employee embezzlement

[taxea]

BH one can only provide the client options and hope he makes the right decision. Perhaps this is right for him but, preparer definately has a fool for a client.

[BHoffman]

I don't think he's a fool. He's a very busy guy. I think he's smart not to let this cost him any more trouble than it already has since he has almost no hope of being repaid. He isn't vindictive.

[WhiteOleander]

I don't think he's a fool. He's a very busy guy. I think he's smart not to let this cost him any more trouble than it already has since he has almost no hope of being repaid. He isn't vindictive.

Since the client doesn't want to press charges, maybe he can issue a 1099 for the funds. The IRS says embezzled funds are income to the theif. Then he can deduct the loss that way. ???? Just an idea.

[spt]

update on theft

We have been to prove to state sales tax audit and remove $20000 sales tax debt as employee duplicated many estimates as invoices. Taxpayer advocate has helped and IRS is refunding $16000 of penalty and reduced interest. We filed with IRS showing police report (which is mandatory if looking at employee theft with IRS) and history of events with any documents we thought would help our case and the IRS officer ruled that employee was in charge of paying bills and taxes therefore removed the penalties. Insurance co filed a report stating employee theft and paid my client on a year by year basis. The FBI is finishing up their work and we hope to have charges or an arrest against the employee in the near future. All agenices and ins co have told us that the plice report filing was the only thing that enabled them to continue with the case. I suggest that any one that has this issue to advise their client to file a police report. By the way, I am considered that main witness in the case since I discovered the theft by just providing the bookkeeping to file his tax returns. We have moved forward alot with this case but still all is not complete. Thanks to all for suggestions.

[BHoffman]

spt - thank you for the followup and sorry I hijacked your thread . I'm so glad you are keeping us informed about how it's going with your client's situation.

[taxea]

Since the client doesn't want to press charges, maybe he can issue a 1099 for the funds. The IRS says embezzled funds are income to the theif. Then he can deduct the loss that way. ???? Just an idea.

I thought sending the 1099 was given. But if he doesn't file charges what is he going to call the money the employee got. If he makes it a loan he needs a document in order to prove the loan and then he can only take the expense as a loss if and when he can prove attempts to recover the money.

BH do you really think it is vendictive to bring criminal charges against someone who committed a felony against you? What would you do if it was your employee? Maybe the TP can afford to walk away from that kind of money. I couldn't.

[BHoffman]

Client can afford to walk away. No 1099 issued, and no deduction taken. That's what the client wants to do.

Maybe they had some sort of compensation deal going on that I don't know about, and the client is ashamed to tell me about. Not going to question his motives.