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Top Tax Scams Every Business Owner Needs To Watch Out For In 2024

Navigating Tax Season: Protecting Yourself Against Common Scams

As the tax season has just passed, safeguarding your personal and financial information is paramount. Explore the top scams to watch for and proactive measures to keep your assets secure for next year.


Understanding IRS Communication Methods


The IRS employs specific communication channels when reaching out to taxpayers. According to the IRS website, they do not initiate contact via email, text, or social media to request personal or financial information. Instead, they primarily communicate through physical mail. In rare cases where mail is ineffective, they may resort to phone calls. However, even in these instances, they refrain from soliciting sensitive information or making threats. If you're unsure about any communication purportedly from the IRS, consult resources like this article to confirm its authenticity.


Top Tax Scams to Stay Aware Of During Tax Season:


Beware of Refund Scams


Taxpayers should be wary of a prevalent scam aimed at convincing individuals that they are eligible for a tax refund, as cautioned by the Internal Revenue Service. Typically, recipients receive formal notifications, often in the form of letters, claiming they have an "unclaimed refund" awaiting them. These communications may arrive in various guises, such as cardboard envelopes bearing the IRS logo, adding an air of legitimacy.


However, the deceptive nature of these letters lies in their request for sensitive personal information, including detailed images of driver’s licenses. Cybercriminals exploit this data to access tax refunds and other confidential financial information. Stay alert to such misleading communications, and remember, if it seems suspicious, it likely is.


Some ways to verify if your refund check is real include the following:

(1) to hold up the check to the light and verify if there's a "U.S. Treasury" watermark on the front and back of the check;

(2) to find microprinting in three areas, after magnifying the tiny lines turn into visible words;

(3) the Treasury seal located to the right of the Statue of Liberty has security ink that will bleed red if moisture is applied.


Combat Identity Theft


Identity theft occurs when cybercriminals gain access to your personal information, enabling them to file fraudulent tax returns and potentially receive refund payments in your name. Recent reports from the IRS indicate that over 1 million tax returns were flagged for potential identity theft last year.


To safeguard against tax-related identity theft, consider applying for an Identity Protection PIN from the IRS before filing your return. Filing your taxes early can also mitigate the risk of criminals beating you to it. Additionally, if you receive notices regarding duplicate tax returns or owed taxes, promptly contact the IRS as soon as possible to address the issue.


Navigating Employee Retention Credit (ERC) Scams


The Employee Retention Credit (ERC), also known as the Employee Retention Tax Credit (ERTC), offers a refundable tax credit for certain employment taxes. However, the IRS and tax professionals are increasingly encountering aggressive advertising tactics, including broadcast advertisements, direct mail solicitations, and online promotions, related to the ERC.


While the ERC is a legitimate credit, some promoters are misrepresenting and exaggerating eligibility criteria to lure taxpayers. Consequently, the IRS has issued numerous warnings about ERC schemes orchestrated by third-party promoters who often charge hefty upfront fees or fees based on the refund amount. Additionally, these promoters may neglect to inform taxpayers that they must reduce wage deductions claimed on their business's federal income tax return by the amount of the credit.


Before claiming the ERC, businesses, tax-exempt organizations, and other eligible entities should meticulously review the official requirements to ensure compliance and avoid falling victim to fraudulent schemes.


The “Impact Payment” Scam


As you gather your documents for your 2023 tax return, stay vigilant against a new online scam making the rounds. This fraudulent scheme presents itself in an email adorned with the IRS logo, claiming to address the "third round of economic impact payments," framing it as an urgent matter related to your recent tax filing.


The email alleges the existence of discrepancies or missing details in your records and promises a refund of $976 upon submission of the required documentation. However, exercise caution: while the email includes a button labeled "complete my information," IRS Media Relations Specialist Robert Marvin advises against clicking it.


Beware of the "Additional Information Needed" Scam


Exercise caution if you receive an email purportedly from the IRS requesting tax form submissions. Genuine requests for forms like W-9 or W-4 are typically directed to companies, not individual taxpayers. Disregard such emails and report them promptly to the IRS to avoid falling victim to fraudulent activity. Remember, the IRS does not initiate contact via email for form submissions, so any such request is likely a scam.


Beware of Tax Agency Impersonation


Scammers often masquerade as legitimate or fabricated tax agencies during phone calls, posing as entities such as the Taxpayer Advocate Service or the nonexistent Bureau of Tax Enforcement.


While the Taxpayer Advocate Service is indeed legitimate, it does not engage in unsolicited calls to taxpayers. Conversely, the Bureau of Tax Enforcement does not exist as a genuine organization.


Exercise caution and skepticism when receiving unsolicited calls from purported government agencies. If feasible, request a reference number, end the call, and independently verify the authenticity of the phone number before returning it. These precautions are essential for safeguarding against potential scams.


Protect Yourself During Tax Season


Now that you have learned about the different forms of tax scams for the next year, it is important to stay vigilant to identify IRS imposters and safeguard your finances and sensitive data. Filing your taxes early can reduce the risk of identity theft, while thorough vetting of tax preparers is essential. Consider investing in a fraud protection service for added security.


Cybercriminals are relentless, using tax scams as just one method to steal information and money. Ensure comprehensive protection by implementing a robust cybersecurity system. Take advantage of our FREE third-party security assessment to identify and address vulnerabilities in your network. Schedule your assessment today for peace of mind and proactive security measures.

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