Beware! Tax-Related Scams Small Business Owners Should Watch Out For


The holiday season isn’t only the most wonderful time of the year for you, it can be the time when scammers and spammers come out to play. 

I recently read an article from TaxGirl Kelly Erb on a new phone scam targeting U.S. taxpayers. This detailed scam involves a series of phone calls purportedly from the IRS telling the taxpayer that his identity has been stolen and asking for identifying details to aid in the investigation. Of course, the scammers then use that identifying information… to steal the unwitting taxpayer’s identity. 

This new version on the same old scam got me thinking about other financial frauds I’ve seen over my years writing about small business and taxes. 

Why Financial Scams Work 

According to a 2013 survey by the FINRA Investor Education Foundation, 8 in 10 survey respondents were approached about some kind of financial fraud. And 11% of respondents actually lost money to fraud. 

Most of the time, fraud occurs because of totally understandable ignorance. If you’ve never had to deal with the IRS in your entire life, how would you know that they normally contact you with important information via U.S. mail and not a phone call? Or if you’re fairly new to email, that message from your bank asking you to click a link and give them your private details could be very tantalizing. 

Fraudsters also play on fear. There’s a reason that they use email subject lines like “Your identify has been stolen!” They want to get your guard down and panic you so that you throw your good sense out the window as they lure you farther into the scam. 

Sadly, scammers also feed on desperation. In a bad economy, a good person struggling financially can be tempted by offers of money that seem too good to be true and that they normally wouldn’t look twice at if not in a place of financial need. 

Be suspicious of easy money and anyone who asks for your identifying information out of the blue and you’ll be inoculated from most fraudsters. 

Common Scams Small Business Owners Face 

Email Phishing Scams – Beware of emails that appear to be from your bank or the IRS asking for personal information. Most times, these emails will tell you to click on a link and enter identifying data, like your social security number. Of course, the link usually goes to a site set up by the fraudster, who then uses it to collect the data he can later use to steal your identity. If you ever receive a communication from the IRS or a financial institution through email, don’t click any links. Instead contact the purported sender yourself to find out if the communication is legitimate. 

Tax Preparer Fraud – This scam occurs when a less-than-professional tax prepare claims she can get you a huge tax refund. Often, you’ll notice that she receives a percentage of your return, so, of course, it’s in this fraudsters best interest to take every outrageous deduction and tax break she can find. She’ll also often fail to give you a copy of the return, or insist that the refund be deposited into her bank account first. Make sure your tax preparer is a professional and beware of too-good-to-be-true tax refunds. 

For more info about these and other common scams check out the IRS’s common scams page or their Dirty Dozen Tax Scams list for 2014.