[Welcome to another edition of our Side Hustle Series! Up today, Keith Schroeder from The Wealthy Accountant who teaches us how to make some extra money today as a forensic accountant. A smart and fun dude, who currently holds the #1 slot in our Blogger Net Worth Tracker at over $12 Million. Whip out a notepad and get ready to take notes!]
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A man walks into a bar…
It sounds like the beginning of a sleazy joke. But wait!
A man walks into a bar… and before he orders his first drink, he already knows the owners are experiencing six figures of embezzlement by their manager.
The joke isn’t so funny anymore, is it?
Before I spanked a period on the page I managed to say I have near magical powers in determining malfeasance in a business before anyone said a word. Extraordinary claims require extraordinary proof. And you will have that proof before this article is finished.
A Side Gig Where It’s Legal to Stalk
People are retiring earlier than ever while more people work later in life. All this is due to the side gig. Everybody wants one: A side business that doesn’t take too much time, create stress and still pays well.
Enter forensic accounting.
Accountants are lucky. We hear things only the local priest, lawyer and doctor hear, except more often. People may lie to their priest if they decide to attend confession; doctors only hear the embarrassing medical issues; lawyers the legal stuff.
But accountants. We hear it all. People see their accountant more frequently and ask advice on every subject, as if accountants know more about parenting than normal mortals.
How I Got Started
It was an accident that I learned about forensic accounting at all. A long-time client had a family member pass away—an uncle of my client if memory serves. The family hired a high-priced forensic accountant to find all the hidden money uncle buried around the planet.
In six months the forensic accountant managed to find around $280,000. My client knew his uncle had more than that. A lot more.
As my client told the story I casually asked if the accountant pulled an IRS transcript. The look on his face was all the answer I needed. The family signed a Power of Attorney and I went to work. The IRS transcript shows all the income reported to the IRS.
This one step uncovered another $300,000, more than the other accountant found in six months. Not bad for ten minutes of work.
It was time to get serious. A simple IRS transcript doesn’t show everything. When I find that much previously unknown information on a transcript I know there is more to expose. A lot more.
LexisNexis is the world’s most power information database I know of. They know things about you you don’t know about yourself. A Lexis search enlightened my client to several hundred thousand dollars more, including money in an Irish bank.
Once I got a taste for forensic accounting I expanded my business to include searching for lost money and examination of business accounts.
Back To The Bar Joke….
The bar scene to open this article is a real story from my office. Several clients purchased a bar with a banquet hall near my office and handled the accounting and payroll internally the first few years.
One of the owners works close with me in other business dealings and asked me to review the financials of the bar. In ten minutes I was suspicious. Something was off. The cost of goods sold compared to revenues compared to waitress wages and tips didn’t fall within expected parameters.
I started asking questions. I wanted to know who handled the money and where cameras were in the building. I wanted to know if anyone was ever alone with cash.
The manager was a good friend of the owners. This is always a bad sign.
In embezzlement cases it’s frequently the best employee, family member or good friend who is robbing the owner blind.
The manager was the only one who handled the money alone at night after closing. Cameras covered the whole building, including the office, except for a ten foot area between the office and safe.
There was only one last course of action. It was time for me to pay the establishment a visit. I asked my client to inform the manager and staff that I was the new accountant and when I would be arriving. There was a reason for this.
On the fateful day I strolled in the front door and before I reached the bar I already knew the manager was guilty, where the money was being diverted, approximately how much of it, and that the employees knew something was up.
How could I know this? The employees knew I was coming and were nervous, giving me the cold shoulder and trying to avoid me. There is no reason for this response to an accountant’s visit unless something was up.
The camera blackout between office and safe was the place the crime happened and only the trusted manager handled money alone, never taking a day off work.
Further digging led me to believe somewhere between $100,000 and $200,000 had been diverted. It would later prove the manager embezzled over $300,000!
My clients were in denial. It took months of research to prove my point while money kept walking out the door. Finally the bloodletting was brought to an end. The owners never prosecuted for fear it would tarnish their name. It also means I can’t name names if I want to avoid a lawsuit. You’ll just have to take my word. *Ahem*
How Much Money Can You Make With Forensic Accounting?
Before we talk income possibilities, know that there are different types of forensic accounting. Finding embezzlement requires some understanding of accounting principles. Without an accounting background you will need to confine your forensic gig to uncovering lost investments and bank accounts.
I cover more of the accounting issues on my blog in this article.
If you like the idea of finding lost money (who doesn’t?), you can earn $300 per hour or more. Some sleuths charge a percentage of funds uncovered. However, if the amount is small you don’t make much and if the amount is large the client balks.
In my office I charge by the hour, plus expenses. A retainer is required. A typical search can bring a few thousand dollars to over $10,000 of income to the forensic accountant.
Limiting your side gig to money searches can alone yield a $5,000 monthly income working five hours per week. If you expand to business forensic accounting the fees can double or triple, but require special knowledge, training and experience.
Learning to Search
If you know only two ways to search for lost money you will find more than 90% of what the so-called professionals do: The IRS transcript, and LexisNexis.
Both reports give you all you need, except in the rarest of cases.
To pull an IRS transcript you need an IRS Power of Attorney. The client signs Form 2848 giving you the right to discuss the client’s account with the IRS and access information the IRS has on the taxpayer. The discussion goes as follows: “Give me the darn transcript!” That’s it. There is no more to discuss.
There are several types of transcripts. You want the Wage and Income Transcript. If you want a copy of the return filed there is a fee involved, but it’s not really needed. The Wage and Income Transcript shows all the information returns the IRS received on your client’s account for the year/s in question. Get the last three year’s transcripts to assure as many accounts as possible are revealed.
The next part is more difficult. LexisNexis is a treasure trove of information. However, Lexis is difficult to decipher and you need to be approved for an account before you can access information. Each inquiry also involves a fee whether you find something or not.
There is an easier way to get a Lexis report. Find a collection agency that is willing to help you. Ask to speak with their ace collector. They are masters at finding the money, except this time they are not chasing a debtor for once.
The collection agency will pass the Lexis fee on to you with a nominal profit tacked on. The ace collector will want something for her time. It’s worth it. They know how to read and interpret a Lexis report. The reports can be long and complicated.
With an IRS transcript in one hand and a superstar collector with a Lexis report in the other, you are armed to the teeth in your quest to find the gold for your client.
You just earned your $3,000 fee.
Finding Clients
Forensic accounting is an awesome side gig with plenty of income potential. But how do you get clients if you don’t have an accounting firm with plenty of clients already built in?
Speak with other accountants and estate attorneys. You’ll land a few leads a year if you work it hard.
Speaking to the local apartment association will also bring more clients than you can handle alone. You can use the knowledge provided above to help landlords collect delinquent rent awarded them in court. Most landlords are happy the tenant is out and the bleeding has stopped. However, you will have a bright shiny halo around your head when you tell landlords you’ll work their judgments against past tenants for a 50/50 split! You can’t pull an IRS transcript without permission, but a Lexis report will load your bazooka.
Another place to find clients is church. You heard me right: church. Between Sunday services offer to speak to the congregation about finding all the accounts of a loved one who has passed. Your speech can basically be this blog post.
Dave Ramsey built a personal finance empire by co-opting with churches. Before the minister or priest even says yes to your offer, they will probably have a few cases for you to work immediately.
Once you help a few clients find some serious money, others will start coming to you. Word spread fast when somebody knows how to find the gold.
Further Resources
If you want to find the most money (and get paid the most), you want to read the article on my blog and several books on the subject. Here is the one to start with:
Forensic Accounting for Dummies — This is the lowest cost basic education on the subject you can get, and also a good place to start if you are new to the game.
For more in-depth reading on the subject, I recommend the following (they cost more, but are high quality and worth it if you’re serious about going down this path):
- Forensic Analytics: Methods and Techniques for Forensic Accounting Investigations
- Forensic Accounting and Fraud Examination
- Forensic Accounting and Fraud Investigations for Non-Experts
Happy hunting!
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Keith Schroeder writes The Wealthy Accountant blog, is really rich (like the President) and enjoys helping his clients in his accounting practice of over 30 years. He lives in the backwoods of NE Wisconsin with his wife, Mrs. Accountant (how lucky can an accountant get than to find a life mate with a last name of Accountant!), two daughters, a cat named Pinky and a herd of chickens. When he isn’t punching buttons on his laptop he has his nose buried deep in a book.
This is part of our Side Hustle Series. Here are some others you might like as well:
- Patent Researcher ($100-$1,000+/contest)
- Mechanical Turk Worker ($150-300/week)
- Trash Picker-Upper ($30-$50/hr)
- Mystery Shopper ($200-$500/mo)
- Frozen Meal Maker ($10/meal profit)
- Christmas Tree Stand Operator! ($7,500/season (5 weeks))
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Now that’s cool! I can imagine it could give you a massive headache by day’s end but the hunt has always intrigued me.
Considering how jilted ex-girlfriends (not mine; I’m happily married for 29 years) pursue this side gig without compensation leads me to think there is more pleasure than headache.
Whisky, it really isn’t much of a headache. You don’t spend time running around spying on people. This stuff is all digital today. If you handle business issues there is more time involved, but that’s what you get paid for.
And people think accountants are boring!! That sounds really cool! My husband is in finance, and majored in accounting in college. I remember different classmates talking about going this route, but I guess I never realized what it entailed. This really does seem like a fun side hustle, especially since it’s something you can charge a good bit, so it’s worth your time. Thanks for sharing this!
Boring! How dare you! I can’t keep the women off me, Ember.
Accounting gets a bad rap and it’s hurting the profession. This stuff is fun and profitable. And you get to help really awesome people in the process.
Thanks Keith for the tips.
I’m a CPA, and it never crossed my mind to do forensic accounting on the side. Will look into it. Who doesn’t like extra money in their pocket?
Also thanks for bigly representing accountants on the RSF Networth Tracker
99to1, I’m trying to cut down on the bigly part. Too many sweets. What? Oh, the net worth thing. Never mind.
What a fascinating job… haha, accounting can be quite a sexy hustle, huh?!?
https://youtu.be/39YUXIKrOFk
OMG this is such an interesting profession! When I was reading this post, I felt like I was watching another episode of Law and Order. That’s a lot of money to be hidden and made at the same time.
Congrats on your successful side hustle!
Haha yeah – it needs the theme song running in the background while you read :)
Wow, that was an interesting story!
What kind of useful information do you usually find in a LexusNexus report?
In ten minutes I will know if you wear boxers or briefs, FF.
Lexus reports are customized for what you need. They contain eeeeeeverything! Bank accounts, how much is in them, where you work, assets owned, value of assets owned, and on and on. Pull a Lexus report on yourself and you will be surprised.
How is that even legal though? Sounds so strange that anyone can find out how much money you have and where it’s all located? Like, wouldn’t it be the #1 place thieves use? (I like how all of a sudden I’m now pissed that anyone can get data on us so easily, haha…)
It’s legal, J. Lexus gives you a proctology exam before giving you access to their data and you MUST have an economic interest in the information you all pulling. Stalk the ex and you’ll be out on your tail in a third of a second with the police at your doorstep the next third of a second. That’s why I recommend using a collection agency. If you own debt you can pull a report legally for information to collect on said debt.
Join DBA International for pocket change and you’ll have access to hundreds of additional companies with info you didn’t know existed.
People like me have a lot of connections and know how to find certain things. If I end up dead over suspicious circumstances you might have an idea why.
At least all that extra money will help your family grieve easier ;)
Wow, this sounds so neat! You’re like Sherlock looking for clues as to where the money is hidden and who is hiding it. Love it!
A buddy of mine is a forensic accountant — he’s worked on the Madoff case and a few corporate acquisition & divestiture deals. He has an obscenely good time doing his work. His house cost 4x what my wife and I paid for ours, so he’s obviously doing well.
It sounds like an intriguing and lucrative line of work; I kinda wish I could go back twenty years and bump my freshman-in-college self toward it. Thanks for sharing your experiences and knowledge!
Ooooooh that Madoff one would be super interesting! (And also depressing at the same time I’d imagine?)
The big cases like Madoff take special training. What he did is above my pay grade and not a part of what I offer in this post,
This is such a cool and helpful side-gig. Stopping fraud and reuniting folks with their inheritance! What kind of insurance must you carry to do this? A general umbrella? Or something more specific?
I’ll be taking some of these tips for when I am the executrix for my father’s small estate.
ZJ, I don’t think much is needed for insurance. My business policy covers me, but if you don’t have a business it might be a good idea to discuss this with your insurance professional. If you are hunting for hidden money is one thing; ferreting out fraud could care serious liability risk. All comes down to facts and circumstances, ZJ. This is a case of: Don’t trust the guy on the internet. Verify before leaping.
I saw the movie the accountant and imagine that’s what you do…do you drive a 30 foot airstream too?
This seems like a very cool gig. Who says accounting is boring. Now I wish I had done this instead of medicine. Seems like some easy cash indeed. Thanks for sharing.
I drive a bank repo for 20 years and cuss like a drunken sailor when I have to upgrade. (Piece of junk!)
Thanks so much for this article! I’m an internal auditor (mainly SOX audits) and have been trying to brainstorm a side hustle gig for awhile now. I’ve also been thinking of pursuing the CFE (certified fraud examiner) certification for my career, but it might help even more for this type of side work!
fascinating!! It does seem like the *perfect* match for you :)
I always love how the simple (and seemingly unrelated) fact that an employee never takes vacation is often a sure sign of massive fraud. Such “devotion”! :-)
It’s not a “sure” sign. When something is amiss I look for indicators. The good employee can be just a darn good employee, Paul. Unfortunately, experience has taught me devotions sometimes comes with a price. That is why you hear professionals tell business owners employees MUST take their vacation. If an employee has access to money they are required to take a two week vacation annually. Malfeasance can’t be covered when they’re gone and bubbles to the surface when a perp is on vacation.
This was one of the best articles I’ve read in a long time! I can’t believe there is a Dummies book for forensic accounting. I shall have to order from the library. But you know what they say… Actuaries are people who found accounting too exciting, so maybe its not for me…
Oooooh, that is a good one, Actuary on FIRE. I love it! The Dummies book is just that, a dumbed down version of forensic accounting. As a side gig you are not going to handle major financial issues in a Fortune 500 company. As a side gig, it is a fun and profitable way to turn some coin for a modest investment of time.
Accounting too exciting. Wow, Actuary on FIRE. You might be right. Your pulse could increase one, maybe two beats and hour taking my side gig idea. Best not to risk it.
Do you mean LexisNexis? I couldn’t find anything under LexusNexus.
Sounds like a pretty sweet side gig! And challenging, in a fun way.
Yup – sorry! We just changed it, good catch :)
Sounds like a great side gig, BUT it’s LexisNexis.
Bela, when you’re in the receivables industry for a while, saying LexisNexis a lot gets shortened to Lexis real quick. My apologies for the earlier misspelling. Tax season extension are due in a week and I’m doing this too. (As if any excuse is acceptable.)
For people researching this, Bela has the correct spelling. Please pardon the crazy accountant.
I feel like to be really amazing at the business side of this you would have to be as smart as Ben Affleck’s character in “The Accountant”. Especially for these huge multinational corporations. I’d start out with the mom and pops lol.
I’m ready to hustle. I agree with @Dads Dollars debts–sounds easier than medicine!
Looks like they teach it here online: http://www.algonquincollege.com/ccol/program/forensic-accounting-and-fraud-investigations/part-time-online/
Much cleaner than becoming a coroner. I wonder…has anyone made the leap from outside the field?
How pissed would your parents be if you gave up all that school for something that doesn’t require a degree at all? Haha…
Hey Keith! Fellow Wisconsinite here — I’m a journalist and I feel like there’s a lot I could probably learn from you and your blog/book. I’m going to start following you for sure! I’ve gotten pretty good at tracking information over the years but forensic accounting might make a nice addition to the toolbox. (I have used LexisNexis before — a paper I worked for gave it a trial run and boy was it useful! Then they cheaped out and canceled it…)
Awesome post. I work in EMS and have copious amounts of down time and want something to do that makes me money on the side rather than scrolling Facebook…although that’s what led me to this site.
Does one have to be a CPA to venture into this? Or can I get mega smart with the resources you’ve provided?
HAH! I agree w/ the aimless Facebook stuff – that’s what prompted me to start this blog all those years ago – to do something more productive with my time! :)
I’ll let Keith answer your certification question here since he wrote this post up, but my impression was that anyone can do it as long as they have the skills?
Wow! I love this article! It sounds very interesting and fun honestly. I ended up running across this while looking up ways to make extra money because being a household of 6 on 1 income just doesn’t seem to be working. I wish I were able to understand and figure all this out. I live in a super small town (but bigger cities are within 30min driving distance) and I could almost bet there have been people who have passed away here that have just been forgotten about. I think it would be an amazing feeling to find some money for someone who didn’t even realize there was money out there for them. Again on the other hand weeding through someone’s bs and numbers mess of their business just to discover someone from the inside is sucking them blind would feel liberating. Awesome work! You help karma come to those who deserve.
Glad you liked it! You’ll have to let us know if you end up giving it a shot :) Hopefully you find other ideas here that’ll help you along your $$$ journey as well.
That is certainly the coolest side gig I’ve ever heard of, and well written to boot. Well done.