I was at the annual SuperSeminar a couple of weeks ago. Bob McKenzie, one of the presenters, mentioned that the IRS has found that sending undercover agents to businesses that are for sale has been a very useful strategy. Mr. McKenzie told the story of the sale of a Chicago pub, where the owner maintained two sets of books. The pub owner told a prospective buyer not to worry that the pub had only been slightly profitable; the true books showed the real profits. That prospective buyer happened to be an undercover officer from the IRS criminal investigations unit. Oops….
I found the idea of this to be somewhat hard to believe. After all, would individuals be that foolish? Well, I should never underestimate the Bozo contingent.
Let’s head to Palo Alto, in the Bay Area. AJ’s Green Dry Cleaners and Laundromat was up for sale. An undercover IRS agent approached the manager of the business, Sung Ho Choi. Mr. Choi showed the undercover agent the computerized records that showed the true sales in the business. Unfortunately, Mr. Choi only provided his parents (who owned the business) and their accountant the bank statements. The IRS agent compared the computer records to the tax returns, and there was a $194,973 difference in the gross income. That’s a big oops, and Mr. Choi pleaded guilty to four counts of aiding or assisting in the preparation of a false tax return.
If you sell a business, one set of books is enough. The individual looking at your business might just be from the IRS.
[…] and was allegedly told that the true profit was quite a bit higher than what was on the books. Yes, once again that was an IRS agent. But that wasn’t the only problem for Mr. […]