Common tax scams targeting small business owners

Don’t fall for it

Scam artists love preying on small businesses, but yours doesn’t have to be one of them. Here are the most prevalent scams targeting small businesses this tax season.

“You owe big — Pay up now!”

Someone calls your office, says he’s from the IRS, and demands you pay a giant tax bill — immediately. Beware! Why? The IRS will never call you to demand immediate payment or to discuss tax liability without first mailing you a bill. This scam also comes via email and other electronic media. Rest assured, the IRS does NOT initiate communication with taxpayers, personal or small business, through unsolicited email, social media, or text messages.

Other red flags proving they’re phony? If they ask for your credit card number or personal information, demand a specific type of payment, or threaten to call law enforcement, they’re vicious scammers on the hunt.

“We’ve got a refund waiting for you!”

Who doesn’t want to hear that extra money is coming their way? Be careful. The old adage — If it’s too good to be true, it probably is — holds merit in this case. Contact the IRS and your accountant to verify the claim or, more likely, report the scam.

“Update your file immediately!”

A professional looking email says your small business needs to update its “file” with the IRS. It looks legit – the logo, the font and the web address all seem aboveboard. But remember, the IRS will never initiate communication with you through email. This form of identity fraud can cost you big. Call the IRS before handing over any information.

“I’ll get you a HUGE refund!”

Everyone wants to pay as little as possible at tax time, and a quality accountant [link to How to choose an accountant post] can prove invaluable. But not every tax pro has your best interests at heart. And no matter what, you are responsible for your taxes – not your tax preparer, even if he or she proves to be the scum of the earth.

Always read the return before you sign it, and no matter what, never sign a blank return.

Be wary of any tax pro guaranteeing a huge refund, and insure your tax pro has a “Preparer Tax Identification Number.” Also, don’t do business with someone who gets paid based on a percentage of your return or who completes your return without asking for your paperwork. Always read the return before you sign it, and no matter what, never sign a blank return.

“Help the starving children.”

Donations to charitable organizations are wonderful. Donations to fake charities are not. Be scrupulous when your small business writes a check to support a cause. Scammers can create a fake charity complete with letterhead and a website in minutes flat! This scam is particularly common in the wake of a natural disaster when emotions are high and the need is great.

Spot fake charities by checking their names against the IRS-approved list. Be alert to charities whose names are similar to reputable organizations, and never supply your Social Security number or EIN.

Common sense goes a long way, but knowledge is power. When in doubt, consult the IRS; no question is too small when it comes to protecting your small business.


Image by: Wesley Fryer via Wikimedia Commons cc