances.

Utilizing Aging Reports for Strategic Analysis

Aging reports are essential tools for understanding the status of outstanding invoices. These reports categorize receivables based on the duration since the invoice was issued, making it easier to identify overdue accounts. Regularly analyzing aging reports helps businesses prioritize follow-up efforts, allocate resources effectively, and take targeted actions to minimize delinquencies.

A data-driven approach to AR management not only enhances the efficiency of collections but also provides valuable insights into the company’s financial health. Recognizing patterns in payment behavior can inform adjustments to invoicing procedures, credit policies, and follow-up strategies. Accurate and timely aging reports are crucial for maintaining cash flow and ensuring that overdue accounts are addressed promptly.

Balancing Automation with Human Oversight

While automation offers numerous benefits for accounts receivable management, human oversight remains indispensable. Automated systems excel at handling routine tasks like invoicing, sending reminders, and updating payment statuses, but they cannot replace the expertise and judgment of experienced professionals. Human involvement is necessary for analyzing data, handling complex payment disputes, and maintaining customer relationships.

Businesses should strike a balance between automation and manual oversight. Leveraging automation for repetitive tasks allows AR teams to focus on higher-value activities, such as negotiating payment plans and resolving disputes. A well-rounded approach that combines technology with human expertise ensures that AR management remains adaptable and responsive to changing circumstances.

Proactive Collections and Follow-Up Procedures

A proactive approach to collections is crucial for maintaining healthy cash flow. Sending invoices as soon as work is completed and issuing payment reminders well before the due date can significantly reduce payment delays. Establishing a structured follow-up schedule for overdue accounts—such as sending gentle reminders at 15 days and more assertive notices at 30 days—helps businesses maintain consistent cash flow.

Maintaining detailed records of all payment communications provides a clear audit trail and ensures that the collection process remains professional and well-documented. Professional yet firm follow-up procedures demonstrate the company’s commitment to timely payments while preserving the relationship with clients.

Monitoring Key Performance Indicators (KPIs) for Continuous Improvement

Tracking key performance indicators (KPIs) is essential for assessing the effectiveness of AR management strategies. Metrics such as Days Sales Outstanding (DSO), average collection period, and the percentage of overdue accounts provide valuable insights into cash flow health. Setting specific goals for these KPIs encourages continuous improvement and helps identify areas where adjustments are needed.

By regularly monitoring and analyzing these metrics, businesses can refine their AR processes, implement targeted strategies, and optimize collections. Effective AR management not only improves cash flow but also strengthens the organization’s financial foundation, supporting sustainable growth and long-term success.

Accounts receivable management services

Several reputable accounts receivable management services are available to help businesses enhance cash flow and streamline collections. TSI (Transworld Systems Inc.) specializes in customized debt collection and payment reminders, reducing delinquency rates through targeted analytics. Atradius Collections offers global AR management, focusing on credit insurance and tailored solutions for international clients. Dun & Bradstreet Receivable Management Services provides comprehensive AR solutions, including credit risk assessments and data-driven strategies. Gulf Coast Collection Bureau supports industries like healthcare and utilities with services ranging from AR outsourcing to debt recovery. ABC-Amega delivers global commercial debt collection and AR outsourcing, assisting clients in managing complex cases and reducing payment delays. These services are designed to enhance financial stability and improve payment practices across various industries.

Conclusion

Optimizing accounts receivable management is a critical step toward ensuring consistent cash flow and financial stability. By establishing clear policies, leveraging technology, conducting regular reviews, and maintaining strong customer relationships, businesses can minimize risks and improve payment efficiency. A combination of automated tools and human oversight, alongside a proactive collections strategy, allows organizations to manage their receivables effectively. Prioritizing AR management is not just about getting paid—it’s about securing the financial health and longevity of the business.

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Accounting

Tax Fraud Blotter: Partners in crime

Published

1 day ago

November 22, 2024

Business Finance News

Captive audience; some disagreement; game of 21; and other highlights of recent tax cases.

Barrington, Illinois: Tax preparer Gary Sandiego has been sentenced to 16 months in prison for preparing and filing false returns for clients.

He owned and operated the tax prep business G. Sandiego and Associates and for 2014 through 2017 prepared and filed false income tax returns for clients. Instead of relying on information provided by the clients, Sandiego either inflated or entirely fabricated expenses to falsely claim residential energy credits and employment-related expense deductions.

Sandiego, who previously pleaded guilty, caused a tax loss to the IRS of some $4,586,154.

He was also ordered to serve a year of supervised release and pay $2,910,442 in restitution to the IRS.

Ft. Worth, Texas: A federal district court has entered permanent injunctions against CPA Charles Dombek and The Optimal Financial Group LLC, barring them from promoting any tax plan that involves creating or using sham management companies, deducting personal non-deductible expenses as business expenses or assisting in the creation of “captive” insurance companies.

The injunctions also prohibit Dombek from preparing any federal returns for anyone other than himself and Optimal from preparing certain federal returns reflecting such tax plans. Dombek and Optimal consented to entry of the injunctions.

According to the complaint, Dombek is a licensed CPA and served as Optimal’s manager and president. Allegedly, Dombek and Optimal promoted a scheme throughout the U.S. to illegally reduce clients’ income tax liabilities by using sham management companies to improperly shift income to be taxed at lower tax rates, improperly defer taxable income or improperly claim personal expenses as business deductions. As alleged by the government, Dombek also promoted himself as the “premier dental CPA” in America.

The complaint further alleges that in promoting the schemes, Dombek and Optimal made false statements about the tax benefits of the scheme that they knew or had reason to know were false, then prepared and signed clients’ returns reflecting the sham transactions, expenses and deductions.

The government contended that the total harm to the Treasury could be $10 million or more.

Kansas City, Missouri: Former IRS employee Sandra D. Mondaine, of Grandview, Missouri, has pleaded guilty to preparing returns that illegally claimed more than $200,000 in refunds for clients.

Mondaine previously worked for the IRS as a contact representative before retiring. She admitted that she prepared federal income tax returns for clients that contained false and fraudulent claims; the indictment charged her with helping at least 11 individuals file at least 39 false and fraudulent income tax returns for 2019 through 2021. Mondaine was able to manufacture substantial refunds for her clients that they would not have been entitled to if the returns had been accurately prepared. She charged clients either a fixed dollar amount or a percentage of the refund or both.

The tax loss associated with those false returns is some $237,329, though the parties disagree on the total.

Mondaine must pay restitution to the IRS and consents to a permanent injunction in a separate civil action, under which she will be permanently enjoined from preparing, assisting in, directing or supervising the preparation or filing of federal returns for any person or entity other than herself. She is also subject to up to three years in prison.

Los Angeles: Long-time lawyer Milton C. Grimes has pleaded guilty to evading more than $4 million in federal taxes over 21 years.

Grimes pleaded guilty to one count of tax evasion relating to his 2014 taxes, admitting that he failed to pay $1,690,922 to the IRS. He did not pay federal income taxes for 23 years — 2002 through 2005, 2007, 2009 through 2011, and 2014 through 2023 — a total of $4,071,215 owed to the IRS. Grimes also admitted he did not file a 2013 federal return.

From at least September 2011, the IRS issued more than 30 levies on his personal bank accounts. From at least May 2014 to April 2020, Grimes evaded payment of the outstanding income tax by not depositing income he earned from his clients into those accounts. Instead, he bought some 238 cashier’s checks totaling $16 million to keep the money out of the reach of the IRS, withdrawing cash from his client trust account, his interest on lawyers’ trust accounts and his law firm’s bank account.

Sentencing is Feb. 11. Grimes faces up to five years in federal prison, though prosecutors have agreed to seek no more than 22 months.

Sacramento, California: Residents Dominic Davis and Sharitia Wright have pleaded guilty to conspiracy to file false claims with the IRS.

Between March 2019 and April 2022, they caused at least nine fraudulent income tax returns to be filed with the IRS claiming more than $2 million in refunds. The returns were filed in the names of Davis, Wright and family members and listed wages that the taxpayers had not earned and often listed the taxpayers’ employer as one of the various LLCs created by Davis, Wright and their family members. Many of the returns also falsely claimed charitable contributions.

Davis prepared and filed the false returns; Wright provided him information and contacted the IRS to check on the status of the refunds claimed.

Davis and Wright agreed to pay restitution. Sentencing is Feb. 3, when each faces up to 10 years in prison and a $250,000 fine.

St. Louis: Tax attorneys Michael Elliott Kohn and Catherine Elizabeth Chollet and insurance agent David Shane Simmons have been sentenced to prison for conspiring to defraud the U.S. and helping clients file false returns based on their promotion and operation of a fraudulent tax shelter.

Kohn was sentenced to seven years in prison and Chollet to four years. Simmons was sentenced to five years in prison.

From 2011 to November 2022, Kohn and Chollet, both of St. Louis, and Simmons, who is based out of Jefferson, North Carolina, promoted, marketed and sold to clients the Gain Elimination Plan, a fraudulent tax scheme. They designed the plan to conceal clients’ income from the IRS by inflating business expenses through fictitious royalties and management fees. These fictitious fees were paid, on paper, to a limited partnership largely owned by a charity. Kohn and Chollet fabricated the fees.

Kohn and Chollet advised clients that the plan’s limited partnership was required to obtain insurance on the life of the clients to cover the income allocated to the charitable organization. The death benefit was directly tied to the anticipated profitability of the clients’ businesses and how much of the clients’ taxable income was intended to be sheltered.

Simmons earned more than $2.3 million in commissions for selling the insurance policies, splitting the commissions with Kohn and Chollet. Kohn and Chollet received more than $1 million from Simmons.

Simmons also filed false personal returns that underreported his business income and inflated his business expenses, resulting in a tax loss of more than $480,000.

In total, the defendants caused a tax loss to the IRS of more than $22 million.

Each was also ordered to serve three years’ supervised release and to pay $22,515,615 in restitution to the United States.