The Association of Certified Fraud Examiners (ACFE) released its biannual 2016 report last week. According to the report, the typical organization loses 5 percent of its revenue to fraud each year. The losses caused by fraud reported in the study found an average loss of $2.7 million per case, with $150,000 being the median loss. We’ve compiled a shortlist of their findings focused on small to medium sized businesses.
The most common form of occupational fraud found was asset misappropriation, which occurred in more than 83% of cases and caused a median loss of $125,000. Financial statement fraud was much less common (less than 10% of cases reported) but caused the most damage, with a median loss of $975,000.
While corruption was more a common fraud risk in large organizations, check tampering, skimming, payroll and cash larceny schemes were twice as prevalent in small organizations as in larger organizations.
Small Organizations are at the most risk. Organizations with fewer than 100 employees were the most likely to suffer from fraud in the study, representing about 30% of the cases reported. The median loss suffered by those firms was $150,000, the same as those suffered by large organizations (10,000+ employees) and more than organizations with 1,000-10,000 employees.
Small organizations are particularly vulnerable to fraud because they a significantly lower implementation rate of anti-fraud controls and have fewer resources to withstand losses. Small organizations also are much less likely to have anti-fraud controls in place than larger organizations.
For the full ACFE executive summary, go here.
While no company, even with the most robust internal controls, is completely protected from fraud, it’s important that entrepreneurs put measures in place that protect their company’s financial and management data. Internal controls are critical in the process of setting and achieving operational objectives, accurate and reliable financial reports, and compliance with applicable laws and regulations.
For more information, contact Talley & Company today.
If you’re planning to do some egg-dyeing or egg-hiding for Easter, prepare to spend a little more for a carton than you did last year. In February 2016, the average retail price of eggs was $2.27 per dozen, which is considerably higher than the $2.07 per dozen last Easter. Grocery-store prices are still showing the effects of the avian influenza outbreak that hit the U.S. last year, which drove prices up almost 18% nationwide in 2015, when nearly 40 million egg-laying chickens died. While that won’t stop Americans from spending $17.3 billion on Easter this year, here’s what you can learn from it.
Costs of eggs not your problem? If you are a business owner, you most likely know just how much cost increases outpacing revenue gains can affect your profitability. Even if you’re in a field as remote from food as the semi-conductor business, changes in your supply chain, production process, logistics or distribution system, and any number of additional forces can have a major impact on your profitability. While there’s little anyone can do about sudden disasters like the Avian flu outbreak last year in the egg industry, there are plenty of warning signs that come with more everyday events impacting your business.
With the right advisors working with you to set up and analyze your financial data, you can effectively ascertain many negative and positive trends affecting your bottom line well before they hit mainstream news. Knowing where to look and having it at your fingertips can help you develop solutions before experiencing deep cuts into your bottom line.
Talley & Company has helped clients find best practice solutions to implement systems and controls that identify leading & lagging indicators, allowing them to capitalize on growth trends in their product lines while maximizing profits. From inventory controls that help monitor and actively increase cash flow on a day-to-day basis, to budgeting & forecasting tools to see both where you’ve been and where you are going, Talley & Company has your business’ profitability covered.
The professionals at Talley & Company are here to help monitor, protect, and put to work your hard-earned money in the most profitable way possible. Call Talley & Company today.
Erin Andrews recently was awarded a $55 million verdict in her peephole lawsuit, but unsurprisingly, the IRS may be the real winner in the case. The perpetrator, Michael Barrett is on the hook for $28 million whereas the Marriot franchisee and operator, West End Hotel Partners LLC and Windsor Capital Group Inc., face the remaining balance of $27 million. Though the verdict will likely face an appeal by the hotel franchisee and operator and the perpetrator will unlikely have the funds to pay up, taxes may be the biggest thing standing between her and a big pay day.
The IRS treats damages for physical injuries (e.g. broken bones from an auto accident) as tax-free. So are damages for physical sickness. But since 1996, your injury must be “physical” to be tax-free. The IRS says your injuries must be visible, so Ms. Andrews may have trouble treating the damages awarded to her as tax-free. She was understandably humiliated and clearly suffered emotional distress. But without being able to argue something considerably more ‘physical,’ it is all subject to tax.
Ms. Andrews may have more tax-mitigating options available by choosing to settle out of court. In a settlement both parties can attempt to iron out the tax issues and tax reporting, with varying amounts of success.
Attorney fees can be a tax trap, too. If you are the plaintiff and use a contingent fee lawyer, you’ll usually be treated (for tax purposes) as receiving 100% of the money recovered by you and your attorney, even if the defendant pays your lawyer directly.
Ms. Andrews did the right thing and showed an enormous amount of courage by standing up for herself in court. From a financial viewpoint, her case presents an excellent example of the significant tax implications revolving around settlements/judgments that not everyone is aware of.
04 Mar 2016
If you’re planning on doing estate planning for the first time in 2016, or want to make sure your current planning documents aren’t out of date, staying on top of the latest changes is important. Here are several updates to keep in mind if you need to establish or revisit your estate plan in 2016:
The estate-tax exemption. For 2016 you can leave bequests (gifts to other individuals upon your death) worth up to $5.45 million (up from $5.43M last year) free of any federal estate tax. If you’re married, both you and your spouse are entitled to separate $5.45 million exemptions. If one spouse dies and does not use up his or her full exemption, the leftover exemption amount can be transferred to the surviving spouse.
The gift-tax exemption. You can also give away a cumulative total of up to $5.45 million to whomever during your life without owing any federal gift tax. If you’re married, both you and your spouse are entitled to separate $5.45 million gift-tax exemptions. If one spouse dies and does not use up his or her full exemption, the leftover exemption amount can be transferred to the surviving spouse.
The $14,000 annual gift tax exclusion remains the same. For those with large estates, the $5.45 million estate-tax exemption isn’t enough. That’s where the $14,000 annual gift tax exclusion rule can help. Gifts made under the $14,000 annual gift tax exclusion rule (more on that below) will not trigger any federal gift taxes, nor will they reduce your federal gift-tax or estate-tax exemptions. However, gifts in excess of the $14,000 will reduce both your federal gift-tax or estate-tax exemptions dollar for dollar.
The benefit of making gifts up to the exclusion amount: they reduce your taxable estate, and they shift any taxable income generated by the gifted money to your kids, who are probably taxed at a lower rate than you. Gifts under the annual gift tax exclusion rule don’t cut into your $5.45 million gift-tax or estate-tax exemptions, but they chip away at your taxable estate. So your estate tax exposure can over time be reduced by taking advantage of the annual gift tax exclusion.
For a full list of the must-know facts that will affect estate planning in 2016, contact Talley & Company today.
26 Feb 2016
Last week the IRS warned that email and texting scams aiming to trick U.S. taxpayers into providing personal data have surged 400% in 2016 so far. The schemes involve phishing (“fishing” for information and “hooking” victims) messages designed to trick taxpayers into believing the emails and texts represent official communications from the IRS, tax software companies or others in the tax industry. Here’s what you need to know.
What to Look For in These Scams
You may receive an official-looking email or text message from what appears to be an official source, whether the IRS or someone in the tax industry. The messages typically ask for data related to tax refunds, filing status, or seek confirmation of personal information, including ordering IRS transcripts or verification of IRS Personal Identification Numbers.
When you click on the links (which you shouldn’t be doing), you are sent to what appear to be government websites that ask for Social Security numbers and other personal information that identity thieves can profit from filing false tax returns. The sites may also contain malware that infect taxpayers’ computers and enable cyber-thieves to gain access to files or track consumers’ keystrokes to get personal data.
It is important to keep in mind the IRS generally does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.
Also Note That the IRS Will Never:
- text/email you demanding immediate payment, nor will the agency call about taxes owed without first having mailed you a bill;
- demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe;
- require you to use a specific payment method for your taxes, such as a prepaid debit card;
- ask for credit or debit card numbers over email/text/phone; or
- threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.
Accounting Today recently released a summary of the IRS’ “Dirty Dozen” list of the top tax scams for 2016. You can view it here.
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