Tax-related scams targeting consumers often make the news, but businesses are also susceptible; in PWC's 2014 survey of over 5,000 businesses, 37 percent reported experiencing an economic crime in the past year. The cost to victim businesses is often steep, with 18 percent of organizations that suffered from fraud reporting a financial impact between $1 million and $100 million.
As a business owner, the best thing you can do to prevent fraud is to familiarize yourself with common methods scammers use to deceive you and your employees. Here are three tax scams to be aware of:
Scam artists sometimes pretend to be tax agencies in order to steal information or money. While these scams often target individuals, phishing schemes also go after businesses to steal confidential information or trick unsuspecting business owners into making payments for supposedly unpaid taxes. Be sure your employees know the IRS reaches out first by mail, not email.
Return payer fraud
Busy small-business owners often turn to third parties for help with tax preparation. While the vast majority of tax preparers are upstanding, some aren’t; the IRS listed return preparer fraud as one of the top 12 scams taxpayers face. Scam artists posing as professionals often promise enticing refund amounts and then steal crucial information that can be used to steal refunds, identities, and more.
It’s important to ensure the person you're working with is legitimate before you share any business information with them. Signs that someone may not be a lawful tax professional include:
- They lack an IRS Preparer Tax Identification Number (PTIN) for 2015. A PTIN shows they are authorized to prepare federal tax returns. Every preparer has to show their PTIN and sign every return.
- They base their fees on a percentage of your tax returns.
- They say they won't be available after April 15.
- They ask you to sign a blank or incomplete tax return.
- They refuse to provide a copy of your return.
Remember: Taxpayers are legally responsible for what's on their tax return, even if someone else prepared it. Always review and make sure you are comfortable with your return before signing it, and ask questions if you don’t understand something.
Donating to nonprofit organizations can be a great way for businesses to give back to local communities — and earn tax benefits. It’s important to be certain, however, that the organizations to which you donate are legitimate. Scam artists sometimes masquerade as charities, allowing them to take money or critical information from unsuspecting businesses. They've even been known to call or email people to aggressively solicit "donations."
Some signs of a possible charity scam include:
- Charities whose names sound similar to or have websites that resemble those of other, well-known organizations.
- Asking for personal information such as your social security number or passwords to process a donation.
- Requesting cash-only donations. Without a receipt, there's no way to track the donation.
Not certain if an organization is legitimate or not? The IRS provides a searchable database of exempt organizations, EO Select Check. This is a great resource to check organizations before donating or to find legitimate charities.
These three scams are just the tip of the iceberg when it comes to fraudulent schemes that target businesses. Staying aware of common schemes and training employees on these techniques may help protect your business from potentially damaging fraud.