When Mrs. Accountant and I got married we had a bucket list. Most items on the list are private and irrelevant to the story at hand. The one item on the list I will share is our desire to have foster kids early in our marriage.
The goal was to help foster kids at a higher level than the average foster home. We also wanted to have foster children early in our marriage out of concern for having foster children after we had our own children.
Mrs. Accountant and I realized our goal. Several foster kids were placed in our home over three years. Rather than collect a stipend (the county paid us $1,000 per child per month tax free!) and ram as many kids through as possible for some quick squid, we planned on helping these kids get the start they deserved in life.
After they settled into their temporary home I started a daily routine with them. Back then Tony Robbins had recently released his first version of his Personal Power program. This 30 day course took you from where you were at to accelerated growth in areas of personal development and even issues relating to money.
Monday through Friday I would sit with the foster child (we only took one child at a time) as we listened to another episode of Tony. The program strongly recommended keeping a success journal and completing each day’s tasks to move a step closer to your goals.
Hatred is in the air and it’s costing the nation plenty and a whole lot more to those who harbor the hate. The President has now banned transgender people from the military and the alt-right is cheering. And it’s a stupid idea.
It is easy to see how dumb this policy is if you think about it for even a moment. If we exclude gays and transgender people from the military because it might hurt morale, why not exclude these people from all areas of society. Think about it. We can complain when they work and complain when they don’t. We can really mess with these people.
But let’s not stop there, my Aryan Judeo-Christian friends. As long as we are excluding those we consider undesirable we need to name the groups we want out. The gays and transgender people are only the beginning. We had a little thing called the Civil War that started 156 years ago. The discussion was slavery if memory serves me right, but it might be fake news. Women gained suffrage in 1920 in the U.S. with ratification of the 19th Amendment to the Constitution. White men haven’t heard the end of it ever since.
Let’s take a tally. We want gays, queers, transgenders, blacks, Mexicans, women, and let’s not forget the Jews (of which a tincture probably runs through the author’s veins) from serving in the military. Basically, we only want white men in the military.
Here is why this is soooooo stupid. When the military is called to duty only white men will be on the line fighting for the nation. Inevitably some of these fine young “white” men will die. That will leave a disproportionate number of gays, transgender, black, Hispanic and other undesirables to spend time with, shall we say, white women.
It’s hard being a racist when you really start to think about it. Now we get to think about how it is killing your pocketbook.
Mrs. Accountant, the girls and I took a hard turn right as we headed home from the eclipse. Gas low, we stopped at a gas station to fill up when I noticed a massive sign announcing the Powerball lottery was somewhere around a gazillion dollars and change. My frugal nature prevented me from buying a ticket, but Mrs. Accountant couldn’t resist. And now we are the proud owners of a massive nest egg.
Don’t worry! I will remember all the little people who helped me over the years. Now and again I’ll publish another post on this blog to rub your noses in the good life I am living. Suckers!
To be honest, Mrs. Accountant didn’t actually buy a lottery ticket and truth be told, we headed straight home after watching the moon slowly cover the sun.
There is a strong temptation when the lottery hits nosebleed territory. What people forget is that the odds are still 292.2 million to 1. For all practical purposes the odds are impossible. But, the argument goes, somebody eventually wins. True, but it won’t be you.
If enough people play the odds are someone will win at some point. The odds are so long no one in their right mind—I said right mind—would waste a nickel on state run lotteries. It’s the worst racket in town and in the end it will ruin your life if the impossible happens.
And after all this I still claim I won the lottery and I have. If you listen close you can win the same lottery I did as long as you don’t buy a lottery ticket.
I have a confession. I was jealous of Mr. Money Mustache. Well, not exactly of Pete himself, but of something he has been able to do for a long time that has eluded me.
Several years ago before I met Pete I read how he periodically traveled the country and rarely paid for a hotel room. There was always someone willing to put him up. One summer he spent in Hawaii at a guy’s house and he helped him with some remodeling as payment. There were several other incidents where he mentioned couch surfing.
My first attempts at this fell flat. You can’t just bed down in anyone’s home. What if your host is a serial killer (notice the empty corn flakes boxes behind the house)? What if the host thinks you’re a serial killer?
It really wasn’t Pete’s fault. I just hadn’t learned the fine art of securing accommodations outside the hospitality industry. I didn’t know enough people from around the country where this would work on a regular basis and couch surfing at a stranger’s home seemed to me fraught with risks.
Then I got an email.
Winter seems like a lifetime away. A quick check of the calendar and a shiver will run down your spine as only a few months remain before the heating season begins in the northern latitudes and creeps south.
Saving money is my favorite passtime. What other hobby provides so many tax-free financial benefits?
If you are reading this at its regularly scheduled publication date, Mrs. Accountant, the girls and I are heading to or are enjoying the eclipse. Trevor McDonald contacted me a few months back asking to write a guest post. We worked together (he wrote, I edited and provided guidance and recommendations) until he had a solid piece you will enjoy reading.
I’ll let Trevor take the driver’s seat and explain.
The past week has been an interesting one around the Wealthy Accountant world and all I can think of to explain it is. . .
Put up or shut up.
The best way to tell this story is to go back to the beginning.
Long time readers know I opened shop without knowing I opened shop in 1982. I prepared my first tax returns that year because I wanted the money and it seemed like easy work. It took until the 1989 tax season to realize this is something I could do for a living and still appear as a hard working, up standing (that illusion wore off fast) young man supporting his new wife.
The world was a different place back then. The local newspaper had two and a half pages of business card sized ads during tax season for tax preparation services. I was one of those ads. There hasn’t been an ad in that newspaper offering tax services in 15 years.
Fifteen years ago a client who has since passed away had a complaint. He explained his uncle had died and the family was having a difficult time finding his money. The family knew his uncle had money, but he hid it everywhere, kept no records and refused to reveal his secrets to anyone.
The family decided to hire a forensic accountant who took six months to find around $280,000. My client’s complaint was they knew the uncle had a lot more than $280,000, but had no idea where to start looking.
This was during the my early days as a hedge fund manager. The hedge fund didn’t buy stocks or businesses; we bought charge-off receivables and collected on the debt.
When banks have bad loans on the books they sell them for a fraction of the face value. (Banks never really lose. It blows the mind how they every have financial trouble. It takes a new level of stupid to fail as a bank.) Once we took possession of the accounts we sent our legal teams around the country to locate and collect, even in court if necessary. (I authorized over 22,000 suits over the years. Yeah, I was one of those a-holes. But I was good at it. Stick with me here. This is all going to work to your advantage this time.)
Running the type of hedge fund I did (I eventually was hired to run two) provided me with the resources, connections and experience in finding people and their hidden stash. Finding money is something I got really good at.
My client was awed when I started to explain how I would have handled the case versus the forensic account they hired. In 30 seconds I gave them one piece of advice and found over $300,000 more than the forensic account they hired did in six months. Before I was done we collected seven figures of cash from around the United States and even found an account with serious cash tucked away in Ireland.
The family promptly hired me.
Finding Money as a Side Gig
This is a story of finding stuff no one else can. Most side gigs people pick up in retirement earn a modest income. A forensic accountant can earn six figures part-time without breaking a sweat. With the story above in hand we will walk through the simple process of finding old or lost accounts for people.
The resources in this short post will be enough to find the vast majority of assets. To get the fine edge in your performance I will share some resources at the end.
A forensic accountant doesn’t need to be a CPA, enrolled agent or attorney to do the job. In fact, the best people at this are as far away from these professional designations as you can get. This is a job you can do on your laptop in your BVDs without any problem. (I recommend putting on your shorts when meeting with the client.)
The pay is excellent. $300 an hour and up is common in this field. Some forensic accounts change a percentage of what they find while others charge by the hour. People are reluctant to go the percentage route because they all think you’ll find a gazillion dollars and they don’t want to share. Fine! That’ll be $300 per hour, plus expenses. Oh, and I need a $5,000 retainer. Are we having fun yet?
Who Are the Clients?
Over the years I hunted down lost treasures for estates on a regular basis. However, some of my best clients (repeat clients even) are insurance companies looking for answers on an embezzlement claim. Business owners have hired me to do the same. Attorneys sometimes hire my forensic services also. I never had to testify in court on one of these cases, but it wouldn’t bother me if I had to.
The fun cases revolve around helping a family find the belongings of a deceased loved one. For them it is like finding an unknown insurance policy. (I have found a few unknown life insurance policies as well though the insurance companies are much better today than two decades ago at knowing when one of their policy holders is pushing up daises.)
The ugly cases—the ones that also pay very well—involve businesses. Money goes missing or the business owner can’t figure out why business is so good and she is still losing her tail. Hint: The most valued and trusted employee, close friend or family member is the embezzler the majority of the time. I could tell stories.
For several years a local insurance company called me in on any case over a certain value. I reviewed a lot of books back then and it kept the doors open over the summer when tax work was slow. I also liked the work. The down side is you are not a loved visitor when you stop by the business. They know your job is to hang someone. (And I always kept a new rope in the truck for just such an occasion.)
Finding the Goodies
Back to our story. My client knew there was more money. I casually mentioned pulling a transcript from the IRS. This will show any 1099-DIVs and 1099-INTs issued to the person in question. Banks are required to issues 1099s when the amount is $10 or greater. For some crazy reason the forensic accountant they hired never took this step. My client was instantly $300,000 richer and I was hired with a generous retainer.
I now need to introduce you to skip tracing. Skip tracing is a process of finding the whereabouts of an individual. An impure use of the word also includes searching for all the assets, including income sources like a job, of a person or business.
Skip tracers generally hunt for debtors or fugitives. We are interested in debtors. In our example we are not looking for debts. But if you have someone who owes you money you want to find their assets and income sources. This is highly beneficial talent if you are searching for a deceased person’s stuff.
The best skip tracers come from the wrong side of the track. Some are clean cut, but in my experience the ones who are really good at it have tattoos and are rough around the edges. These people know how to find a body no matter how deeply dug in. Perhaps from personal experience.
You can learn skip tracing yourself, but there is a short cut. Go to your local debt collection agency and hire their best skip tracer and let’em loose. It’s your way of spreading the side gig economy around. (You are only hiring the skip tracer for the job, not full-time employment.)
Most attorneys already have resources to do this also. But we are not technically looking for the person; we are looking for the goods. Our skip tracer has another skill we need.
If you are serious about a side gig as a forensic accountant you will need LexisNexis. LexisNexis is a powerhouse of personal information. Once you see this thing you will be scared. They know things about you and everyone else you didn’t think anyone knew. In your search for lost accounts they will bring a deluge of results.
LexisNexis is expensive. If you are friendly with a collection agency you can usually hire them to do the LexisNexis search for you. There is so much information it is good to have someone familiar with the platform help you acquire and interpret all the information you get. A deep drill down will uncover just about anything the mark ever did since the first computerized records began and even a fair amount of stuff from before the Computer Age.
An IRS transcript and a LexisNexis search will be 99% of your job. If you suspect the client has money in another country (my client did) you use the same procedures in that country. Western Europe is as straight forward as the U.S. and Canada. Just find a debt collector in the target country and expand from there.
It doesn’t take long to uncover virtually every asset. There are some costs so you need to remind your client of this upfront.
The Problems with Embezzlement
Finding malfeasance can be trickier. In these instances you are not always looking for assets or hidden account (though that frequently is part of your job description later), you are looking for accounting irregularities. We are usually not talking about an accountant cooking the books. The issue is either money stolen (which could be the accountant) or stolen merchandise.
The issues tend to be complex here and if you don’t have an accounting background you will need to at least have a fundamental understanding of the accounting process.
Misappropriation of funds generally sticks out like a sore thumb in the accounting records. What you are looking for is a discrepancy between revenue and certain expenses. For example, a restaurant will have a cost of goods sold within a relatively narrow range depending on the type of restaurant compared to sales. Payroll also falls within a certain parameter or revenue, COGS and tips.
The issues become too complex for a short blog post. Here is the take-away. There is always a relationship between items in the financial statements. Deviation of these ratios (between sales and COGS or sales to wages as an example) is a telltale sign of something wrong.
The timing of the deviations frequently correlates with the hiring of the instigator. You will always review multiple years of records looking for inconsistencies, i.e. COGS changing significantly from one year to the next. Most of my work is done on an embezzlement case before I even get out of my chair and visit the establishment.
The easiest way to see this is with an example. This is a real client with a restaurant.
My office manger one day came to my office concerned about the client in question. She couldn’t understand why the client had growing sales but was going broke. A 30 second review of the financials and I knew an employee was embezzling. The cost of goods sold was waaaay out of whack for a restaurant of any kind and I could see the progression.
My first thought was a waitress was guilty. The client was brought in and I questioned her about the waitresses and how they handled money. It was quickly apparent a waitress wasn’t the culprit. Waitresses had few opportunities alone with the cash in this establishment.
I started to question the business owner about other employees. When we reached the cashier she said it couldn’t be her as it was her close friend of decades. The search was over. The friend did it.
It wasn’t a guarantee at this point, but I knew where this was headed. The business owner did not have cameras. I told her to inform the employees her accountant was concerned about embezzlement and demanded cameras be placed in the building. The cashier quit on the spot. Uh-huh.
We weren’t done. The ratios between COGS, sales, and waitress payroll and tips was still off even after accounting for the embezzled funds. I suspected more than few cases of steaks and seafood were wandering out the back door of the kitchen. Fed up, I had the client place cameras at the kitchen doorway leading to the parking lot without informing employees. A week later the entire kitchen staff was fired.
The sad end to this story is that the restaurant did not survive the assault. The damage was too great. We caught the malfeasance relatively early even though we weren’t hired to do that job. But the business owner stalled, certain her friends were innocent. The wound was too deep and the victim died. And all the jobs along with a great restaurant were gone. I still kick myself for not insisting more action be taken sooner.
In 2,000 words I actually gave you a good template for a basic forensic accounting side gig. You will find more than the average accountant for sure with these methods. If you want to hone your skills to a fine edge I recommend you continue your training. Your local technical college may have courses on the topic. There are also plenty of seminars and conferences, of course. Look for conferences specifically for collection agencies. They are the masters at finding assets. Or, you can start with some really good books on the subject. The books can get pricey, but these are the books used in colleges many times and the books are cheaper than college itself. One gig can pay for the whole thing and more.
Forensic Accounting for Dummies (This is the lowest cost basic education on the subject you can get and also a good place to start if you are new to the game.)
Below is a selection of high quality books on forensic accounting. These books are high quality and cost a bit more. They are worth it if you are serious about forensic accounting as a side gig and tax deductible if you are in the business.
I hope this article and resources are an awesome opportunity for you to earn a nice income in a side gig or even as a career.
And remember, no matter where you are, no matter where you go, I will find you.
And you stuff, too. So pay your bill so you don’t end up a client of my hedge fund. (Hint: I sold out the two funds a few years back so you are probably safe. Probably.)
More Wealth Building Resources
Personal Capital is an incredible tool to manage all your investments in one place. You can watch your net worth grow as you reach toward financial independence and beyond. Did I mention Personal Capital is free?
Side Hustle Selling tradelines yields a high return compared to time invested, as much as $1,000 per hour. The tradeline company I use is Tradeline Supply Company. Let Darren know you are from The Wealthy Accountant. Call 888-844-8910, email Darren@TradelineSupply.com or read my review.
Medi-Share is a low cost way to manage health care costs. As health insurance premiums continue to sky rocket, there is an alternative preserving the wealth of families all over America. Here is my review of Medi-Share and additional resources to bring health care under control in your household.
PeerSteet is an alternative way to invest in the real estate market without the hassle of management. Investing in mortgages has never been easier. 7-12% historical APRs. Here is my review of PeerStreet.
QuickBooks is a daily part of life in my office. Managing a business requires accurate books without wasting time. QuickBooks is an excellent tool for managing your business, rental properties, side hustle and personal finances.
A cost segregation study can save $100,000 for income property owners. Here is my review of how cost segregations studies work and how to get one yourself.
Amazon is a good way to control costs by comparison shopping. The cost of a product includes travel to the store. When you start a shopping trip to Amazon here it also supports this blog. Thank you very much!
Living a frugal lifestyle sometimes lends to a false sense of security. We take all the financial precautions to increase our savings rate and invest in broad-based index funds. Before long the net worth starts reaching for the stars and we feel good about ourselves.
Now, we decide, might be a good time to get a second car or trade for a new one. Moving to a smaller home, across town or to another state or country, sounds tempting and easy to do with your nest egg growing faster than you are spending.
Your habit of caution is well defined. There will be no stupid tax in your future! Careful planning leads to good decisions. You look before you leap.
Then it happens and you never even saw it coming. You paid a stupid tax without even realizing it was there.