Suspect financial fraud by accountant and ex-wife in California business taxes. Need next steps.

Question

I've been using an accountant recommended by my ex-wife since 2014 to handle the taxes of my small business, a C Corp/Electrical Contractor. After recently filing an extension for 2023, she suddenly informed me she's too busy and I should find another accountant. I suspect financial manipulation or fraud and have substantial documentation to back up my concerns. Given that my ex-wife works closely with this accountant, I want to investigate their involvement and rule them out as suspects. What should my next steps be to address this situation?

Pavel Kolmogorov · Answer

First, I would suggest gathering all the documentation you have—tax returns, bank statements, invoices, payroll records, and anything else tied to your Corp’s finances since 2014. Make digital backups and store them somewhere safe. 
 
Next, find a new independent accountant. A forensic accountant might be overkill right now, but if you’re set on digging deep, one with experience in small business fraud could be a good fit. Give them your records and ask for a full review of your 2023 filings, plus a look back at prior years for anything funky—like unreported income, odd deductions, or payments that don’t add up. Don’t mention your suspicions about manipulation upfront; let them flag issues objectively. 
 
Finally, chat with an attorney regarding the accountant’s findings.

James L. Arrasmith · Answer

Your suspicions deserve immediate attention, as the timing of your accountant's sudden unavailability raises legitimate red flags. First, secure all your financial records - gather bank statements, tax returns, receipts, and any correspondence with the accountant dating back to 2014. These documents will be crucial evidence if fraud has occurred. 
 
Next, consult with both a tax attorney and a forensic accountant who have no connection to your ex-wife. They can conduct a thorough audit of your business finances, identify any irregularities in your tax filings, and help determine if fraud has actually taken place. If substantial evidence emerges, you may need to report this to the California Board of Accountancy, the IRS, and potentially local law enforcement. 
 
Remember to protect yourself moving forward by implementing stronger financial controls for your business. Change all passwords to financial accounts, revoke any access your ex-wife or former accountant might have had, and consider setting up regular independent reviews of your finances. The emotional betrayal in this situation can be overwhelming, but focusing on the practical steps of investigation will help you navigate this difficult period while safeguarding your business interests.

Q: Suspect financial fraud by accountant and ex-wife in California business taxes. Need next steps.