How to Prove Hidden Income Using the Bank Deposit Method
- 1). Obtain legal jurisdiction to access the person or organization's financial information. Typically, such information is private and access to it might require the permission of a court.
- 2). Locate the person's most pertinent income tax information. Tax filings vary from person to person, depending upon their financial holdings. Filings will be more complex if you are proving hidden income for a company or other organization, as opposed to an individual. Individuals or married couples file a version of Form 1040; because there are different provisions for companies and organization, consulting a certified public accountant (CPA) or another tax professional might be beneficial in locating and deciphering tax filings for an organization.
- 3). Check for non-taxable income sources. Non-taxable income sources could be various types of loans, financial gifts or inheritances, according to US Legal. Be sure to corroborate all of your findings with information confirming that certain income items are non-taxable. Such support could be forms documenting a loan, a person's will or other financial record.
- 4). Determine the person's taxable income based upon his tax filings. This figure will be his gross income minus all deductions and non-taxable income. Such a figure will be reported clearly in the person's income tax paperwork.
- 5). Evaluate the person's bank account information to compute taxable income. Having multiple bank accounts is not uncommon, so remember to consider deposits made to every bank account the person might possess. Compute the value of the person's deposits minus business expenses, deductions and non-taxable income sources. Essentially, when evaluating bank deposits, you are confirming the accuracy of the information reported to the government for taxation.
- 6). Compare the two results and check for discrepancies. If the sum of taxable income rendered via the Bank Deposit Method is different from that reported for taxation, the person or group has hidden income. The Bank Deposit Method is sufficient for supporting allegations of hidden income, according to Justice.gov. The accused is, of course, entitled to explain the discrepancy.
Source...