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These S Corp Election Mistakes Create Years of IRS Problems

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A sole proprietor registers a brand-new LLC, reuses the EIN from their old payroll account, files Form 2553 with an effective date of January 1 (months before the entity even existed) and waits for the IRS to bless the election. What they get back instead is a mess: a new EIN they didn’t ask for, returns filed under the wrong number, and IRS notices piling up about unfiled 1120-S returns. It’s the kind of procedural train wreck that Jeremy Wells, EA, CPA, sees regularly in practice, and it’s entirely preventable.

In this episode of Tax in Action, Jeremy breaks down the S corporation election from start to finish, including the eligibility requirements, the precise mechanics of Form 2553, the framework for late election relief under Rev. Proc. 2013-30, and the analytical rigor required before recommending the election in the first place. The episode is a direct response to the flood of oversimplified S corp content circulating online, much of it from influencers who reduce a major business decision to a single rule of thumb about income thresholds.

In reality, the S corporation election decision is loaded with procedural traps and downstream implications that demand careful analysis. Tax professionals who understand the mechanics of making the election and the full range of factors that determine whether it’s actually beneficial serve their clients far better than those chasing shortcuts.

The episode walks through the procedural mechanics of making the election, the common mistakes that derail it, how late election relief actually works, and what practitioners consistently get wrong about it. Finally, Jeremy digs into why the decision to elect S demands analysis that goes well beyond self-employment tax savings, including ownership structure, balance sheet consequences, QBI deduction impacts, and state and local taxes that can wipe out any benefit entirely.

Getting the election right: The procedural traps that create lasting problems

Before evaluating whether the S election makes sense for a client, you need to know how to actually make it correctly. The requirements look straightforward on paper. In practice, several mistakes can cause problems that last years.

Eligibility

The entity must be a domestic corporation or domestic eligible entity under IRC §1361(b)(1). It can have no more than 100 shareholders, although Jeremy notes he’s never worked with an S corp that came anywhere close to that limit. The overwhelming majority have one, two, maybe three shareholders.

Shareholders must generally be individuals, though certain estates, trusts, and organizations can qualify. Jeremy warns that including an S corp interest in an estate plan can be tricky. There’s a serious risk of inadvertently terminating the election when a trust or estate steps into a deceased shareholder’s place. No shareholder can be a nonresident alien. Basically, shareholders need Social Security numbers.

The eligibility requirement that actually blows elections in practice is the single-class-of-stock rule. An S corporation cannot have shareholders with differential rights to distributions. Voting differences are fine—you can have voting and non-voting shares. However, you can’t have distribution waterfalls, preferred stock arrangements, or any structure in which some owners receive distributions before others. That’s partnership territory. Jeremy points out this issue has been litigated repeatedly in tax court and district courts, with businesses forced to choose between their own governing documents and tax law. The S election usually loses.

The check-the-box shortcut most practitioners still get wrong

Jeremy emphasizes this requirement because many practitioners misunderstand it. An LLC electing S does not file Form 8832 separately. When an LLC files Form 2553, it triggers two simultaneous deemed elections. First, classification as an association (which defaults to C corporation status), and then S corporation treatment. Both happen instantaneously. “Do not file Form 8832 to elect a C corporation first, and then file the 2553. Just file the 2553 to elect S,” Jeremy says. 

Filing both confuses the situation and makes a mess. The only time you file Form 8832 for an S corporation is when the entity is revoking its S election and wants to revert to its default classification as a disregarded entity or partnership. Jeremy covers that process in episode 15, Breaking Up with Your S Corp Part Two.

Timing matters, and there’s no extension

Taxpayers must file the election by the 15th day of the third month of the taxable year to be effective for the current year. That’s March 15 for calendar-year taxpayers. Miss that date, and the IRS treats the election as effective for the following year. An election effective January 1, 2026, must be filed by March 15, 2026. File it on March 16, and you’re looking at a January 1, 2027, effective date unless you file for late relief.

Form 2553 details that trip people up

Jeremy identifies several issues drawn directly from situations his firm has handled:

  • EIN confusion. Electing S does not require a new EIN for an existing entity. That’s Treasury Regulation §301.6109-1(h)(1). But when a sole proprietor forms a new LLC to elect S, that new entity needs its own EIN. You cannot reuse the sole proprietor’s old payroll EIN. Jeremy describes exactly what happens when practitioners try. The IRS accepts the election but assigns a new EIN. The practitioner then files 1120-S returns under the old number. A couple of years later, the IRS sends notices about unfiled returns because nothing was filed under the EIN the IRS actually assigned.
  • Effective date before the entity exists. The S election effective date cannot precede the entity’s incorporation or registration date. If they formed the LLC in June, the effective date cannot be January 1. Jeremy notes that so many people made this mistake that the IRS printed a caution directly on Form 2553 itself.
  • Wet ink signatures only. Every signature on Form 2553, including the officer’s on page one and each shareholder’s consent on page two, must be wet ink. No e-signatures. Jeremy acknowledges it’s annoying, but his firm has a workaround: provide the form through a secure portal, instruct the client to print, sign, and scan it back using the portal’s smartphone scanner.
  • The shareholder consent grid. Page two requires each shareholder’s name, address, tax ID, shares owned, acquisition date, tax year end, and signature, all under a statement that reads “under penalties of perjury.” That language matters, especially for late elections, where shareholders also declare they’ve reported income consistently with S corp status for all affected years.

Even when practitioners know these rules, sometimes the deadline slips. The question then becomes whether late relief is available and whether practitioners should even pursue it.

Late election relief

Late election relief is one of the most discussed (and most misunderstood) aspects of S corp elections. Jeremy sees widespread misconceptions about the process of making a late election, and about whether practitioners should make it in the first place. Before you file anything late, you need to understand the legal framework and the IRS requirements.

The statutory authority starts with IRC §1362(b)(5), which allows the Secretary of the Treasury to treat a late election as timely when the entity has reasonable cause for missing the deadline. Treasury Regulation §301.9100-1 lets the Commissioner grant reasonable extensions for regulatory and statutory elections, and §301.9100-3 extends that to entity classification elections provided the taxpayer shows they acted reasonably and in good faith, and that granting relief won’t prejudice the government’s interests.

Over the years, the IRS issued various revenue procedures for different types of late elections. Rev. Proc. 2013-30 consolidated them into a single document that now governs late S elections, along with electing small business trusts (ESBTs), qualified subchapter S trusts (QSSTs), qualified subchapter S subsidiaries (QSubs), and late corporate classification elections.

The four requirements you must satisfy

Section 4.02 of Rev. Proc. 2013-30 lays out four criteria, and Jeremy stresses taxpayers must meet all four:

  1. The entity intended to be classified as an S corporation as of the effective date. Jeremy calls this “the most important to really nail down.”You can prove intent through board meeting minutes, corporate resolutions, communications with a tax advisor—anything that demonstrates the entity wanted S corp status even though it didn’t file the paperwork on time. The problem is most small business owners don’t keep these records. If your client doesn’t have formal documentation, look for email exchanges with advisors, meeting notes, or other evidence that the intent existed before the deadline passed.
  2. Request relief within three years and 75 days of the effective date. That gives you roughly three years, one month, and 15 days. This is the general window, although there is one exception, which Jeremy covers later.
  3. The only reason the entity doesn’t qualify as an S corporation is the untimely filing. Everything else, including eligibility, ownership structure, and a single class of stock, must be in order. If there’s an underlying eligibility problem, late relief won’t fix it.
  4. Reasonable cause for the failure, plus diligent action to correct the mistake. Jeremy notes the most common explanation is straightforward: owners simply didn’t understand the paperwork or deadlines until a tax professional advised them. There are no strict criteria for what constitutes reasonable cause, and Jeremy has seen various approaches, some successful, some not. The key is being honest and specific about what happened.

The procedural mechanics

You still use Form 2553 to request relief, but with modifications. Print “FILED PURSUANT TO REV. PROC. 2013-30” in all caps at the top of page one. Most tax software has a checkbox that handles this automatically. Include a reasonable cause statement either on the form itself (there’s blank space on the bottom half of page one) or on an attached separate sheet.

If the S corporation has filed all its 1120-S returns for tax years between the effective date and the current year, attach the completed Form 2553 to the current year’s 1120-S, as long as the taxpayer files that return within the three-year-and-75-day window. If there are delinquent 1120-S returns, file them all simultaneously. Jeremy admits this makes him uncomfortable. “I don’t feel good doing that. I don’t like filing that many returns on top of one another.” But he’s done it, and it can work.

His firm’s practice is to fax Form 2553 directly to the applicable IRS service center and attach a PDF to the e-filed return. “It can’t hurt to do it both ways,” he says. Just remember, filing Form 7004 to extend the 1120-S does not extend the deadline for the election itself. There is no mechanism to extend Form 2553.

The exception to the time limit

The three-year-and-75-day window doesn’t apply if all of the following are true:

  • The entity and all shareholders reported income consistent with S corp status for the year the election should have been made and every year after
  • At least six months have elapsed since the entity filed its return for the first year it intended to be an S corp
  • The IRS never notified the corporation or any shareholder of a problem within those six months.

Jeremy stresses this last point. Always make sure clients check their physical mailboxes regularly, because the IRS corresponds about S elections exclusively by mail.

If the entity can’t satisfy Rev. Proc. 2013-30’s requirements, the only remaining option is requesting a private letter ruling from the IRS. PLRs can get expensive, and they’re the last resort rather than a routine tool.

Both the officer signing Form 2553 and each consenting shareholder declare under penalties of perjury that the election is true, correct, and complete. For late elections, shareholders also declare they’ve reported income consistently with S corp status for all affected years. This is a sworn statement the IRS takes seriously.

When the S election is (and isn’t) the right call

This is where the internet’s favorite rule of thumb falls apart. The self-employment tax savings that dominate most S corp conversations are just one variable in a multi-factor analysis. Jeremy identifies several factors that can offset or even eliminate those savings.

Stop relying on rules of thumb

The typical logic goes that if you make more than a certain amount (usually some middle five-figure number), you should elect S corporation status. Jeremy calls these rules of thumb “very dangerous” because they omit critical nuance. Yes, the typical purpose of an S corporation is to replace a larger self-employment tax burden with a smaller payroll tax burden. But that single calculation ignores everything else that changes when you make the election.

Review the ownership structure and the operating agreement

S corporations don’t have the flexibility of partnerships. They don’t allow special allocations, differential distribution rights, or waterfalls. The practical problem is that LLC operating agreements are almost always written from a subchapter K (partnership) perspective, not subchapter S. The partnership language baked into those documents won’t translate well for an S corporation. It can set up owners to inadvertently terminate the election.

Jeremy taught a two-hour webinar for the New York State Society of Enrolled Agents on reviewing LLC operating agreements for non-attorneys. He strongly recommends that practitioners request and review operating agreements before recommending any S election. If you’re not already doing this, start.

Examine the balance sheet before you recommend anything

Unlike partnerships, S corporation shareholders don’t get basis for corporate debt, only for bona fide shareholder loans to the corporation. Personal guarantees don’t count. There are no recourse-versus-non-recourse debt considerations like you’d find in a partnership.

Transferring liabilities in excess of assets into the S corporation as part of the §351 exchange—the corporate transfer that happens when an LLC makes that deemed corporate election—can trigger a taxable event. Appreciated fixed assets, especially real estate, create built-in gains issues, and there’s no §754 inside basis step-up available. Jeremy published a detailed post that walks through corporate transfer accounting.

Don’t ignore what happens to the QBI deduction

Owner wages paid by an S corporation are deductible for the business, which reduces qualified business income. That reduction shrinks the §199A qualified business income deduction. Jeremy has seen cases where the QBI reduction offsets most and sometimes nearly all of the self-employment tax savings. “Essentially, it’s a wash.”

The Election Is Easy. The Decision Isn’t

The mechanics of filing Form 2553 may seem straightforward, but the decision to elect S corporation status rarely is. As Jeremy makes clear, the real work is understanding eligibility rules, avoiding procedural traps, and evaluating whether the election actually improves the client’s overall tax picture.

For a deeper walkthrough of the rules, real-world mistakes practitioners make, and the analytical framework Jeremy uses to evaluate S elections, listen to the full episode of Tax in Action.

A Startup Claims AI Can Do Partnership Tax Returns Autonomously, But Where’s the Proof?

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Can an AI agent really complete a partnership tax return by itself? A two-year-old startup just raised $100 million claiming it can, but the hosts of The Accounting Podcast want to see the receipts.

In a recent episode, Blake Oliver and David Leary tackle the biggest AI claims hitting accounting right now. A startup called Basis says it built an AI that can prepare partnership tax returns autonomously. Intuit mentioned AI 150 times in one earnings call while announcing deals with both OpenAI and Anthropic. And new desktop tools let accountants automate recurring tasks without writing any code.

But that’s not all they covered. Trump’s tariffs were just ruled illegal, setting up a gold rush of refund claims. There’s finally a Senate bill to regulate tax preparers, because believe it or not, there are currently zero requirements. And one tax expert bet his life savings against DOGE and won.

A Billion-Dollar Claim (But Where Are the Receipts?)

The most jaw-dropping news comes from Basis, a startup founded in 2023 that just hit unicorn status. They raised $100 million at a $1.15 billion valuation, with money from Google Ventures and former Goldman Sachs CEO Lloyd Blankfein. The company claims it built an AI agent that can complete a partnership tax return autonomously.

Blake explained why this would be huge if true. “When you use TurboTax and you go through the wizard, it’s basically just taking your information and plugging that into the correct boxes on the forms. Partnership returns are much more complex because your balance sheet has to tie out, and you have to make all these adjustments and basis calculations. It gets really complex with the partners’ different shares of ownership.”

If Basis really pulled this off, accounting firms could skip having staff accountants prep these returns entirely. Everything would go straight to manager review. That’s a massive cost savings.

But David isn’t buying it without proof. “Their whole website’s optimized to raise money from investors,” he said. Until just before the fundraising announcement, Basis had no screenshots, videos, or demos anywhere. Its blog posts focus on the money they’ve raised and internal software development rather than showing how the accounting agents actually work.

“Where is this great blog post showing how they’re doing this return?” David asked.

Basis claims 30% of the top 25 accounting firms are “using” their software. But David, drawing from his Intuit days, knows better. “Using and using are not the same two words. A big accounting firm would buy 2,500 seat licenses for QuickBooks. A year later, they rolled out two to clients.”

Blake’s message to Basis was simple, “If you’re listening, we want to see it.”

Get Ready for the Refund Rush as Trump Tariffs Ruled Illegal

While everyone’s debating AI, there’s real money on the table right now from Trump’s tariffs. The Supreme Court ruled them illegal, and companies are scrambling for refunds.

“Eighteen hundred companies have already filed refund lawsuits against the federal government,” Blake reported. Big names like Costco, Goodyear, Barnes and Noble, and FedEx are in the mix. Through December 10th, at least 301,000 importers were subject to these now-illegal tariffs.

The kicker is Trump immediately announced new 15% global tariffs under a different law. But Blake thinks these are probably illegal too. “We have trade deficits, but we don’t have balance of payments deficits,” he explained. Trump is using a law from the 1970s when the U.S. was on the gold standard. Those conditions don’t exist anymore.

The administration’s own lawyers previously argued companies could get refunds if the tariffs were ruled unlawful. Now they’re stuck with that position. As one viewer commented during the livestream, “Only the richest companies will get tariff refunds, and consumers will get hosed in the end.”

“Offer this as a service at your firm,” David says, offering accountants a business idea. “Spin up a service and help importers get their tariff refunds.”

Intuit’s Playing Every Side of the AI Game

Intuit CEO Sasan Goodarzi mentioned AI about once every 30 seconds during the company’s recent earnings call, a total of about 150 times. But the real story is its strategy of partnering with everyone.

They’re working with OpenAI and Anthropic’s Claude. Plus, they’re building their own AI. David compared it to Microsoft in the late ’80s. “Microsoft was working on Windows. At the same time, they were in bed with Apple working on Mac OS, and they were working with IBM on OS/2. Nobody knew which OS was going to win.”

Intuit’s betting that no matter which AI platform wins, it wins too.

Goodarzi made an interesting point about why AI companies want to partner rather than compete. “Frankly, in some ways, this addressable market is too small for them to even worry about.” Accounting AI is tiny compared to the trillion-dollar AI market. These companies would rather partner with Intuit than build their own accounting platform.

The company claims its AI saves customers 12 hours per month on accounting and 17 to 18 hours a week on financial statements. But David called BS. “I just can’t imagine any small business owner spending 18 hours a week building a P&L or a cash flow statement—maybe one week a year.”

But Blake sees why Intuit will survive. “They have the data. They are the trusted database for accounting, financial, and tax information. Somebody could build a QuickBooks clone, but you’re not going to get everyone to switch.”

The AI Tools You Can Actually Use Today

While companies make billion-dollar bets, there are tools available right now that work. Blake’s current obsession is Claude Cowork, which can access files on your computer and click around your desktop.

“You could say every time a new file is added to this folder, look at it and analyze it and figure out what to do with it,” Blake explained. “Maybe I want you to plug those numbers into some practice management system. Maybe I want you to take that file and create an invoice.”

Blake built his own automation that takes meeting notes from Google, extracts all the tasks he committed to, and automatically adds them to his task list with due dates. “I don’t have to wait around for somebody to have that bright idea. I can just build it myself right now.”

The workforce impact is already showing up. According to a Kantata survey, 87% of professional services firms plan to manage AI agents as part of their workforce. But it’s changing the nature of work. The study found that while AI makes workers faster, people end up taking on more tasks and working longer hours without being asked.

For accountants, you’re either a reviewer or you’re in trouble. “It’s hard to get an entry-level job or a job where you’re the doer,” Blake said. “But if you are a reviewer or manager, if you have experience and you know what you’re looking at, you are super in demand.”

Other Big Developments This Week

Other news Blake and David covered in this episode includes:

  • A Senate bill to regulate tax preparers. There are currently zero requirements to be a paid tax preparer in the US. A new bipartisan bill would let the IRS deny or revoke preparer ID numbers and crack down on ghost preparers who don’t sign returns.
  • SEC considers biannual reporting. Public companies might only have to report twice a year instead of quarterly. Blake likes the idea. “One of the problems in the US is that companies are expected to beat earnings estimates quarter after quarter. It incentivizes them to make short-term decisions.”
  • Washington’s CPA problem. Washington State issued a record 2,086 CPA licenses last year, but 60% went to international candidates. You don’t even need a Social Security number to get a CPA license in Washington. “Is the accounting shortage actually getting solved, or is Washington just becoming a gateway for outsourcing?” Blake asked.
  • The DOGE bet. Alan Cole, senior economist at the Tax Foundation, bet $342,000 of his life savings that the Department of Government Efficiency wouldn’t cut spending. He won $128,000 when the government spent more in 2025 than in 2024. “We were smart enough. We could have done this,” David observed.
  • IRS scam alert. A Michigan man lost over $1 million to scammers claiming they needed to move his money to a “federal IRS locker” for protection. “Send all your clients an email telling them that this doesn’t exist,” David advises accountants. “It’s a good story. Your clients will open it, and it looks like you’re providing value.”

The accounting profession is at a crossroads. AI agents might really be able to do complex tax returns. Legacy software companies are scrambling to stay relevant. And the tools available today are already changing how work gets done.

But as Aaron Harris from Sage pointed out, “Technology shifts faster than customer trust.” And David added, “It’s probably even worse with accountants.”

Want to hear the full discussion, including why IBM lost $31 billion in market cap when Claude learned COBOL programming? Listen to the complete episode of The Accounting Podcast.

The Off-Season Work That Makes Tax Season Manageable

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Imagine it’s mid-March, and an accounting professional just left for spring break with her family. The business tax deadline is days away, and she’s at the beach.

Meanwhile, at firms across the country, accountants are settling in for another late night, sustained by the promise of a half-day Friday sometime in June (if they’re lucky). Blackout dates stretch from January through April, and the unspoken rule is that personal lives get shelved until after the deadline.

These two realities coexist within the same profession during the same tax season. The difference isn’t luck or lighter client loads; it’s deliberate design.

Rachel and Marcus Dillon, owners of Dillon Business Advisors, have spent 15 years building a firm where tax season looks remarkably different from the industry norm. Their team of about 30 remote professionals works 36-hour weeks year-round, maintaining “Flex Fridays” even during peak filing season. Team members take spring break. And by mid-January, they’ve already filed dozens of returns because the real work happened months earlier.

During a recent episode of the Who’s Really the BOSS? podcast, the Dillons responded to a LinkedIn discussion that had been making the rounds. Their friend David Cristello asked, “How do you keep your team motivated during tax season?” When another friend jokingly suggested pizza parties—a tongue-in-cheek reference to the go-to perk at many firms—it sparked a deeper conversation.

The Foundation: Improvement Season Sets Up Success

When Marcus responded to that LinkedIn post about keeping teams motivated during tax season, his answer surprised some readers: “The hard work starts outside of tax season.”

It’s not a deflection. It’s the foundation that makes everything else at DBA possible. The firm operates on what they call “improvement season,” the period right after each tax deadline when the team identifies what went right and what went wrong and implements fixes before the next cycle.

The results speak for themselves. By mid-January 2025, DBA had already filed dozens of returns because the books were already closed. When you send financials to clients by the 15th of every month throughout the year, there’s nothing to catch up on in January.

This year-round engagement creates a ripple effect on tax season workload. The firm conducts tax projections in Q4, so clients already know roughly where they stand before the new year begins. When a business owner learns in October that they might owe $80,000 with their return, and the final number comes in at $50,000, that’s actually good news rather than a crisis. The cash flow conversation happened months ago, not in a panicked April phone call.

“We just try to minimize surprise as much as possible,” Marcus says.

But even with these systems in place, the Dillons are quick to point out they’re still learning. After acquiring two firms in 2025, they’re dealing with a higher volume of annual-only tax clients than they’ve had in years. This influx has highlighted some stark contrasts.

Take 1099 preparation. For monthly clients, the groundwork happens throughout the year. Client service managers review vendor payments quarterly and request W-9s as soon as they spot gaps. By January, there are usually only a handful of forms to chase down.

Annual-only clients are a different story. “We have no idea what’s been going on all year long,” Rachel explains. “We have no idea how many 1099s they’re going to need, if they’ve asked for W-9s or not, if they can get a hold of the people, if we can get a hold of the annual client.”

The experience has Marcus questioning whether they should even offer 1099 services to annual-only clients. “If you’re not engaging us for monthly recurring accounting services, you can do your own 1099s is kind of how I’m feeling at this point,” he says. Though he adds with a laugh that since team members probably listen to the podcast, they might hold him accountable for that change next year.

Team Structure That Creates Real Flexibility

Having year-round client touchpoints only works if you have the right people consistently delivering those services. At DBA, that happens through their “Team of Three” model, a structure Marcus calls “one of our biggest wins by far.”

For monthly clients, the model assigns three distinct roles to every client relationship. The Client Service Manager handles all communication and administrative tasks. The Client Controller focuses on preparation and review. The Client CFO provides complex review, planning conversations, and quality control.

This separation might sound simple, but the impact runs deep. When administrative tasks get pulled out and assigned to someone whose specific job is coordination, preparers and reviewers suddenly have hours back in their week.

“Breaking out the administrative parts and giving those to a professional who can handle them and communicate with clients gives a lot of time back to preparers and reviewers,” Rachel explains.

The same structure now applies to annual-only tax clients, a recent adaptation as they handle more of these relationships. The Tax Administrator manages all client communication, including sending organizers, accepting documents, generating engagement letters, and handling the back-end filing process. The Tax Controller handles preparation, often reviewing simpler returns. And their Director of Tax and Financial Planning provides oversight, education, and handles complex returns.

This structure creates essential coverage. When someone takes time off, two other team members understand each client relationship. Work doesn’t pile up while someone’s away.

The coverage philosophy shapes how DBA handles time-off requests. Before approaching leadership, team members coordinate with their Team of Three to ensure coverage. “You have to let your team of three know the dates and make sure it doesn’t put somebody else in a weird spot,” Marcus explains.

This approach makes possible what would seem impossible at traditional firms: client controllers taking spring break in March, right when business tax deadlines hit.

Rachel addresses the human reality behind these decisions. “When someone takes more than a day or two of PTO, it’s rare that they’re going alone somewhere. Most of the time, they’re traveling with their family, extended family, or friends for a special occasion.”

The Dillons understand this firsthand. They started taking spring break specifically because it was the only time their daughters’ swim practice and school schedules aligned. Expecting employees to forfeit those windows because of arbitrary blackout dates ignores how life actually works.

Marcus doesn’t mince words. “If you have blackout dates and you tell people they can’t live life during four months out of the year, they’re not going to leave your accounting firm for another accounting firm. They’re going to leave your accounting firm for another profession or another industry altogether.”

The team also maximizes efficiency through technology. Every deliverable, from financials to tax returns and projections, includes video commentary recorded through Vimeo. Clients watch explanations on their own schedule, rather than booking meetings just to review numbers. Zoom phones enable text messaging that looks direct but feeds into practice management systems, meeting clients where they communicate while maintaining boundaries.

Marcus notes that team members are often most productive right before vacation. “You are most efficient and effective right before you go out of town,” he observes. The team plans accordingly, with people getting ahead on work before time off rather than dumping it on colleagues.

Building a Culture Beyond Temporary Perks

The LinkedIn discussion that sparked this podcast episode revealed something telling about the profession. When asked how to keep teams motivated during tax season, someone jokingly suggested pizza parties, and everyone got the joke because nearly everyone has worked somewhere that tried to make up for brutal hours with free food.

“For us, as a remote team, that would cost a lot of money to send everybody pizza,” Marcus notes about their 30-person team. But cost isn’t the real issue. “Being in different roles over my career, knowing my voice is being heard means way more to me than a slice of pizza.”

At DBA, that philosophy takes concrete form. The firm maintains a shared spreadsheet where any team member can nominate a client for exit at any time. Leadership might see completed work and paid invoices, but they don’t witness the difficult phone calls or patterns of disrespect that make certain clients exhausting to serve.

This isn’t just lip service. In what they’re calling their “year of refinement” for 2026, DBA has shortened its tolerance for poor-fit clients. “In the past, we would give people a couple of different opportunities to tell us no,” Marcus says. “Where we’re at today as a business, it’s just one time to tell us no before we exit that client relationship.”

The same philosophy of actually listening to the team’s needs shaped their benefits evolution. Half-day Fridays started as a summer perk to give back time worked during tax season. Then it expanded to most of the year. Now it runs year-round, including during tax season. A full-time employee at DBA works 36 hours, not 40.

“We didn’t want to take it away from people,” Marcus says simply. “A lot of clients aren’t around on Friday afternoons either.”

PTO evolved similarly. In 2025, the firm extended paid time off to part-time team members, in proportion to their hours. But tracking PTO across multiple systems created an administrative burden that defeated the purpose. “Ultimately, you want people to use their PTO and have time off, not necessarily be worried about tracking their PTO,” Marcus explains.

Effective January 1, 2026, DBA moved to unlimited PTO with guardrails around approval and booking limits. The policy includes part-time team members.

Marcus addresses the common criticism head-on. “I know it’s been discussed that people take less time off with unlimited PTO. That is not our intention at all.”

For individual tax clients who might otherwise only appear at filing time, DBA offers its Tax Advisory Plan (TAP). This monthly recurring service includes tax preparation plus two annual projections, one mid-year and one year-end, each with a consultation. Clients get introduced to their dedicated team, so when questions come up, someone familiar with their situation responds without hours of research.

“We have solved for that with our tax advisory plan,” Rachel says. The service transforms annual relationships into year-round engagement, turning filing-time scrambles into predictable workflows.

“Allowing your team more freedom to go home at a normal time, every day and all year long, is going to go a lot further than a one-time meal or party,” Rachel says, capturing what actually matters to team members.

Taking Control of Your Firm’s Tax Season

The Dillons freely admit they’re not perfect. They’re dealing with integration challenges from two recent acquisitions. They’re still figuring out whether to offer certain services to annual-only clients. Marcus is currently working from a poorly insulated sunroom in an Airbnb because their Fort Worth house renovation isn’t finished. But their approach offers a blueprint built on three principles that any firm can adapt.

Start improvement season immediately after tax season

The work that makes January through April manageable happens in the months after the previous deadline. When clients know their tax position from Q4 projections and books stay current monthly, there’s nothing to scramble over in March.

Structure teams for coverage, not just efficiency

The Team of Three model distributes work and creates redundancy. When someone leaves for spring break, two others understand every client relationship. Breaking out administrative from technical work maximizes everyone’s strengths.

Listen to what teams actually want

Sustainable practices beat temporary perks every time. Team members want their concerns heard and acted on. They want to attend their kids’ events, travel when their families can travel, and not have their lives dictated by arbitrary deadlines.

“We’re not up against the CPA firm down the street anymore. It’s a different ballgame,” Marcus says, putting the stakes in perspective. Talented professionals have options beyond public accounting, and firms that don’t adapt will lose team members to other industries.

Listen to the full conversation on the Who’s Really the BOSS? podcast for additional insights about managing life transitions during busy season, specific tools for client communication, and how the Dillons are applying these principles during their own busy season. As Rachel notes at the end, “All of these things eliminate the need for staying at the office until midnight doing actual work because all you’ve done all day is put out fires.”

Tax season doesn’t have to control your firm. But escaping that cycle requires doing the hard work when everyone else is taking a breather. The firms having calm tax seasons aren’t lucky; they’re prepared.

Listen to the complete episode to hear how DBA is navigating tax season, managing team growth from recent acquisitions, and keeping their Flex Friday promise even in the thick of filing season.

Rachel and Marcus Dillon, CPA, own a Texas-based, remote client accounting and advisory services firm, Dillon Business Advisors, with a team of 15 professionals. Their latest organization, Collective by DBA, supports and guides accounting firm owners and leaders with firm resources, education, and operational strategy through community, groups, and one-on-one advisory.

Your Shoulder Isn’t Distracting Anyone, But Worrying About It Hurts Your Performance

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In 2018, EY told 30 of its female executives “women’s brains absorb information like pancakes soak up syrup, so it’s hard for them to focus.” Men’s brains, apparently, are more like waffles—better at focusing because information “collects in each little waffle square.”

This was a half-day professional development workshop called “Power, Presence and Purpose” that happened just seven years ago.

When an article about this training resurfaced in a WhatsApp group of accounting professionals, it sparked exactly the conversation the profession needs to have. Nancy McClelland and Questian Telka, hosts of She Counts, the real-talk podcast for women in accounting, dove into this issue in their latest episode, unpacking where these expectations come from and what they really cost women professionally.

When Your Body Becomes Everyone Else’s Business

The message starts early and never really stops. Women’s bodies are problems to be managed, and managing male reactions is somehow their responsibility.

“I was told I couldn’t wear spaghetti strap tank tops to school because it would be too distracting for the boys,” Questian recalls of her middle school days.

That expectation followed her straight into adulthood. Her mother, trying to prepare her for professional success, advised, “In a man’s world, you have to learn to cover your body and cut your hair and make yourself blend in with male colleagues. Think pantsuits, and not the colorful, fun kind.”

The EY training took this messaging to new extremes. The 55-page presentation included a score sheet where participants rated themselves on “masculine” versus “feminine” traits. According to the training, masculine meant “acts like a leader,” “athletic,” “aggressive,” and “independent.” Feminine traits included “eager to soothe hurt feelings,” “shy,” “understanding,” “loves children,” and “cheerful.”

“So this makes sense,” Nancy says with pointed sarcasm. “Men don’t love children, and they’re not understanding. And women don’t act like leaders, and they’re not independent.”

But the advice went far beyond stereotypes. Women were told not to “flaunt their bodies” because “sexuality scrambles the brain.” They were instructed to “speak briefly because they often ramble and miss the point.” Most jaw-dropping of all was the advice not to directly confront male colleagues in meetings and to avoid sitting directly across from them, as it might make the men feel threatened.

“If that was required, I would be fired immediately,” Questian laughs. “I’m not going to last very long.”

“For the men listening, you’re not responsible for how women dress,” Nancy says, cutting to the heart of it. “You’re responsible for your behavior and your professionalism.”

The Hidden Tax on Women’s Brains

This constant self-monitoring is exhausting and actively undermines performance. Questian points to objectification theory, developed by researchers Fredrickson and Roberts, which shows that when women constantly monitor their appearance, it creates self-objectification.

“A 2020 review of that research found that this constant body monitoring actually reduces your cognitive performance,” she explains.

Nancy knows this firsthand. At a recent conference, wearing a black-and-gray sweater dress instead of her usual colorful attire, she found herself worrying, “People are going to be like, ‘What’s up, Nancy? ‘” How come you’re not colorful today?’

The irony wasn’t lost on her. After years of worrying about standing out too much, she was now anxious about blending in. Either way, that mental energy was stolen from the work itself.

“When I feel like my insides and outsides line up, I stop the constant self-objectification,” Nancy explains. “My brain focuses on doing the work instead of being busy watching itself.”

The research backs this up. McKinsey’s 2023 Women in the Workplace report and Catalyst’s work on emotional tax show that women—especially women of color—must maintain constant vigilance at work, scanning for bias and managing others’ reactions. That’s energy they can’t use for actual leadership.

The double bind makes it worse. “It’s this impossible tightrope of looking good, but not too good at work,” Questian says. “Don’t be too much, but don’t be too little.”

The problem persists today. At a recent conference, Questian learned that men were standing around discussing a female colleague’s clothing and body. The woman was, by any standard, appropriately dressed.

“What I found disturbing was the standing around discussing a woman and her attire and her body,” Questian says. “It’s a responsibility to behave and be professional, regardless of what she was doing or how she was dressing. Just don’t engage in those conversations.”

Finding Your Way Back to Yourself

Both hosts have wrestled with these pressures personally, though they’re quick to acknowledge the privilege that comes with running their own firms.

Nancy’s transformation is striking. For over a decade, she wore almost exclusively black, gray, brown, and white. As someone who regularly spoke to C-suite executives and boards, she wanted to be taken seriously.

Then a friend noticed the disconnect. “You’re one of the most colorful personalities that I know, and your exterior doesn’t match your interior,” she said, giving Nancy a colorful necklace.

“I was so scared the first time I wore that necklace,” Nancy admits. “Because I was like, oh, everybody’s gonna notice me. And I wanted to be noticed for my accomplishments.”

But when Nancy started dressing more authentically, her clients in Chicago’s quirky Logan Square neighborhood, where she runs a hyperlocal firm, actually trusted her more.

“Wearing a traditional black suit said ‘professional in an office.’ It didn’t say ‘You get me,'” she explains.

Questian takes a different approach, embracing how she wants to dress regardless of others’ opinions. “Some people will like me for it. Some people will not like me for it. And if it’s not appropriate, maybe that’s not the space I’m meant to be in.”

She’s pushed boundaries her entire career. Fifteen years ago at a Big Four firm where pantyhose were required in the dress code, she simply never wore them. She was never disciplined. The rule existed more to police than to serve any real purpose.

“For us to be able to say, ‘I’m doing this, and I feel comfortable’, it’s a little unfair,” Nancy acknowledges, recognizing that many women face real consequences for dress code violations.

Rewriting the Rules

The solution requires individual choices and systemic change. For women navigating these waters, the hosts offer three essential questions:

  • Can I move in it? Is it comfortable and functional for your workday?
  • Will I be thinking about it during the day? Will it create mental distraction?
  • Does it feel like me? Does it align with who you are?

Questian adds deeper considerations, like what makes you feel confident? How do you want to show up as a leader? What environments make you feel seen and safe?

Here’s what firm leaders can do better:

  • Involve employees in creating policies through genuine collaboration, not top-down mandates.
  • Shift from appearance to function. What does the work require? Are there safety needs? What are client expectations?
  • Redefine professionalism around respect, results, and competence, not clothing choices.

Nancy shares a perfect example of functional requirements. “I was working on a client project that turned out to be in the middle of a rail yard, and I was walking across this rail yard in a business suit with a skirt and high heels. That is a safety issue.”

For male colleagues who want to be allies, the ask is simple but powerful. When the conversation shifts to a woman’s appearance, redirect it. “Let’s stay focused on her work” or “She’s an excellent leader” doesn’t have to be dramatic. It just has to happen.

“If this woman heard the conversation you were having,” Questian asks, “would it be a conversation you would be proud of?”

The Real Bottom Line

EY paid a $100,000 fine and created a half-million-dollar scholarship fund for women and underrepresented minorities after their training came to light. But an independent review two years later showed things hadn’t improved much. Policy changes without culture change aren’t enough.

“Professionalism should be built around respect and results and competence,” Questian emphasizes, not around policing women’s bodies or managing men’s reactions.

 “The solution is communication,” Nancy says, bringing the conversation home. “Have employees participate in dress code conversations. Create a safe space where people can put their two cents in and build something off of that.”

As the hosts wrap up, they invite listeners to join the conversation on the She Counts Podcast LinkedIn page. What’s the most ridiculous dress code rule you’ve ever been given?

Questian closes with a modified quote from Yves Saint Laurent: “What is most important in your attire is the woman who’s wearing it.”

The mental energy women spend managing their appearance isn’t just unfair; it’s a measurable drain on the talent and leadership the accounting profession desperately needs. When firms finally stop asking women to dress to accommodate others’ discomfort and start defining professionalism by actual professional behavior, everyone wins.

Listen to the full episode above to hear Nancy and Questian’s complete conversation about pancakes, power suits, and why personal autonomy at work shouldn’t be negotiable.

A $600 Credit Card Complaint Unraveled One of the Biggest Frauds of the 1980s

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The auditors stood in what looked like a massive insurance restoration job. Equipment everywhere. Workers milling around. Paperwork ready and in order. It looked like a thriving construction site.

Except it wasn’t real.

The workers were hired actors. The paperwork was fake. The project didn’t even exist. And the company behind it was worth hundreds of millions of dollars on paper.

This is the story of Barry Minkow and ZZZZ Best. On a recent episode of the Oh My Fraud podcast, host Caleb Newquist explained this financial crime with his trademark dark humor that resonates with accounting professionals and true crime fans alike.

Starting in the Garage

Barry was born in 1966 and grew up in Reseda, a middle-class suburb in the San Fernando Valley. He wasn’t an athlete or particularly popular. His classmates nicknamed his old Buick “the bomb,” which tells you where he stood socially.

But Barry wanted to stand out, and business seemed like the way to do it.

At 15, Barry started a carpet cleaning company out of his parents’ garage. He called it ZZZZ Best. The four Zs represented the number of kids he wanted someday. The name also put the company at the end of the phone book listings, which wasn’t great marketing, but he was 15. What did he know?

Actually, Barry knew more about the carpet-cleaning industry than most teenagers did. His mom worked at a carpet cleaning company, and he’d done telemarketing there as a kid. He understood how to pitch services, how pricing worked, and what customers expected.

The business was real at first. Barry hustled, running local ads, making aggressive sales calls, and working long hours. ZZZZ Best built a modest reputation by showing up when scheduled, charging what they quoted and working late to finish jobs. Compared to competitors known for bait-and-switch tactics, ZZZZ Best seemed like the most honest option.

But running a business as a teenager created problems. California law didn’t allow minors to sign binding contracts, so banks would shut down his accounts once they realized how old he was. He wasn’t even old enough to drive at first, so he needed rides from friends to meet customers.

The biggest problem was cash flow. There are upfront costs like equipment, supplies, advertising, and payroll. Revenue comes later, after you do the work. When you’re 15 with no savings and no credit, those gaps become huge problems.

That’s when the shortcuts started. Check kiting to cover expenses. Overcharging customer credit cards and only refunding if someone complained. He staged burglaries at his own office to collect insurance payouts and even sold his grandmother’s jewelry to raise cash.

These actions could have landed him in jail. But at this stage, it wasn’t massive corporate fraud. It was just a young business owner scrambling to keep something afloat.

The Pivot to Fake Restoration

The thing about solving cash flow problems with fraud is you’re not actually fixing anything. You’re just postponing the problem and adding new ones.

The carpet cleaning business was real, but it wasn’t wildly profitable. And it definitely wasn’t generating the kind of money Barry was starting to claim publicly. He needed something bigger. Something that could explain rapid growth and put impressive numbers on paper.

Enter insurance restoration.

The pivot made some sense. Carpet cleaning and disaster restoration overlap—smoke damage, water damage, that kind of work. But the real appeal was scale. Residential carpet cleaning might bring in a few hundred dollars per job. Commercial restoration contracts could run hundreds of thousands, sometimes millions of dollars.

Restoration work also offered complexity. Multiple parties were involved, including insurers, adjusters, contractors, and property owners. Work spread across multiple locations. Payments happened in stages. Lots of documentation. From the outside, it’s hard to tell what’s actually happening on any given job.

Around this time, Barry met Tom Padgett at a gym in the San Fernando Valley. Tom was an insurance claims adjuster and was established in the industry. He understood exactly how insurance companies documented and approved restoration claims. That gave him credibility Barry didn’t have.

Together, they began creating restoration projects that existed mostly on paper. Contracts showing large commercial cleanup jobs. Work orders and invoices—the kind of supporting documentation you’d expect if major restoration work was actually happening.

To make it more believable, they created Interstate Appraisal Services. On paper, it looked like an independent firm verifying restoration projects for insurers. In reality, it was part of the same scheme.

With those fake restoration contracts documented, Barry started factoring receivables. That meant selling ZZZZ Best’s accounts receivable to banks at a discount in exchange for immediate cash. Instead of waiting months to get paid, you get most of the money now. The bank collects the full amount later.

The problem was that the invoices weren’t tied to real projects, so there was nothing for the bank to collect. New contracts had to appear to cover old obligations. More documentation. More fake projects. Bigger numbers. It wasn’t exactly a Ponzi scheme, but it worked like one. Except the people being recruited were banks instead of investors.

By the mid-1980s, ZZZZ Best was reporting roughly $50 million in annual revenue. Most of it came from the restoration business that largely didn’t exist.

Fooling the Auditors

Going public would solve many of Barry’s problems. He’d get access to capital, legitimacy, visibility, and the kind of validation that makes lenders and partners more comfortable.

But there was one obstacle: auditors.

Before a company can go public, independent auditors must review the financial statements, verify revenue, and confirm contracts exist. The numbers have to reflect reality. That’s a big problem when much of your revenue is fake.

ZZZZ Best hired Ernst & Whinney, one of the then-Big Eight accounting firms. It was a serious firm with a serious reputation. Exactly the kind of name you’d want if you were trying to build credibility.

Ernst & Whinney did what auditors do. They asked questions. They requested documentation. Eventually, they wanted to see some restoration projects in person.

Paperwork alone wasn’t going to be enough anymore. So the fraud evolved.

Instead of just fake documents, Barry and his team created fake job sites. Barry temporarily staged buildings that weren’t ZZZZ Best projects to look like they were. They brought in equipment, added signage, and had workers show up. They prepared paperwork in advance. There was enough activity to create the impression of a functioning restoration job.

Put yourself in the auditors’ shoes. You’re visiting a site for a brief period. It’s your first time there. Management is guiding you through everything. From your perspective, everything lines up. The site visit confirms what you’re being told. Independent appraisals exist. The documentation matches.

Ernst & Whinney issued an unqualified audit opinion. They believed the financial statements fairly reflected the company’s finances. ZZZZ Best cleared a major hurdle.

The company went public in January 1986 through a reverse merger with a shell company already publicly traded. It’s a faster route to the stock market that can involve less scrutiny than a traditional IPO.

The stock began trading at around $4 per share. Within months, it climbed to about $18. Barry Minkow, barely out of his teens, was suddenly CEO of a publicly traded company worth nearly $300 million.

The $600 Complaint That Brought It All Down

For a while, everything looked like it was working. Media coverage was positive. Barry conducted interviews, leaning into the young-entrepreneur success story. But behind the scenes, pressure was building. Some lenders were asking more detailed questions about restoration contracts. Industry people wondered how such a young company had landed so many large jobs so quickly.

Then came a problem with a flower order.

Barry owned a small side business called Floral Fantasies. It wasn’t a major part of ZZZZ Best, just another little venture. A Los Angeles secretary named Robin Swanson was overcharged by about $600 on a credit card purchase. She complained and tried to get a refund. She kept calling but got nowhere.

Most people would eventually let it go. Not Robin.

She started asking questions, talking to other customers and comparing experiences. What she found suggested a pattern of repeated questionable charges tied to Barry’s businesses. She documented names, dates, and amounts and took it all to the Los Angeles Times.

When reporters started digging, they weren’t initially investigating the restoration business. They were looking at credit card complaints. But when journalists pull at one thread, they tend to find others. Questions about Floral Fantasies led to questions about Barry’s business practices, which in turn led to scrutiny of ZZZZ Best’s restoration contracts.

The article hit on May 22, 1987: “Behind Whiz Kid Is a Trail of False Credit Card Billings.”

At first, it didn’t look catastrophic. But it accelerated scrutiny that was already building. In early June, Ernst & Whinney abruptly resigned as ZZZZ Best’s auditor, citing unresolved questions about certain restoration contracts.

When your auditors suddenly quit, that’s about as reassuring as a smoke alarm going off in the middle of the night.

The stock price plummeted from $18 to the mid-$6 range. A proposed acquisition that might have stabilized everything fell apart. By July 1987, Barry resigned as CEO, citing health reasons. Shortly afterward, ZZZZ Best filed for bankruptcy.

When the dust settled, the company that once had a market value of nearly $300 million had remarkably little underneath it. Just some equipment and a few vehicles for a small, legitimate carpet-cleaning business. Investor losses topped $100 million.

Prison, Pastor, and More Fraud

In January 1988, a federal grand jury indicted Barry and several associates. The charges covered securities fraud, mail fraud, racketeering, bank fraud, tax violations, and conspiracy. After a trial lasting several months, Barry was convicted on dozens of counts.

In March 1989, Judge Dickran Tevrizian sentenced Barry to 25 years in federal prison and ordered him to pay tens of millions in restitution. Tom Padgett, who helped create the fake restoration projects, pleaded guilty and was sentenced to eight years.

That’s where most fraud stories end. But Barry’s story was just beginning.

While serving his sentence in Colorado, Barry went through what he described as a religious conversion. Raised Jewish, he became a born-again Christian in prison. He got involved in ministry programs and studied theology. He was released in 1995 after serving about seven and a half years.

Barry enrolled at Liberty University and earned a master’s degree in divinity. By the late 1990s, he was pastor of San Diego Community Bible Church. He also founded the Fraud Discovery Institute in 2001, positioning himself as someone who could spot fraud because he’d committed it.

He spoke at churches, universities, and accounting conferences. He wrote books about ethics and redemption. Media profiles framed him as a cautionary tale-turned-expert. By the late 2000s, Barry had rebuilt surprising credibility.

Then came Lennar.

The Fraud Investigator’s Fraud

Lennar Corporation is one of the largest homebuilders in the United States. In 2009, right after the housing market collapsed, the company was under pressure, as was much of the construction industry.

Barry released a report through his Fraud Discovery Institute accusing Lennar of accounting misconduct. He alleged financial irregularities and potential fraud at the executive level. He filed complaints with regulators and spoke publicly about the allegations.

Lennar’s stock dropped from about $11.50 to the mid-$6 range within weeks. Media coverage amplified the claims, prompting analysts to ask questions.

But there were problems with Barry’s allegations.

Before going public with his claims, Barry had taken short positions against Lennar stock, meaning he bet that Lennar’s stock price would go down. If negative news about Lennar came out, Barry would profit.

Also, a San Diego developer named Nicolas Marsch III, who was already suing Lennar over a failed real estate deal, hired Barry to investigate the company. The fraud allegations weren’t coming from a neutral source.

Federal investigators concluded that key elements of Barry’s fraud claims against Lennar lacked evidence to support them. Prosecutors charged him with conspiracy to manipulate Lennar’s stock through false allegations.

He pleaded guilty in 2011. Judge Patricia Seitz sentenced him to five years in federal prison and ordered him to pay $583 million in restitution, essentially the amount Lennar’s market value dropped after his report. She said Minkow had “no moral compass.”

The Pastor Who Stole from His Flock

While the Lennar situation was unfolding, something else was happening at Barry’s church.

During much of his time as pastor of San Diego Community Bible Church, prosecutors said Barry was embezzling money from the church itself. According to the U.S. Attorney’s office, he stole more than $3 million through unauthorized accounts, forged checks, and diverted donations.

Some victims were individual church members who knew Barry personally and trusted him spiritually. One victim was a widower who thought he was funding a humanitarian hospital project overseas. Investigators concluded the project didn’t exist.

Churches tend to operate on trust, which means financial oversight often relies on good faith rather than verification. That didn’t help here.

In January 2014, Barry pleaded guilty to conspiracy to commit bank fraud, wire fraud, mail fraud, and defrauding the federal government related to the church schemes. Federal prosecutors called him “a professional con man expertly plying his craft, a predator from the pulpit.”

The judge called it a “despicable, inexcusable crime” and imposed the maximum sentence allowed: another five years in federal prison on top of the Lennar sentence.

Lessons for Accounting Professionals

Barry was released from federal prison in June 2019. He reportedly works in addiction counseling now. He owes $612 million in restitution across his various convictions. He’ll be paying that back for the rest of his life.

His three-decade criminal career offers several lessons:

  • Fraud escalates. ZZZZ Best didn’t begin as a massive public company scandal. It started with check kiting and overcharging.
  • Small rationalizations become bigger ones. A “temporary” cash-flow fix becomes fabricated contracts that turn into staged job sites. Early ethical lapses are often leading indicators rather than isolated incidents.
  • Revenue deserves skepticism, especially when growth outpaces reality. ZZZZ Best reported explosive revenue from complex restoration contracts that few people fully understood. When you see rapid growth tied to opaque transactions, multiple third parties, or heavy reliance on estimates and documentation, that’s a cue to dig deeper.
  • Independence and professional skepticism matter more than reputation. A Big 8 firm with a string name wasn’t immune to being deceived. Don’t outsource your judgment to management narratives, staged environments, or impressive paperwork.
  • Verification beats trust. The fake restoration sites worked because auditors saw what they expected to see. Fraudsters exploit expectations. Time pressure and client relationships can dull the instinct to “trust but verify.” Independent confirmations, third-party evidence, and corroborating documentations are essential safeguards.
  • Culture and governance are risk factors. ZZZZ Best was led by a charismatic founder with little oversight and a board that lacked the experience or backbone to challenge him. That same pattern reappeared at the church and in the Lennar situation. Weak governance structures and concentrated authority create environments where fraud can thrive. When evaluating clients, ask hard questions about the tone at the top and real accountability.
  • Small complaints can uncover big problems. ZZZZ Best started unraveling over a $600 credit card complaint. Pay attention to the outlier, the small anomalies, and the client who keeps asking questions. Those moments often reveal more than polished financial statements ever will.

When the Paperwork Looks Perfect, Look Closer

The story of Barry Minkow and ZZZZ Best is part cautionary tale, part masterclass in how fraud evolves and how even sophisticated professionals can be misled.

For accountants, auditors, and advisors, it’s a reminder that our role is both ethical and technical. It requires curiosity, courage, and the willingness to challenge narratives that feel too neat.

For a full breakdown, listen to the complete episode of Oh My Fraud. It’s a fascinating look at one of the most audacious frauds in modern business history and the lessons it still holds for the profession today.