“Being informed is the greatest weapon against fraud.”

– Unknown

 

  Fraud, swindle, trick. Where there is money, unfortunately there is sometimes also dishonesty. As an honest business owner, it is important to watch out for tax scams as you prepare for the April 18, tax filing deadline. Let’s take a look at some of the most common tax scams.

  1. Aggressive third-party employee retention credit (ERC) promoters.

ERCs were helpful to many business owners during the pandemic era. That said, many third parties have capitalized on this by providing filing for a percentage of the money received by business owners. While some companies do this ethically, many people have taken advantage of vulnerable business owners, and told them falsities about qualifying for this credit or charged an exorbitant amount of money to help them with their claim. Avoid this by reaching out to a TSBDC center to discuss any concerns and considerations before claiming the ERC. Remember, according to irs.gov, Eligible taxpayers can claim the ERC on an original or amended employment tax return for qualified wages paid between March 13, 2020, and Dec. 31, 2021. However, to be eligible, employers must have:

  1. Email and text message scams.

Fishing just isn’t fun anymore. At least not for taxpayers. Phishing with a ph means the fraudulent practice of sending emails or other messages purporting to be from reputable companies to induce individuals to reveal personal information, such as passwords and credit card numbers. Oh, and to make it even more exciting, there’s now something called smishing. It’s like phishing, but through text messages. These messages make claims on everything from account holds to legal charges. They typically ramp up around tax season, so please remember this when dealing with calls or text messages. Be on the lookout and employ the spam blocker on your phone to help ensure safety from these scams.

  1. “Help” setting up your online IRS account.

You can set up an online IRS tax account for ease of access. That said, it is important to know that some “companies” will try to “help” you set up your account and use this information to steal the identity of an unsuspecting taxpayer. This is a double whammy for business owners since sometimes business owners become confused about what types of accounts they need to create when setting up their business. Keep a lookout for “free” services offering to help you set up an account by asking for your personal information with no other guidance or feedback. Please note, the SBDC is a trusted resource where business owners can go to get help understanding the steps to set up online accounts and file for an EIN.

4. Shady tax preparers

Ways to know someone is shady-wears sunglasses and a fake mustache. I’m just kidding, really though, keep an eye out for these few things when dealing with a tax preparer and be cautious if A) They ask for cash up front. B) They don’t actually admit to creating your tax returns i.e. they don’t sign them. Or C) They meet you in a random parking lot to hand over your tax documents. Seriously. All three of those things have happened with my clients. So, please hear me, it is so important to trust but also VERIFY the validity and capability of a business organization before handing over your sensitive financial data. This will help you avoid mishaps and scams. Additionally, the TSBDC maintains a list of reputable resources that may be useful to you in avoiding hiring someone who isn’t working in your best interest.

As you continue to work through getting your taxes ready for the upcoming April deadline, please protect yourself. Remember the TSBDC is here to help you throughout your entire business journey, and even though we can’t function as CPAs, we are happy to help point you in the right direction and provide you with trusted resource partners. 

Article sources:IRS.gov

TSBDC|April 2023

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