Hidden Income in a Cash Business – Fraud Files Blog

I love working on divorce cases where one spouse is trying to hide money.

When a business owner has a cash business and is getting divorced, sometimes the income coincidentally (or not so coincidentally!) drops dramatically.

What can we do to investigate that? It’s hard. The business owner knows that cash leaves no paper trail and is difficult to prove.

But all is not lost. There are techniques we can use to find indirect proof of the amount of cash a business should be generating (even if the owner isn’t reporting all of it).We can do things like:

• Look at payroll records. If you’re not earning income, why do you need so many employees?
• Find expenses that usually move in step with income. If the income has really decreased, those expenses should decrease too.
• Look at cash income versus credit card income. This works especially well in a business like a restaurant. If we see that credit card income has stayed stable but cash income has dropped, that’s suspicious.

This is not direct proof of hidden income. But if we can find multiple ways to prove income indirectly, a judge may be more likely to believe there is indeed hidden income.