Theft and taxes

[Davc]

Churches are too trusting of their employees.
When I worked for the Air Force Auditor General, I made an audit of the Chaplain's fund.
My first step was to make a cash count, but the Chaplain's assistant said he had taken the Sunday collection home with him to count before depositing it, and would have to bring it tomorrow.

The same thing happens with student funds when auditing school districts except that the teacher who has the cash box is out of state on vacation.

[taxxcpa]

Church embezzlement

Churches are too trusting of their employees.
When I worked for the Air Force Auditor General, I made an audit of the Chaplain's fund.
My first step was to make a cash count, but the Chaplain's assistant said he had taken the Sunday collection home with him to count before depositing it, and would have to bring it tomorrow.

[OtisMozzetti]

church bookkeeper

But, it does seem there are more and more stories of embezzlement. Part of the current economy maybe.

It was revealed a day or so ago that the bookkeeper at a church (of God) in Visalia, California, had made off with 2 or 3 million during the last 10 years or so.

[JG EA]

While it is true that restitution of embezzled funds may give rise to an ordinary deduction for the embezzler in the year of repayment, James v. United States, supra at 220

Excert from Steven J. Romer, TC Memo 1996-287

Thanks for the info. I'm off on another tangent by now. But, it does seem there are more and more stories of embezzlement. Part of the current economy maybe.

And Rita - good one.

[RitaB]

Theft and taxes

I looked at your title and thought, "Same thing."

[okie1tax]

Repayment of theft

While it is true that restitution of embezzled funds may give rise to an ordinary deduction for the embezzler in the year of repayment, James v. United States, supra at 220

Excert from Steven J. Romer, TC Memo 1996-287

[JG EA]

Thanks V! Now let me take that a step further. Would the pay back then be a deduction in the year it is paid back if in fact they did amend the returns? Just mulling here.

[veritas]

Circular 230

Says you must promptly inform the client of the error/omission and the consequences. The IRS also holds the position you should inform the client of corrective action.

The money received in the prior years would be income in the years received and you should advise the client to amend the returns.

[JG EA]

Say Madoff was your tax client and he wanted you to do 2010 taxes for him. It is clear under current due diligence that we should know or have reason to know about some extra money coming in that needs to be reported.

But what about prior years? If he forgot to tell us about stolen monies then, should we then demand to amend in order to do this year's return? I know it says we just need to tell him of his obligation, but since he lied before should we have reason to know he would probably lie again?

Now a different scenario. What if he only stole a little bit of money in prior years, but the court ordered it to be paid back and he in fact is starting to pay it back. Would it still be necessary to amend (or tell him his obligation to amend) since as a cash basis taxpayer he got extra money in those years?