You Suspect Your Spouse is Hiding Income or Assets

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If you think your spouse may be attempting to hide income or assets during your divorce proceeding, your first step should be to tell your divorce attorney. Your attorney should know how to handle situations such as this, and the sooner he or she can act, the more likely you are to see results.

You should also quickly gather and secure any documentation that might prove your allegations. Financial documents that you can legally access should be copied and turned over to your attorney. This might include tax returns, pay stubs, credit card statements, bank statements, brokerage statements, contracts, or any other documents which might prove the existence of assets or streams of income.

A financial expert with experience in the divorce arena can be invaluable in searching for hidden income and assets. The expert can help you identify the financial documents that will be needed for analysis, and can assist your attorney in determining which documents to subpoena. Continue reading

Evaluating Business Tax Returns in Divorce Cases

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Tax returns can be one of the most important pieces of information a forensic accountant evaluates in a divorce case. Of course, there are other very important financial documents, but income tax returns provide summary information about of lot of financial issues, including income, expenses, and assets. I typically recommend reviewing three to five years of tax returns, but the further you can go back, the better the picture you will get of the personal or business finances.

If a party claims that personal or business tax returns are unavailable for any reason, consider requesting the records directly from the Internal Revenue Service. This requires the consent of an individual or business owner, and can be done with Form 4506, Request for Copy of Tax Return.

On the business side, it will be important to compare the financial statements with the income tax returns. Because of differences in accounting rules and the tax law, numbers for the same period may differ between the financial statements and tax returns. Depreciation is one example of a line item that typically differs between the financial statements and income tax returns. The expert should investigate any differences between the financial statements and tax returns, and refer to the tax laws to confirm whether such a difference is legitimate.

Some of the key information that may be found in the income tax returns includes: Continue reading

Divorce Financials: Finding Hidden Income

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divorceIt is not unusual for the “out” spouse (the one who is not the major breadwinner in the family and who does not have control over the family’s finances) to suspect that income and assets are being hidden during a divorce.  When one party is accused of hiding income, how can a forensic accountant find it?

Below are a few techniques that I may use to uncover hidden income. A more in-depth discussion of this topic appears in Chapter 9 of my book, Lifestyle Analysis in Divorce, published by the American Bar Association. Continue reading

Tips For Finding Hidden Assets in Divorce

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It is not uncommon for one spouse to hide assets during a divorce. Everyone is in love until they’re not, and then they may not feel much like splitting everything with a soon-to-be e-spouse. If hidden assets and streams of income remain hidden, it may be impossible to get a fair divorce settlement.

Women are very often in the lesser position when it comes to the finances of the family. The money earner in the family is most often the husband. Even when both spouses work, most often the husband earns more than the wife.

Assets are hidden in divorce more often than you would expect, and women are disproportionately affected by this due to their tendency to be in the less powerful financial position. Continue reading

Lifestyle Analysis in Divorce: Is It Simply Data Entry?

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When completing a lifestyle analysis in a divorce or child support case, I am often asked whether my work is simply data entry. Why does a forensic accountant need to do the lifestyle analysis? Can’t anyone with a bit of accounting training do it?

As Tracy discusses in the video below, a lifestyle analysis is much more than a data entry exercise. There is a high level of quality control needed to ensure that all transactions are included in the analysis, and that none are duplicated. In larger cases, this gets complicated because of the high volume of data to manage. The divorce client needs an expert who can handle this volume of data AND maintain the integrity of the data. Continue reading

Divorce Red Flags of Fraud

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The vast majority of family law cases are settled without trials. However, a client should not enter into a voluntary settlement if there are significant concerns about the truth of the financial disclosures and indications that assets or income may be hidden. The first step in determining whether a forensic accountant is needed to evaluate the finances of the parties is the identification of “red flags” of fraud. A red flag is simply a warning sign or an unusual item or circumstance.

Attorneys often use their instinct to determine when a forensic accountant is needed in a family law case. If something does not feel right, it probably should be investigated.  A client is often suspicious of the spouse even before they are separated. The spouse may even be known to manipulate the money.

Beyond using intuition to determine if something is wrong, there are plenty of warning signs that indicate the finances should be evaluated carefully. These red flags by themselves do not mean that money has disappeared or the finances are being manipulated. But they are signs that an investigation is warranted. Because divorce is so adversarial, it is likely that one or both of the spouses will conceal or manipulate financial facts. Continue reading

Book: Lifestyle Analysis in Divorce Cases

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Tracy Coenen talks about her book, “Lifestyle Analysis in Divorce Cases: Investigating Spending and Finding Hidden Income and Assets.” The book was published by the American Bar Association

shares her insight on uncovering financial details to ensure that divorce settlements are fair and equitable. A forensic accountant and fraud investigator, Coenen wrote the book to arm lawyers with a powerful tool when valuing and dividing property in complex divorce cases.

Manipulating Finances in Divorce

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When a divorce is pending, it is not uncommon for one of the parties to manipulate the finances. Tracy discusses some common items that can be manipulated such as salary, selling assets to related parties, and more.