Tax Returns that May Be Requested in a Financial
James J. Vaughn, CPA
U.S. Treasury Department
Bureau of Alcohol, Tobacco, and Firearms
Tax returns, both state and federal, provide substantial information.
Federal tax returns, filed with the Internal Revenue Service (IRS), can
only be obtained with federal court order. When federal tax returns are
obtained from court order they may only be used in federal court. If a state
trial is anticipated, tax returns should be obtained from state tax authorities.
Tax returns filed with the IRS and state taxing authorities should be
compared to tax returns used to obtain loans. Often the banks have returns
that have been embellished. This may lead to bank fraud charges.
The following tax returns may be of interest in a financial investigation:
Form 1040 U.S. Individual Income Tax Return: This is a personal
tax return. The form contains a Schedule C. This schedule contains information
about income and assets. Inventory levels may be established from the return.
The inventory amount on the return will help substantiate the inventory
on the insurance claim. Depreciable assets are listed on the return as a
Form 1120 U.S. Corporation Income Tax Return & 1120S U.S. Income
Tax Return for an S Corporation (Schedule K-1 (Form 1120S) Shareholder's
Share of Income, Credits, and Deductions, etc.) and Form 1065 U.S. Partnership
Return of Income (including Schedule K-1 (Form 1065) Partner's Share of
Income, Credits, Deductions, etc.): These returns have balance sheets.
The Balance Sheets will identify the purchase price and book value of assets
at the time of the fire. Balance Sheets can be used to establish the gain
from the fire. The owner's investment may be established from these returns.
Payroll Form 941 Employer's Quarterly Federal Tax Return and Form
940 Employer's Annual Federal Unemployment (FUTA) Tax Return: These
forms will establish employment levels.
In addition, Sales Tax records will establish business trends and Real
Estate taxes help put a fair market value on property. If the property is
over insured these bills will assist.
reprinted by permission