What would you do

[percy]

I'm not sure how IRD work nowadays. Back in the day they would audit prostitutes (which back then was an illegal activity. They didn't dob in the prostitute - they just wanted teh tax

So the owner gets a tax bill for $3,000,000 for revenue not declared,with penalties,as "they just want the tax"..ie not declared revenue up to $25,000 a week over 260 weeks [5 years] is $6.6mil.
That would focus the owner's attention.What undeclared revenue.?
Perhaps with IRD proof he would ask the boss a few questions,or ask the police for their help.
The whistleblower remains an innocent bystander.

[minimoke]

So the owner gets a tax bill for $3,000,000 for revenue not declared,with penalties,as "they just want the tax"..ie not declared revenue up to $25,000 a week over 260 weeks [5 years] is $6.6mil.
That would focus the owner's attention.What undeclared revenue.?
Perhaps with IRD proof he would ask the boss a few questions,or ask the police for their help.
The whistleblower remains an innocent bystander.

you dont get taxed on revenue. you get taxed on profit (gst aside). If the money is lost (stolen) then any revenue will be offset against loss - so tax neutral.

Its not the OP's business to call the police - owner is first point of call. OP doesnt make a judgement on whether an offence has occurred or not - that is for others. Likewise tax - once the accountants have been through the books there will be a better view on what tax (if any there is to pay)

Tax payable on reparations is an issue to be decided by tax specialists post event.

[Stranger_Danger]

What I'm hearing from the OP's two posts is that this is an "other people's money" business, perhaps property management, or handling investments?

This is based on your sentence "Also to clarify some of your comments it is not the case of overcharging clients it’s a case of altering documents and financial records to make it appear to the client that their financial income is less than what it actually was. For example, a client did earn $20,000 for a one month period but the boss altered the accounting system to show they only earnt $10,000, the rest of the money mysteriously disappears."

If I've understood this correctly, it isn't really the owner's business that is the victim, it is either the investment income or the investments themselves, funds managed on behalf of others, that is being stolen. If this is correct, the range of outcomes start at theft and fraud and end in ponzi scheme!

If you've known about this for 5 years and your interest is in self preservation either (a) Blow the whistle, now, and hope like hell nobody else knows you knew about it for five years or (b) Leave, now, and hope like hell nobody else knows you knew about it for five years.

[Snoopy]

What I'm hearing from the OP's two posts is that this is an "other people's money" business, perhaps property management, or handling investments?

This is based on your sentence "Also to clarify some of your comments it is not the case of overcharging clients it’s a case of altering documents and financial records to make it appear to the client that their financial income is less than what it actually was. For example, a client did earn $20,000 for a one month period but the boss altered the accounting system to show they only earnt $10,000, the rest of the money mysteriously disappears."

If I've understood this correctly, it isn't really the owner's business that is the victim, it is either the investment income or the investments themselves, funds managed on behalf of others, that is being stolen. If this is correct, the range of outcomes start at theft and fraud and end in ponzi scheme!

An 'other peoples money' business does require that business to take a cut of the earnings. The question is, is that an 'immoral cut' or an 'immoral and illegal cut'. The cut is how the business makes its money, and is income to the business. Making some of the cut 'disappear' in an illegal way is robbing both the owner of the business and the client.

SNOOPY

[solved]

Making some of the cut 'disappear' in an illegal way is robbing both the owner of the business and the client.
SNOOPY

Snoopy, nailed it!

If I've understood this correctly, it isn't really the owner's business that is the victim, it is either the investment income or the investments themselves, funds managed on behalf of others, that is being stolen. If this is correct, the range of outcomes start at theft and fraud and end in ponzi scheme!

SD, nailed it also!

Minimoke, thanks for your advice!

[Leftfield]

you dont get taxed on revenue. you get taxed on profit (gst aside). If the money is lost (stolen) then any revenue will be offset against loss - so tax neutral.

Its not the OP's business to call the police - owner is first point of call. OP doesnt make a judgement on whether an offence has occurred or not - that is for others. Likewise tax - once the accountants have been through the books there will be a better view on what tax (if any there is to pay)

Tax payable on reparations is an issue to be decided by tax specialists post event.

Agree notifying the owner is crucial, but also can't help thinking that drawing this to the attention of the auditors (if any) could be a good option?

Both notifications could be done anonymously if worried about yr personal outcome.

[Beagle]

In answer to the thread question if I were you I would go and get some good legal advice about what is the appropriate course of action.

[blobbles]

IRD should not be first port of call, they have no legal authority to investigate the fraud part, only tax evasion as a result.

Also true is that you need evidence first, so if you are in a position to get it, get it! I would also begin to make your own records of where you believe the fraud is occurring, if you haven't already. This is writing notes about date/times and actions in a notebook, taking pictures of cheques, copies of banking records etc etc. Then I would show this evidence to an accountant friend, to make sure what you are thinking is fraud IS fraud. I have suspected fraud before in a workplace, only to find out that actually it was not, merely mismanagement or strange contract conditions. Remember fraud requires purposeful deception for monetary gain.

Once you have the verified evidence, go to the owner. EDIT: First, go get legal advice, as Beagle pointed out. Hit up a lawyer. I would do this by showing up to their home or workplace, somewhere where you can tell them straight away the person they have employed, you believe is committing fraud. Have the evidence with you. You do not want to risk the owner going to your boss saying "Hey, solved rang me up and said he needs to talk to me confidentially, you know what this is about?". That will cause you a whole lot of trouble and may result in the boss getting spooked and destroying evidence or worse, pinning it on someone else. Find a way to approach the boss directly and with your evidence. Also you may need to ensure the business owner is not involved in the fraud themselves.

Understand what comes next. If the business owner is not a party to the fraud, their will be shock/anger/denial/resentment. But once this is settled, they will hopefully send in auditors from an accounting firm and contact a lawyer. Even if you have proof, it is unlikely to be fully believed by police coming from you, coming from an auditor though, is near gold standard. There may be a delay between you telling them and an audit - keep collecting proof. If the auditors are sent in, it needs to be sudden with all access to financial records (and IT systems) turned off except for the auditors. I have heard of weekend investigations happening also, surreptitiously to avoid detection from the perpetrators and or access to systems given remotely to accounting teams to review at night. If the sudden "everybody stop working" approach is taken, likely the first port of call is the IT manager to turn off all access to all systems to avoid anyone who may be a party to the fraud destroying evidence. Remember it could be bigger than you think. Expect that you will also be investigated, so be prepared to hand over your personal banking records.

[777]

If IRD suspect money is being diverted so tax is not declared then they sure do have the right to investigate.

[blobbles]

If IRD suspect money is being diverted so tax is not declared then they sure do have the right to investigate.

Only the tax evasion part, it seems this is secondary to the actual act of fraud. This is what the Serious Fraud Office and Police are for, they would pass evasion onto the IRD for investigation. Auditors would secure the evidence, who would then pass it on to the police and/or the SFO. If tax has been evaded, this would then be investigated by the IRD. But the purpose here seems to be to catch the criminals, not to detect tax evasion.