In Volume 3 of our 2014 newsletter, we highlight:
Chesterfield Office Has Moved
- Protect Your Business Against Fraud
- Is A living Trust Right For You?
- Proving Tax Deductions Without Cancelled Checks
Hochschild, Bloom & Company LLP was started by Peter Hochschild in 1946 in a small 7 x 12 foot office in downtown St. Louis. He subleased the space from a law firm, with whom he also shared a secretary. When Mel Bloom joined the firm in 1950, they both worked in this one room office. When a client came to see one of them, the other one had to leave the office to make room for the client. From downtown St. Louis the office was moved to Clayton in 1953. The first location was on the second floor of an office building on Clayton Road. In between moves, in 1957, the Washington Missouri office was opened. From Clayton Road the St. Louis office moved to an office building on Hanley Road located in the Clayton Central Business District. That move only lasted a couple of years. The third move in Clayton was to the newly built Commerce Bank (formerly: County National Bank) building at the corner of Forsythe Blvd. and Meramec Avenue. Early in the 1980s the West St. Louis County region was starting to flourish and a decision was made to relocate the office to Chesterfield in 1983 (which was not a City until five years later in 1988). We moved into a building that was originally called the Mark Twain Bank building across from Chesterfield Mall. As the bank and various other tenants moved out, we kept expanding our space in the building. Now, after 31 years at this location, the firm has grown and the needs have changed so the decision has been made to relocate again. We are remaining in Chesterfield and the new office is only half of a mile from our current location. We will be moving to our new location the first week of September. Please feel free to stop by and take a look at our new office. The new space was planned out by an interior designer to provide an efficient work flow and work environment. Hopefully it will meet our needs for many years to come.
OUR NEW ADDRESS
15450 South Outer Forty Road, Suite 135
Chesterfield, MO 63017-2066
A – 16100 Chesterfield Parkway West (see map)
B – 15450 South Outer Forty Road (see map)
Head toward Schoettler Valley Drive on
Chesterfield Parkway West (0.5 mile)
Turn left on to Schoettler Valley Drive (0.1 mile)
Turn right into the parking lot of 15450 South Outer Forty Road
We will be in Suite 135
Protect Your Business Against Fraud
By some accounts, fraud costs the U.S. economy approximately $1 trillion a year. As a business owner, you have a duty to yourself and to your employees to try to minimize losses to your company due to fraud.
The biggest mistake you can make as an employer is to blindly trust an employee. White collar crime is typically perpetrated by people in a position of trust. The trust placed in them allows white collar criminals the access to company assets needed to carry out the crime. Even exemplary employees can fall prey to outside pressures like drug abuse, financial difficulties, and even feelings of being unfairly treated by you, their employer.
Obviously, you must place some trust in your employees or your business will not succeed. The trick for you, as the employer, is to establish policies and procedures that will prevent employees from having the needed access to steal company assets. Without a doubt, your greatest weapon is your own powers of observation. You look at everything surrounding your business with a critical eye. You should also observe the habits of your employees. After all, they are an asset of your business – and their well-being has a direct effect on successful operations. Some telltale signs that an employee may be committing fraud include sudden changes in lifestyle for no apparent reason and known employee financial problems.
In addition to your own observations, you need to establish a strong system of internal controls. It is impossible to list all the controls available to you because each business is different. Some of the more important controls include segregation of duties, cash controls, and mandatory vacations, with someone else performing the duties. Simply put, segregation of duties is meant to keep one employee from having so much control over transactions that he or she can successfully hide a fraud. For example, Gertrude was the office bookkeeper. She wrote the checks, paid vendors, collected money, and billed customers. Gertrude also reconciled the bank statement and gave only a copy of the reconciliation to the company’s president. It was not until the company had lost $400,000 that he decided to segregate certain duties. Had he placed controls in effect sooner, the theft never would have occurred.
The importance of establishing a strong system of controls cannot be overstated. Proper oversight will greatly reduce the potential for loss by convincing employees they cannot succeed in a theft. Finally, a strong control environment will help employees provide management meaningful information by which to run the business.
The old saying that “stuff runs downhill” is true in every business. You set the tone for your company. If you signal to your employees that it is acceptable to cut corners and beat the competition by less than ethical means, they will begin to believe the same thing. Eventually, they will be able to justify actions that will harm you by using the same reasoning you used to succeed, by harming your competitors. Set a tone in your company that ethics are valued above all else. Conduct your business ethically and your employees will be more likely to do so as well.
Have a well-documented antifraud policy which includes a way for your employees to report suspected fraud without risk. Many times employees may see something going on that they consider wrong, but they will not report it because the act involves their superior. Rather than lose their job or risk harassment, they choose to remain silent. Develop a way for employees to bypass the level at which the fraud may be occurring and make it clear that no employees will be punished for reporting possible illegal acts. Finally, do background checks on employees, suppliers, and customers.
No system to prevent theft is foolproof, but there are steps you can take that cost you nothing, yet enhance the security of your company. Give us a call and let us discuss how you can better protect both your business and yourself.
Is A Living Trust Right For You?
Revocable living trusts have become popular estate planning tools. Whether a living trust is right for you, however, depends on a number of factors.
A living trust is a trust that you set up during your lifetime, to which you transfer most or all of your assets. You get the income from the trust, and also have the right to withdraw principal. You can revoke or cancel the trust any time during your life. At death the trust becomes irrevocable and its income and assets are disposed of under terms specified by you in the trust papers.
Why would you do this? The main advantage of the living trust is that its assets are distributed without going through the court probate process. That avoids a filing fee in probate court. Also, trustee fees generally are lower than nonfamily executor or personal representative fees would be. However, even if probate is avoided, there will be the expense of preparing an estate tax return, valuing and transferring assets, and making a formal accounting and settlement. Also, to avoid probate, all probate assets must be included in the living trust or designated with transfer on death to the trust. If some are left out, a probate proceeding still would be necessary. As a result, those with living trusts usually also have a will to direct any extra property into the trust.
Some of the other benefits and pitfalls to consider are:
- Quicker distributions: Probating a will and gathering assets into the estate for distribution can take quite a bit of time. With a living trust, by contrast, all assets already are gathered together, so the trustee can make immediate distributions and continue paying bills as usual.
- Protecting minors: Living trusts can help avoid the need to appoint a guardian to represent children’s financial interests, which can cause delay and add to administration costs.
- Privacy protection: Since probate records are public, the size of your estate and the names of beneficiaries and the amounts each received can come into anyone’s possession. The size and terms of a living trust, by contrast, are not necessarily public matters.
- Income taxes: If you create a living trust, you will be taxed on its income in much the same way as if you continued to own the property outright.
- Estate taxes: It is a fairly common misconception that living trusts save estate taxes, but that is not necessarily the case. The trust assets within a revocable living trust will be subject to estate tax just as if you continued to own them outright. Therefore, basic estate planning techniques are important in the context of living trusts as well as transfers at death by will.
As we said, living trusts make a lot of sense for some people and not for others. You have to consider all of the pluses and minuses as they relate to your particular situation to make an informed choice about a living trust. We would be happy to assist you in making the decision that is right for you. Please call if we can be of assistance.
Proving Tax Deductions Without Cancelled Checks
There is a growing trend towards remote deposit of checks. With the increasing sophistication of smartphones, you can now photograph a check written out to you and digitally send it to your bank for deposit. All this and more became possible after the Check Clearing for the 21st Century Act (Check 21) became effective several years ago. What it meant for most consumers then is that most banks discontinued the practice of retaining a paper version or copy of your checks. Check 21 allowed banks to truncate each of your checks, create a new electronic negotiable instrument called a substitute check, and then destroy the originals.
This industry change has important tax consequences for taxpayers who previously used checks to substantiate their expenses or charitable contributions. But the bottom line is that Check 21 allows you to use a substitute check as proof of payment because it is legally the same as the original check. The IRS, therefore, must accept your substitute check as proof of payment (receipt from charitable organization also required on donations over $250).
Many of you may have switched to online banking. If so the IRS will accept image statements of substitute checks as proof of payment. If, however, an IRS auditor is suspicious that the image statement is not genuine, you may still be requested to order the actual substitute check from your bank. This will be a rare instance, however, and will likely occur only if you are audited. As an additional precaution, we suggest that you download and print out your bank statements at the end of the year. That way, even if you are audited several years from now, you will have a record that is easy to access.