Many business owners are always afraid they won’t get paid, depending on who you work for.
What happens when an accountant doesn’t get paid?
Keep reading because you’re about to find out.
My buddy is an accountant, he has his own firm. His biggest clients are small to medium sized businesses.
He had a client who owned 4 different clubs/bars in 2 different cities.
Client was always shady, always slow on payment, etc.
I was also a customer of one of the bars and they had poker game that I would play in on Thursdays.
They are about to pool their resources.
I’m at my buddy’s house having a few beers and he’s ranting about non payment from a client.
I ask who, but he doesn’t wanna say.
It’s really bugging him because it’s a significant chunk of change.
He then says the name, we’ll call him Scott.
I’m like “Wow, Scott isn’t paying you?” he then says Scott is saying business is way down.
I think that’s odd I’ve been going to one Scott place and every Thursday is packed.
My buddy looks at me and goes “Really?”
I go “Yea he does this new cash discount think, 15% off your tab if you pay cash.”
My buddy goes, “Really?”
I tell him about my experience at Scott’s bar, and eventually the topic changes.
A few weeks later my buddy calls me up and says “You going to Scott’s bar to play poker?”
I said “Yea” he says “can I join?” I go “Sure.”
He joins, we get a few drinks in us, lose our money at poker, my house is closer he decides to crash there.
On the way over he breaks down his theory.
He thinks Scott is vastly under reporting his revenue.
The reason why he suspects Scott is offering cash discount is cause cash is easier to hide.
He says he’s going do a deep dive on Scotts finances.
My friend tells me his plan is to go all 4 of Scott’s establishments, get the prices he charges at each place, pieces together how much alcohol he’s buying, vs how much Scott is saying his revenue equates to.
He looks up how much Scott is paying in payroll, rent, bills, etc.
Keep in mind he has access to all this info.
And he determines that Scott is basically using his credit card receipts + a little bit of cash to cover his cost of his business to include rent, payroll, insurance, liquor, food, etc…
However, based upon the amount of products he’s selling he’s suspecting Scott is under reporting his total income by about 35%-40%.
He goes back into Scott’s books even more, and he figures in the last year Scott has been under reporting his sales by 35%-40% but he’s also been under reporting his sales by at least 20%-25% for years on end.
There is no way Scott is going through as much product and as much alcohol as he’s purchasing and having the revenue numbers that he’s claiming, he’s under reporting his sales to his accountant.
Then they see dollar signs.
Which means he’s also under reporting his earnings to the IRS.
By this point Scott owes my friend thousands of dollars that he hasn’t paid.
He said his total amount owe could buy a brand new motorcycle.
He never gave me an exact number.
My friend decides to screw getting repayment from Scott, let’s get repayment from the IRS through the whistleblower program.
He’s estimating Scotts under reported his revenue by millions of dollars over the course of years.
The whistle blower fees he’d earn from the IRS far outweighs the amount Scott owes him.
The IRS will pay between 15-30% of what they collect.
So with the assistance of a lawyer, my friend gathers all the evidence he has has Scott’s under reporting to the IRS and files a whistleblower report with the IRS.
During this time my friend fires Scott as a client for non payment.
Now this part gets boring cause there’s a lot of legal wrangling and back and forth, this went back and forth.
Eventually the IRS comes down on Scott and they come down hard.
It’s estimated that Scott under reported his income to the IRS by about $4.5 million dollars.
My friend never told me how much the IRS was able to recoup, but Scott’s businesses are no longer his businesses, and $4.5 million dollars would put the whistle blower reward at $675k-$1.3 million.
Keep in mind its based on what the IRS collects, not the amount that’s reported.
I’ve asked my friend how much he got in the end, and he’s simply says “I no longer have a mortgage, and it would have been much cheaper for Scott to just pay me.”
Here is what folks are saying.
Sound advice.
I bet he’s not joking at all.
At the very least!
Makes sense. I wonder how that works.
Is the IRS a swan?
I never trust a business that only accepts cash.
But you should be able to trust your accountant.
Thought that was satisfying? Check out what this employee did when their manager refused to pay for their time while they were traveling for business.
