Scammers have become increasingly sophisticated in their tactics, making it crucial for SMBs to stay informed and vigilant.
Every year, criminals and scam artists come up with new tactics to deceive unsuspecting small and medium-sized business owners and leaders. According to the IRS’s annual 2023 Dirty Dozen list, tax fraud risks are not confined to tax season. This is why businesses must stay informed about evolving tax scams and understand how to minimize the possible impact on their operations.
10 Latest Tax Scams Targeting SMBs
We previously wrote about 2022 tax scams targeting small and medium businesses. This article goes into 10 of the most prevalent business tax scams in 2023. Watch out for an upcoming article that shares practical tips you can follow to avoid falling victim to these schemes!
1. Business-Related W-2 Scams
One of the most common tax scams targeting SMBs is the W-2 scam. Hackers use fake emails or text messages to trick payroll and human resources professionals into sharing sensitive tax information, such as employees’ W-2 forms. Once cybercriminals access the W-2 forms, they file fake tax returns to claim refunds.
2. Employee Identification Number Scams
Scammers target businesses applying for Employer Identification Numbers (EINs) by tricking them into signing up through fraudulent websites. EINs are required for various business accounts and tax filings. These scammers collect the taxpayer’s personal information and may use it for identity theft.
3. IRS Impersonation Scams
In an earlier blog post, we previously discussed phone and text tax scams from criminals impersonating the IRS, but this technique has only evolved and spread even further.
These scammers often leave messages with phone numbers that are either non-functional or only work for a short period of time. They may even provide a fake IRS agent’s name and badge number to appear more convincing.
It is important to remember that the IRS will never initiate contact with taxpayers by phone, text, or email to demand immediate payment. Any communication from the IRS regarding taxes owed will be initiated through official mail correspondence. If you receive a suspicious call or email claiming to be from the IRS, do not provide any personal or financial information. Instead, report the scam to the IRS and the IRS Impersonation Scam Reporting website.
4. Excessive Claims for Business Credits
Certain tax credits, such as the Research Credit, are often targeted by unscrupulous tax preparers encouraging businesses to make improper claims on their tax returns. Falsely claiming these credits can result in penalties for both the taxpayer and the preparer. Businesses should be cautious of any tax preparer who encourages them to make questionable claims and verify the credibility of their tax preparer by asking for their Preparer Tax Identification Number (PTIN).
5. Aggressive Pitches for Employee Retention Credit
With the introduction of the Employee Retention Credit (ERC), scammers are promoting large refunds related to this credit to con ineligible individuals into claiming it. These scammers often advertise on the radio and the internet, providing misleading information about eligibility and computation of the credit. It’s important for taxpayers to be aware of these schemes and consult a reputable tax professional to determine their eligibility for the ERC.
6. Evolving Spearphishing Techniques
Phishing, specifically spearphishing, poses a severe threat to SMBs. This tailored phishing attempt targets specific organizations or businesses. Given that tax professionals usually hold considerable amounts of sensitive client information, spearphishing could lead to significant data breaches and even identity theft if successful.
7. Beware of “Helpful” Third Parties
Some scammers offer to help create a taxpayer’s IRS Online Account, claiming that assistance is needed. In reality, no help is required, as taxpayers can establish their own online accounts through the official IRS website. These scammers aim to steal personal information from taxpayers who fall for their offers. It’s essential for taxpayers to create their own online accounts and avoid sharing sensitive information with third parties.
8. Fraudulent Fuel Tax Credit Claims
The fuel tax credit is intended for off-highway business and farming use and is not available to most taxpayers. However, dishonest tax return preparers and promoters entice taxpayers to inflate their refunds by falsely claiming this credit. Businesses should be cautious of tax preparers or promoters encouraging them to make inaccurate claims on their tax returns. Understanding the eligibility criteria for tax credits and only claiming them if eligible is important.
9. Bogus Charities
Scammers take advantage of the public’s generosity during times of crisis or natural disasters by setting up fake charities. They seek money and personal information from unsuspecting victims, which can be used for identity theft. It’s crucial for taxpayers to verify the legitimacy of charities before making donations and ensure that their contributions go to qualified tax-exempt organizations recognized by the IRS.
10. Shady Tax Preparers and Misleading Information on Social Media
While most tax preparers provide professional services, some shady tax professionals engage in fraudulent practices. Taxpayers should be cautious of tax preparers who charge fees based on the size of the refund or refuse to sign or include their PTIN on the tax return. Additionally, taxpayers should be wary of misleading tax information circulating on social media, as it may encourage false or inaccurate claims in hopes of obtaining a refund. It’s important for taxpayers to rely on reputable tax professionals and verify the accuracy of any tax information they come across on social media.
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Navigating the constantly changing landscape of tax scams can be daunting for SMBs. Partnering with eFile360 simplifies your information return filing process and provides top-notch security for sensitive data. You also have access to your historical data and forms whenever you need it. By connecting with eFile360 for your information return filing needs, you can focus on growing your business without worrying about the ever-evolving tax scams.
Are you ready to experience secure, efficient, and reliable information return filing services? Sign up for a free eFile360 account today and strengthen your business’s tax management.