Income

· Omissions of specific items where similar items are included.

· Omissions of entire sources of income.

· Unexplained failure to report substantial amounts of income determined to have been received.

· Substantial unexplained increases in net worth, especially over a period of years.

· Substantial excess of personal expenditures over available resources.

· Bank deposits from unexplained sources substantially exceeding reported income.

· Concealment of bank accounts, brokerage accounts, and other property.

· Inadequate explanation of dealing in large sums of currency, or the unexplained expenditure of currency.

· Consistent concealment of unexplained currency, especially in a business not calling for large amounts of cash.

· Failure to deposit receipts to business account, contrary to normal practices.

· Failure to file a return, especially for a period of several years although substantial amounts of taxable income were received.

· Cashing checks representing income at check cashing services and banks other than the taxpayer’s.

· Covering up sources of receipts by false description of source of disclosed income, and/or nontaxable receipts.

 Expenses or Deductions

· Substantial overstatement of deductions.

· Substantial amounts of personal expenditures deducted as business expenses.

· Claiming fictitious deductions.

· Dependency exemption claimed for nonexistent, deceased, or self-supporting persons.

· Loans of trusts funds disguised as purchases or deductions.

 Books and Records

· Keeping two sets of books or no books.

· False entries or alterations made on the book and records, backdated or post dated documents, false invoices, false applications, statements, other false documents, or applications.

· Invoices are irregularly numbered, unnumbered or altered.

· Checks made payable to third parties are endorsed back to the taxpayer. Checks made payable to vendors and other business payees are cashed by the taxpayer.

· Failure to keep adequate records, concealment of records, or refusal to make certain records available.

· Variances between treatment of questionable items on the return as compared with books.

· Intentional under or over footing of columns in journal or ledger.

· Amounts on return not in agreement with amounts in books.

· Amounts posted to ledger accounts not in agreement with source books or records.

· Journalizing of questionable items out of correct account.

· Recording income items in suspense or asset accounts.

 Allocations of Income

· Distribution of profits to fictitious partners.

· Inclusion of income or deductions in the return of a related taxpayer, when difference in tax rates is a factor.

 Conduct of Taxpayer

· False statement about a material fact involved in the examination.

· Attempts to hinder the examination. For example, failure to answer pertinent questions, repeated cancellations of appointments, refusal to provide records, threatening potential witnesses, including the examiner of assaulting the examiner.

· Failure to follow the advice of accountant or attorney.

· Failure to make full disclosure of relevant facts to the accountant.

· The taxpayer’s knowledge of taxes and business practices where numerous questionable items appear on the returns.

· Testimony of employees concerning irregular business practices by the taxpayer.

· Destruction of books and records, especially if just after examination was started.

· Transfer of assets for purposes of concealment, or diversion of funds and/or assets by officials or trustees.

· Patterns of consistent failure over several years to report income fully.

· Proof that the return was incorrect to such an extent and in respect to the items of such character and magnitude as to compel the conclusion that the falsity was known and deliberate.

· Payment of improper expenses by or for officials or trustees.

· Willful and intentional failure to execute pension plan amendments.

· Backdating of applications and related documents.

· Making false statements on TEGE determination letter applications.

· Use of false social security numbers.

· Submission of false Form W-4.

· Submitting a false affidavit.

· Attempts to bribe the examiner.

 Methods of Concealment

· Inadequacy of consideration.

· Insolvency of transferor.

· Assets placed in other’s names.

· Transfer of all or nearly all of debtors’ property.

· Close relationship between parties to the transfer.

· Transfer made in anticipation of a tax assessment or while the investigation of a deficiency is pending.

· Reservation of any interest in the property transferred.

· Transaction not in the usual course of business.

· Retention of possession.

· Transactions surround by secrecy.

· False entries in books of transferor or transferee.

· Unusual disposition of the consideration received for the    property.

· Use of secret bank accounts for income.

· Deposits into bank accounts under nominee names.

· Conduct of business transactions in false names.

maintained by Bryan Granholm - bryanrg@ptd.net