Scams and Frauds to Avoid

Recent & Other Scams to Avoid

Business Scams and Frauds
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Business owners, like consumers, are subject to several scams and frauds. Being forewarned helps you to avoid these tricksters. In this article, we'll look at some of the most common recent scams and frauds against businesses or those trying to start a business. 

What Is a Scam or a Fraud?

A scam is loosely defined as a dishonest scheme. A fraud, on the other hand, has a more specific definition. The Association of Certified Fraud Examiners says that "fraud includes any intentional or deliberate act to deprive another of property or money by guile, deception, or other unfair means."

Scams Involving W-2 Forms

A new (2017) scam targets businesses with employees, and it involves W-2 forms. The schemes are focused on company payroll departments, hoping to get personal information about employees.

The spoofing emails seem to be sent by company officials by name, and they request individual W-2 forms for employees and Social Security Numbers. 

Before you turn over sensitive personal information about employees, check with the person whose name is on the email.

The 'Business Registration' Scam 

This scam affects small business owners who register their businesses with their state as an LLC, corporation, or partnership.

Here's an example: A business owner moved her business registration to a new state. Within a few weeks, she received several pieces of mail—on the same day! Both were telling her that she had to pay more to register her business. Not true! 

The first mail was from the "Labor Compliance Department" requiring her to pay $84 to post a "current compliant labor law poster in the workplace." The letter spelled out the penalties and risks for non-compliance, including "potential fines in excess of $17,000 per instance."

She didn't have employees and wasn't required to post a labor law poster.

The second mail was from the "Certificate Filing Service," telling her she had to "attain [her] elective Florida Certificate of Status and corporate agreement templates." This one would cost $68.42. Hoever, she can get all the corporate formation documents and forms from the state secretary of state for free or a very minimal charge.

Don't fall for scams like this. If you get something in the mail or through email that asks for money, look carefully. The sender must identify itself as "not a government agency." Do some research. Check the return address and the logo. Many scammers try to mimic the official logo of the agency. You'll find any required forms on the website of the appropriate agency. 

The Fake Employer ID Application Scam

In this scam, someone searches online for "employer ID number registration" and finds a site that appears to be the IRS and that "helps" complete the SS-4 form (the Employer ID Number (EIN) application). Then, at the end of the process, the user must register and pay to "submit" the application to the IRS. 

The EIN application form SS-4 is free. It may be completed online using the EIN Assistant on the IRS website, phone, or mail. You don't need a third party to help you with this application. 

The Fake OSHA Poster and Other OSHA Scams

Every employer of one or more employees is subject to OSHA, and one of the primary requirements of OSHA is a poster at every workplace informing employees of their rights.

Some tricksters take advantage of this requirement by trying to sell unsuspecting businesses a poster and sometimes a "kit" of required materials. But you can download the poster from the Internet for free, so don't waste your time on this one.

Other OSHA scams include an "inspector" claiming to be from OSHA and trying to get you to pay fines and penalties or OSHA kits. 

You should always check the credentials of anyone claiming to be an inspector or government representative.

Fake IRS Emails and Other Scams

The IRS probably has more scams and phishing targeting taxpayers than anyone else. Here's how you'll know something is from the IRS:

  • The IRS initiates most contact with individuals and businesses through the regular mail of the U.S. Postal Service.
  • The IRS will come to a home or business for an overdue tax bill to get a delinquent tax return or delinquent employment tax payment.
  • The IRS will come to a business as part of a tax audit or during a criminal investigation.

The IRS doesn't:

  • Call to demand payment. They will first mail a bill to the taxpayer.
  • Demand that you pay taxes without going through the appeal process.
  • Threaten you with immigration officers or law-enforcement arrest.
  • Revoke your driver's license, business license, or immigration status.

The Phony Cease and Desist Notice

This one isn't from a state or federal agency but an individual. The person claims to have trademarked a name similar to your business trademark and warns you that you must cease and desist from using the name. Of course, there is a threat of court, but the sender says you can avoid a trial by paying off the sender. 

Some of these notices are legitimate, but others are not. The fraudulent ones want you to pay money. Before you do anything, contact your attorney and research carefully. 

How to Avoid These Scams and Frauds

In general, you can protect yourself and your business against fraud by knowing what to look for, checking the source of information, and monitoring the activity of employees and customers.  

Look for the tell-tale signs of a scam or fraud: 

  • Misspelled words, poor grammar, and odd capitals. 
  • An official-looking letter or phone call or visit. If it looks fishy, it probably is. 
  • Someone is asking you to pay for something from a federal or state government. Most federal departments don't charge for documents. States do charge, but they are clear about the charges. 
  • Check the exact name of the government-sounding entity online. 
  • Read the fine print. These scam artists should tell you they are not affiliated with the federal or state government, but it's usually in the fine print. 

How to Recognize Scams and Phishing

If you receive unsolicited email or telephone calls from anyone claiming to be from the IRS, it’s probably a scam. Don’t click on any links; don’t answer any questions. Forward the emails or report the calls to phishing@irs.gov. You can check some of the recent tax fraud and identity theft issues on the IRS Tax Fraud page. 

The Federal Trade Commission has information on how to recognize and avoid phishing scams.