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

Tax season is around the corner, which means so are tax scams. Without fail, every year, individuals and business owners alike fall victim to tax scams, resulting in the loss of substantial amounts of money and sensitive personal data. According to the Better Business Bureau, taxpayers lost $5.7 billion due to tax scams and fraud in 2022 alone. In today’s article, you’ll discover the top scams you need to be on the lookout for to reduce your chances of becoming these scammers’ next victim.

The IRS has specific methods of contacting you

One way to lessen your chances of falling for Internal Revenue Service scams is to know how the IRS will contact you. Per the IRS website, the IRS will not initiate communication with taxpayers through e-mail, text messages or social media platforms for the purpose of soliciting personal or financial information. The IRS’s main method of communication is physical mail; however, if they’re unable to reach you via mail, they may initiate a phone call. If this is the case, they will still try not to solicit any personal or financial information over the phone, and they will never threaten you or demand payment. If you’re second-guessing anything you receive, you can check out this article to help you figure out if it’s really the IRS contacting you.

Here are the top scams to keep an eye on this tax season

The Refund Scam

The Internal Revenue Service has issued a warning to taxpayers regarding a scam designed to deceive individuals into believing they are entitled to a refund. This is often the most common scam that we see happen every year.

In this scheme, recipients receive a formal notification, usually a letter, stating that they have an “unclaimed refund” available. There are variations of this, including one scam that uses a cardboard envelope from what looks to be a certified delivery service and bears the IRS logo.

Similar to many scams, the deceptive letter provides contact information and a phone number that is in no way affiliated with the IRS. What sets this scheme apart is its request for various sensitive personal details from taxpayers, including detailed images of driver’s licenses. Identity thieves seeking to get ahold of tax refunds and other confidential financial data can exploit such information. Stay vigilant and be cautious of such misleading communications. If something seems off, it probably is.

Identity Theft

If cybercriminals are able to get access to your personal information, they can file a fake tax return on your behalf and potentially collect a refund payment. The IRS recently shared that more than 1 million tax returns were flagged last year for possible identity theft.

One tool to prevent tax ID theft is to apply for an Identity Protection PIN from the IRS before you file your return. It’s also good to file early before criminals have a chance, and if you get a notice about an alleged “duplicate tax return” or a notice saying that additional taxes are owed, contact the IRS directly as soon as possible.

The ERC Scam

The Employee Retention Credit (ERC), sometimes called the Employee Retention Tax Credit, or ERTC, is a refundable tax credit against certain employment taxes. The IRS and tax professionals continue to see aggressive broadcast advertising, direct mail solicitations and online promotions involving the ERC. While the credit is real, aggressive promoters are misrepresenting and exaggerating who can qualify for the credit.

This has led the IRS to issue many warnings about ERC schemes from third-party promoters that charge large up-front fees or a fee based on the amount of the refund. These promoters may fail to inform taxpayers that they must reduce wage deductions claimed on the business’s federal income tax return by the amount of the credit.

Businesses, tax-exempt organizations and others thinking about applying for the ERC need to carefully review the official requirements for this credit before they claim it.

The “Impact Payment” Scam

As you prepare to collect the required documents for filing your 2023 return, be aware of a new online scam circulating. This scheme involves an e-mail displaying the IRS logo and addressing the “third round of economic impact payments,” deeming it an “important matter concerning your recent tax return filing.”

The e-mail asserts that certain inconsistencies or missing information have been identified and assures recipients that a refund of $976 awaits them upon submission of the required document. Notably, there’s a button labeled “complete my information,” but IRS Media Relations Specialist Robert Marvin urges you not to click it.

The “Additional Information Needed” Scam

If you receive an e-mail from the IRS requesting that you submit a tax form, proceed with caution. While there are legitimate forms that taxpayers may be required to complete (such as the W-9 for freelancers and W-4 forms for employees), these are typically directed to companies and do not go directly to the taxpayer from the IRS.

To steer clear of potential scams, it is recommended to disregard such messages and promptly report the fraud to the IRS. It’s important to note that the IRS does not initiate contact via e-mail, and any solicitation for forms through this is indicative of fraudulent activity.

Another Tax Agency Scam

Scammers may adopt the appearance of legitimate or fictitious tax agencies when making phone calls. Instances include impersonating entities like the Taxpayer Advocate Service or the nonexistent Bureau of Tax Enforcement.

While the Taxpayer Advocate Service is a legitimate entity, it does not initiate unsolicited calls to taxpayers. On the other hand, the Bureau of Tax Enforcement is not a genuine organization.

Exercise caution and skepticism toward unsolicited calls alleging to be from government agencies. Obtain a reference number if possible, terminate the call and initiate a return call using an officially verified phone number. This practice helps protect against potential scams.

Be Smart And Protect Yourself

The tax season often sees a surge in scams, but with some vigilance identifying an IRS imposter and protecting your finances and sensitive data becomes possible.

To enhance protection and mitigate the risk of identity theft, it is recommended to file your taxes early. Early filing reduces the window for scammers to impersonate you. When hiring a tax preparer, conduct thorough vetting and be wary of those promising substantial refunds without prior access to your information. For an added layer of security and peace of mind, explore a fraud protection service.

Cybercriminals never take a break. Tax scams are only one way they’re trying to steal your information and money. It’s important to have a full cyber security system in place to make sure your organization is protected at every possible entry point. We recommend getting a FREE third-party security assessment. Our team of experts will examine your entire network for vulnerabilities and help you map out a plan to fix them. In all the years we’ve been doing this, we’ve always found something.

To schedule your no-obligation assessment for your peace of mind, click here.