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Cash Business Tax Audit Lawyers
How You Can Endure a Tax Audit When You Operate a Cash Intensive Business
A wide range of businesses and commercial enterprises operate on a cash basis because of the customers or simply because of the nature of the business. For example, clients may pay independent contractor cash for work performed at their home. Customers at a gas station, liquor store, convenience store or other business generally also pay in cash. Some businesses, such as salvage yards, check cashing places, pawn shops, jewelry stores, parking garages, and restaurants also frequently have significant cash receipts.
For owners of businesses of this type, this means that the agent or examiner may enter an audit of such a business with the expectation of finding wrongdoing. This higher level of suspicion and more intensive audit techniques that are used often result in major problems for the business owner. These may include a tax audit that goes overboard and results in an examination by sampling or other statistical methods. In plain English, audits of cash intensive companies often result in significant tax liabilities and penalties, as well as a heightened potential for criminal tax exposure. Thus, they should only be handled by a seasoned tax professional.
The IRS and other tax bodies recognize that the lack of a documentation surrounding cash transactions leaves room for greater latitude for abuse than credit card payments and other transactions that create an electronic paper trail. Principally, the main concern held by tax agencies and other regulators is the propensity for misappropriation by the proprietor and other persons who handle cash or who are in charge of the business finances. Misappropriation in a cash intensive enterprise can occur in a few different ways ranging from low-tech skimming of cash receipts before they get recorded to high-tech fraud done with “zappers” – electronic devices that can alter sales records. Other misappropriation methods can include the theft of cash from the cash register and the theft of goods. Proprietors may also make payments for goods never received to alleged vendors who turn out to be relatives or aliases. Such practices reduce taxable revenues and deprive the state and federal government of tax revenue they might otherwise receive. Tax enforcement agencies go after and prosecute fraudulent criminal behaviors of this type vigorously.
If you are looking for a lawyer that listens, is aggressive where needed, and holds his word above all else, Todd is the best pick. I had hired multiple attorneys prior to hiring the Spodek Group for a white collar case. The first thing that stood out to me was the cost, as anyone going through the process and dealing with the system, money was tight at that time - especially after hiring and firing multiple lawyers. The cost was not as high as others which was definitely a plus. Todd's intake process was also unlike other attorneys. He took the time to actually listen. He cared. He was trying to put himself in my shoes while I was explaining the situation to him and he really took the time to understand the whole situation. Other lawyers will give you 15 mins and send you a retainer agreement. Not Todd, I think he spent almost two hours with me as I was explaining everything.Not only was he great during the onboarding process, he was supportive and very informative through the entire plea process and eventually sentencing. After hiring him, I asked if I should hire a prison consultant, he told me to save my money as he would do everything they would. He was right and held up to his word. Later on I would hear from others that went with the prison consultants that they were a waste of money - I am glad I listened to Todd!When it came time for sentencing, two days prior to sentencing, the prosecutor tried increasing my proposed prison time by almost double - apparently a normal move. Todd and his team worked with me non-stop through the weekend prior to sentencing to ensure that I was not given additional prison time. Again, he took the time to listen and came up with a strategy to explain the case with great detail.Unfortunately, I did plead guilty as that was my best option. Todd and his whole team wrote up nearly 300 pages of a summary of what happened and why I should not be given prison time. If I breakdown the amount I spent with Todd versus the amount of work that I saw being done, I am shocked I was not charged four times as much. The other benefit was, a lot of criminal defense lawyers were just a single attorney with a paralegal or two. Todd had a team of people that I dealt with (5-7 people that I interacted with), but he was ALWAYS accessible. It would never take him more than an hour to reply unless he was in court.I was sentenced to prison and I was emotionally distraught. Todd and his team did whatever they could even after sentencing to make sure I was alright. He personally stayed in touch with my family to ensure I was doing alright and offered support to them. Most lawyers would consider the job complete at sentencing, not Todd.After prison, Todd still spent time with me to make sure I was on the right track and avoiding any potential risks in the future. He has also been giving advice on how to navigate probation etc and has not been looking at the clock for billing.Although I wish I had never been arrested in the first place, I am glad I had Todd and his team in my corner. Without them I likely would have had to spend a lot more time in prison than I did.Thank you, Todd, and the entire Spodek Law team, for helping turn what was a nightmare into a manageable situation!
I am immensely grateful to the entire team at Spodek Law Group for their unwavering dedication and exceptional expertise throughout my case. From our initial consultation to the final resolution, their professionalism and tireless advocacy made all the difference. Their strategic approach and attention to detail instilled confidence in me every step of the way.Thanks to their hard work and commitment, we achieved a truly favorable outcome that exceeded my expectations. Not only did they navigate the complexities of my case with precision, but they also provided invaluable support and guidance during what was undoubtedly a challenging time. I cannot recommend Spodek Law Group highly enough, especially attorneys Todd Spodek and Claire Banks; they are beacons of excellence in the legal profession.YSP.
Todd, Ralph and Alex are amazing. Helped my husband get from a double digit number with multiple charges to a single digit, by the time I blink he will be out. They very professional and help with all your needs. They dealt with my anxiety and worry very well and they understand that your family member needs to get home as soon as possible.
Believe every single review here about Alex Z!! From our initial consultation, it was evident that Alex possessed a profound understanding of criminal law and a fierce dedication to his clients rights. Throughout the entirety of my case, Alex exhibited unparalleled professionalism and unwavering commitment. What sets Alex apart is not only his legal expertise but also his genuine compassion for his clients. He took the time to thoroughly explain my case, alleviating any concerns I had along the way. His exact words were “I’m not worried about it”. His unwavering support and guidance were invaluable throughout the entire process. I am immensely grateful for Alex's exceptional legal representation and wholeheartedly recommend his services to anyone in need of a skilled criminal defense attorney. Alex Z is not just a lawyer; he is a beacon of hope for those navigating the complexities of the legal system. If you find yourself in need of a dedicated and competent legal advocate, look no further than Alex Z.
I don’t know where to start, I can write a novel about this firm, but one thing I will say is that having my best interest was their main priority since the beginning of my case which was back in Winter 2019. Miss Claire Banks, one of the best Attorneys in the firm represented me very well and was very professional, respectful, and truthful. Not once did she leave me in the dark, in fact she presented all options and routes that could possibly be considered for my case and she reinsured me that no matter what I decided to do, her and the team will have my back and that’s exactly what happened. Not only will I be liberated from this case, also, I will enjoy my freedom and continue to be a mother to my first born son and will have no restrictions with accomplishing my goals in life. Now that’s what I call victory!! I thank the Lord, My mother, Claire, and the Spodek team for standing by me and fighting with me. Words can’t describe how grateful I am to have the opportunity to work with this team. I’m very satisfied, very pleased with their performance, their hard work, and their diligence.Thank you team!
I recently had Spodek Law Group represent me for a legal matter in NYC and I am thoroughly impressed with their services.Alex Zhik secured the best possible outcome for my case.It was a seamless journey from the initial consultation to the resolution of my legal matter. From the moment I spoke to Todd about my case, his enthusiasm to help was evident, setting a positive tone for the entire experience. The efficiency and professionalism displayed by the team is commendable.A particularly noteworthy aspect of their service is their user-friendly portal to upload your documents/evidence. This not only simplified the process, but showcases their commitment to streamline the client experience.Lastly, in an industry where legal fees can often be a concern, I found their pricing to be very reasonable, making needing legal assistance feel accessible and stress-free.I am grateful for their support and wouldn't hesitate to turn to them again in the future.
How Do Auditors Identify Potential Tax Fraud in Cash Intensive Businesses?
In addition to other audit and examination techniques IRS, FTB, and BOE agents also utilize what are known as badges of fraud to spot situations where there is an elevated likelihood of tax evasion or other forms of misappropriation. Badges of fraud usually include the behaviors of the audited cash basis business owner. For example, any behavior that is combative or hostile towards the auditor counts as a badge of fraud. Likewise, refusal to provide requested or required information to an auditor could also be construed as a badge of fraud. Some badges of fraud are:
The failure to maintain proper records
The destruction of financial records or other documents
Concealing any assets
Excessive cash transactions
Maintaining a second set of books
Structuring transactions uniquely for tax purposes
Giving unreasonable or implausible explanations or financials
Other indicators of fraud the IRS references in its Cash Intensive Businesses Audit Techniques Guide include a lavish lifestyle that could never be sustained on the reported amounts of income, businesses that carry on operating in spite of stated losses in multiple consecutive years, an increase in cash balances despite reported losses, and unusually low sales for a business of this kind.
The discovery of any badges of fraud places taxpayers in an extremely compromised position. The consequences of their presence as the taxpayer enters a federal civil tax audit can include the possibility of a civil fraud penalty of 75% of the additional tax owed plus interest. If the matter gets referred for criminal investigation, the possibility for a five year prison sentence and up to $500,000 in fines exists.
What You Should Expect from an IRS Audit of a Cash Intensive Business
An auditor’s investigation into you and your business actually begins long before the actual examination of your books and records. Agents engage in a thorough, intensive pre-audit work-up process.
From here, the IRS agent will conduct an interview. A proper interview may take longer than two hours during which all of your statements, appearance, body language, and conduct will be thoroughly scrutinized. Every taxpayer is expected to be capable of explaining every step in the businesses standard operations from the funds that are entering the business as income, through their deposit to their disbursement. Discrepancies in what you may state or imply during the interview compared to the information contained in your records can give rise to grounds that will support a more thorough and intense audit.
What You Should Do When Your Cash Intensive Business is Looking At an IRS Tax Audit
Should your business ever get selected for an audit by the IRS or a state tax enforcement agency (especially a sales tax audit by the BOE), Enlisting the services of an experienced tax attorney is a critical stage during which your business, avoid a worst-case scenario and mitigate the consequences of the audit. Our lawyers understand the taxpayer’s bill or rights and we will not hesitate to remind the auditing agent of your rights in an assertive but professional manner. When you have an experienced tax lawyer taking care of your case, the audit work-up process begins immediately. The lawyer can look your records over, give you an educated assessment of your the situation, and get ready to tackle potential issues that may arise. Moreover, the attorney is more likely to reach out to the auditor to negotiate and set the ground rules for the audit. By laying down ground rules, the process can be under control to a degree. Should the auditor discover errors or inadequate information, you will know what you can expect from the process. In fact, exercising some degree of control over the audit techniques, the attorney could negotiate strategically to protect your business from weak points in the records.
If you operate a cash intensive business, like a restaurant, salvage yard, check cashing business, jewelry store, pawn shop, or parking garage and are in peril of an IRS Tax Audit, contact our experienced tax lawyers right away!
