This article discusses two more scams and frauds that all business owners should protect against.
Payroll Tax Refunds
Most of us have been receiving mailings suggesting that business owners can recover a payroll tax refund up to $26,000 per W-2 employee by pursuing the Employee Retention Credit (ERC). Most of the mailings are from a cottage industry of firms claiming to be specialists in obtaining the credit. Some of those firms solicit employers over the phone with false claims of ERC eligibility. Some promise to process the claims in exchange for a percentage of the credit amount obtained for the company
The credits are available to small businesses that qualified in the last half of 2021 as recovery startup businesses and had a significant decline in gross receipts during 2020 or the first three quarters of 2021. The credit was designed to afford relief to companies that continued to pay employees while shut down during the Covid pandemic or experienced the decline in gross receipts. Wages reported as payroll costs for PPP loan forgiveness and certain other tax credits cannot be claimed for the ERC.
In response, the IRS has become skeptical of ERC claims, and has added fraudulent ERC claims to its annual “Dirty Dozen” list of tax scams. As a result, companies claiming the ERC face an increased risk of audit.
If you believe that your business qualifies for the ERC, consult with your CPA or tax lawyer, and turn a blind eye to solicitors that promise that your company will receive the credit or make other too good to be true promises.
Mail Theft
Theft from US Postal Service mailboxes has risen dramatically in the last several years. The theft has taken the form of robbing mail carriers and stealing from blue mailboxes, among other things. Along with that, check fraud has increased. Because of that, care should be taken when mailing checks.
Some of the theft is committed by sophisticated criminal operations that steal mail looking for checks, use chemicals to remove handwritten ink, and then add new payees and amounts. The operations set up fake businesses and create fake IDs so the new checks can be deposited. Some use information from the checks to open lines of credit to the detriment of the check writer.
What can you do? The best bet is to use automated payment systems that eliminate checks altogether. We are at the point where those systems are now safer than the mail. If you cannot do that, take your mail into the post office rather than using drop off boxes. Finally, avoid handwriting checks so key parts of the check are harder to modify.