His Client Was Living Large on Fraudulent Fortunes, But This Accountant’s Bold Move Caused Jaws to Drop.
The Original Poster’s (OP) accountant friend uncovers a potentially massive tax fraud scheme involving his shady client, Scott. As the stakes rise, the accountant must choose between seeking repayment from the client or turning to the IRS whistleblower program for justice.
The Shady Client
The OP’s friend is an accountant who has a shady client named “Scott.” Scott owns four clubs and bars in two cities. The client is always slow on payments, and OP is a frequent customer at one of his bars. Scott’s delay in payments begins to bother the accountant’s friend.
Curious Observations
OP mentions to his friend that Scott’s bar is always packed and offers a cash discount. This information raises suspicions for the accountant, who starts to suspect that Scott might be under-reporting his revenue.
Joining the Poker Game
A few weeks later, the accountant asks to join OP at Scott’s bar for a poker game. They have a good time, but the accountant friend is observing the business while they play.
The Under-Reporting Theory
The accountant shares his theory with OP, suspecting Scott is under-reporting his revenue because cash is easier to hide. He decides to do a deep dive into Scott’s finances.
Investigating the Establishments
The friend visits all of Scott’s establishments to gather data on prices, expenses, and revenue. He has access to this information as Scott’s accountant.
Uncovering the Deception
The accountant finds that Scott is under-reporting his income by 35-40%, using his credit card receipts and some cash to cover business costs. He also discovers that Scott has been under-reporting his sales for years.
The IRS Connection
Scott’s under-reporting also means he’s under-reporting his earnings to the IRS. The accountant friend is also agitated because Scott owes him over $10,000 for accounting and bookkeeping services.
The Whistleblower Plan
Instead of seeking repayment from Scott, the accountant’s friend decides to report Scott to the IRS through the whistleblower program, estimating that Scott has underreported millions of dollars over the years.
Legal Assistance
With the help of a lawyer, the accountant friend gathers evidence of Scott’s under-reporting and files a whistleblower report with the IRS. During this time, he fires Scott as a client for non-payment.
Legal Wrangling
There is a lot of back-and-forth with the IRS and legal proceedings, which OP describes as “boring.”
The IRS Strikes
Eventually, the IRS took action against Scott, estimating that he underreported his income by about $4.5 million. Scott is forced to sell several of his business to cover the costs.
The Whistleblower Reward
The IRS pays whistleblowers between 15-30% of what they collect. In this case, the reward would be between $675,000 and $1.3 million, depending on the final amount collected.
Mortgage-Free Accountant
When OP asks his friend how much he got in the end, his friend replies, “I no longer have a mortgage, and it would have been much cheaper for Scott to just pay me.”
A Lesson Learned
Scott’s downfall serves as a lesson for the importance of honesty in business and the consequences of underreporting income. Despite the events, OP continues to support his accountant friend, showing the value of loyalty and trust in their friendship.
Was The Accountant’s Behavior Appropriate?
The readers in the forum had a lot of mixed views on the matter. Here are some of their responses…
Forum Responded
One responder wrote: “My father used to say, ‘Cheat whoever you want but never cheat the taxman, because their gears may be slow, but they are steady.’”
Different Perspective
Another reader writes, “This is literally part of the due diligence some accountants/firms will do.”
Another Viewpoint
A different person states: “But did he get the new car?”
What Do You Think?
What are your thoughts on their actions?
What would you have done in this situation?
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Alexander Veros
Alex is a writer for Top Dollar Investor, focusing on lifestyle, travel, and business stories. Alex has started several online businesses and is a blogger who loves providing quality content to help others. He is passionate about affiliate marketing, finance, and cryptocurrency.
