The Financial Crimes Enforcement Network (FinCEN) recently posted a fraud alert on its beneficial ownership information (BOI) reporting portal webpage. This alert is relevant to individuals and entities who may be subject to BOI reporting.

According to this fraud alert, fraudulent correspondence has been received by individuals and entities that may be subject to the BOI reporting requirements. This correspondence could be received via email or traditional mail and appears to come from FinCEN.

FinCEN has warned that the fraudulent correspondence may be titled “Important Compliance Notice” and ask the recipient to click on a URL or to scan a QR code. FinCEN states that they do not send unsolicited requests for information. If you receive a message like this, they advise not to respond, click on any links, or scan any QR codes the message contains. Doing so could compromise your personal information.

If you have any questions about this fraud alert or would like to know if you are at risk, contact us.

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“Thousands of people have lost millions of dollars and their personal information to tax scams,” according to the IRS. The scams may come in through email, text messages, telephone calls or regular mail. Criminals regularly target both individuals and businesses and often prey on the elderly.

Important: The IRS will never contact you by email, text or social media channels about a tax bill or refund. Most IRS contacts are first made through regular mail. So if you get a text message saying it’s the IRS and asking for your Social Security number, it’s someone trying to steal your identity and rob you. Remember that the IRS already has your Social Security number.

“Scammers are coming up with new ways all the time to try to steal information from taxpayers,” said IRS Commissioner Danny Werfel. “People should be wary and avoid sharing sensitive personal data over the phone, email or social media to avoid getting caught up in these scams.”

Here are some of the crimes the IRS has identified in recent months:

Email messages and texts that infect recipients’ computers and phones. In this scam, a phony email claims to come from the IRS. The subject line of the email often states that the message is a notice of underreported income or a refund. There may be an attachment or a link to a bogus web page with your “tax statement.” When you open the attachment or click on the link, a Trojan horse virus is downloaded to your computer.

The trojan horse is an example of malicious code (also known as malware) that can take over your computer hard drive, giving someone remote access to the computer. It may also look for passwords and other information. The scammer will then use whatever information is gathered to commit identity theft, gain access to bank accounts and more.

Phishing and spear phishing messages. Emails or text messages that are designed to get users to provide personal information are called phishing. Spear phishing is a tailored phishing attempt sent to a specific organization or business department.

For example, one spear phishing scam targets employees who work in payroll departments. These employees might get an email that looks like it comes from an official source, such as the company CEO, requesting W-2 forms for all employees. The payroll employees might erroneously reply with these documents, which then provides criminals with personal information about the staff that can be used to commit fraud.

The IRS recommends using a two-person review process if you receive a request for W-2s. In addition, employers should require any requests for payroll to be submitted through an official process, like the employer’s human resources portal.

Scams keep evolving

These are only a few examples of the types of tax scams circulating. Be on guard for any suspicious messages. Don’t open attachments or click on links. Contact us if you get an email about a tax return we prepared. You can also report suspicious emails that claim to come from the IRS at phishing@irs.gov. Those who believe they may already be victims of identity theft should find out what do by going to the Federal Trade Commission’s Online Privacy and Security Homepage.

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President Joe Biden signed two bills on Friday, August 5th, that give the federal government significantly more time to catch and prosecute fraud related to two of the most popular COVID-19 small business relief programs — the Paycheck Protection Program (PPP) and COVID-19 Economic Injury Disaster Loans (EIDL).

The bills are:

• H.R. 7352, the “PPP and Bank Fraud Enforcement Harmonization Act of 2022,” which extends the statute of limitation to 10 years for fraud charges to be brought in connection with PPP loan applications. The law applies to first- or second-draw loans made under the program.

• H.R. 7334, the “COVID-19 EIDL Fraud Statute of Limitations Act of 2022,” which gives prosecutors 10 years to file fraud charges connected to loan applications from the COVID-19-related EIDL program, including EIDL advances and Targeted EIDL advances.

The bills specify that any criminal charge or civil enforcement action alleging that fraud was committed shall be filed not later than 10 years after the offense was committed. This is different from the standard retention and statute of limitations.

The bills passed Congress with bipartisan support.

In October 2020, the U.S. Small Business Administration’s Office of Inspector General identified $78.1 billion in potentially fraudulent EIDL loans and grants paid to ineligible entities and another $6.7 billion in loans and grants linked to alleged identity theft.

Last year, the agency identified more than 70,000 PPP loans, totaling more than $4.6 billion, that were potentially fraudulent.

In March, Biden announced the appointment of a Justice Department special prosecutor for COVID-19 pandemic relief to prosecute related fraud cases.

This article has been adapted from this news release from the Journal of Accountancy.

If you think you were the victim of PPP/EIDL loan fraud, please contact us for advice on how to proceed.

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Unfortunately, some commission-compensated employees may be tempted to abuse this system by falsifying sales or rates. Fraud methods vary depending on an unethical salesperson’s employer and role. But companies need to be aware of the possibility of commission fraud and take steps to prevent it.

3 forms

Generally, commission fraud takes one of three forms:

1. Invention of sales. A retail employee enters a fake purchase at the point of sale (POS) to generate a commission. Or an employee involved in selling business services creates a fraudulent sales contract.
2. Overstatement of sales. Here, a worker alters internal sales reports or invoices or inflates sales captured via the company’s POS.
3. Inflation of commission rates. An employee changes a company’s commission records to reflect a higher pay rate. Employees who don’t have access to such records might collude with someone who does (such as an accounting staffer) to alter compensation rates.

More sophisticated schemes can involve collusion with customers and other outside parties.

Data-driven approach to detection

Regardless of the method used to commit commission fraud, these schemes create data and a document trail your business can use to detect abuse. For example, to uncover commission fraud in progress, you should regularly analyze commission expenses relative to your company’s sales. After accounting for timing differences, the volume of commission payments should correlate to sales revenue.

Also pay close attention to the total commission paid to each employee. Focus on outliers whose commission levels are significantly higher and analyze sales activity and the associated commission rates to ensure consistency. By creating benchmarks — based on commission sales by employee type, location and seniority — you can more easily detect fraud in subsequent periods. Randomly sampling sales associated with commissions and ensuring relevant documentation exists for each payment can be effective, too. You can contact individual customers to verify sales transactions by disguising your calls as customer satisfaction checks.

Commission schemes sometimes require cooperation with other employees and customers, which usually leaves an email trail. Consistent with your company’s policies and procedures, monitor employee email communications for evidence of wrongdoing.

Prevention processes

There are other processes your business can follow to prevent fraud from occurring in the first place. For example:

Formalize policies prohibiting it. State the consequences (for instance, termination and criminal charges) of committing commission fraud in your employee handbook. Also routinely stress your company’s commitment to detecting commission fraud and explain that management will regularly scrutinize individual payments for signs of malfeasance.

Minimize the potential for record tampering. To help prevent salespeople from accessing accounting records, rotate accounting staff assigned to recording commission payments. Segregation of all accounting duties is important to help prevent other fraud schemes from flourishing in your organization.

Set realistic sales goals. Although some employees commit fraud for personal enrichment, others cheat to meet their employer’s overly aggressive sales targets. Periodically solicit feedback from sales staff about their ability to meet objectives and pay close attention when salespeople complain or leave your company. If you encounter excessive frustration in meeting targets, make them more achievable.

Making manipulation difficult

When structured and managed correctly, a commission program can boost employee compensation and morale — and add to your company’s bottom line. But schemes to manipulate a company’s compensation structure often are all too simple for shady salespeople to commit. To make fraud much harder to perpetrate, you may need to step up data analysis and revamp your internal controls.

Many companies don’t have the internal resources to conduct this type of analysis and don’t know how to fix controls that aren’t working. That’s where a CPA or forensic accounting specialist can help. Contact us.

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The fake email claims that “the preparer’s EFIN has been put on a temporary hold” and warns that the EFIN will be suspended unless the preparers open a document that’s been embedded in the email and “confirm or deny that they submitted the Form 1014.” The embedded “1040” document likely contains malware as well.

The IRS reminds all tax professionals that they are high priority targets of cybercriminals attempting to steal client data or practitioners’ identities. This is just one variation of phishing emails you could receive. Fake messages like this are characterized by:

• an urgent message (your EFIN will be suspended)
• an attempt to entice readers into opening a link or attachment

The IRS urges all tax professionals to be on alert and take precautionary measures to protect their clients and their businesses. Review Publication 4557, Safeguarding Taxpayer Data, for how to be safer.

A few simple steps include:

• Using the multi-factor authentication option offered by tax software to protect accounts from unauthorized access.
• Use strong password protections on all devices.
• Never open suspicious emails, links and attachments may carry malware.
• Use strong security software and keep it updated.

This information is from the March 18, 2020 edition of IRS QuickAlerts. Learn more and subcribe here.

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Scams Are Getting Smarter

For many years tax scams existed solely as annoying phone calls from individuals pretending to work for the IRS. Most scams involved asking for social security numbers or credit/debit card numbers, which is something the IRS would never do.

Now that awareness of this scam tactic has spread, the scammers are wising up and sending physical mail in an attempt to gain access to that same sensitive information. The IRS does send mail, so these scams are harder to identify.

As anyone with a crowded spam folder will also know, tax scams frequently show up as emails. These email scams are often more subtle and won’t ask for your personal information directly. Instead, they may ask you to click a link or download a file which embeds malware onto your computer. This malware will scrub through your computer looking for personal data.

If you have the slightest inkling that you may be the target of a tax scam– contact your tax professional at BBB for peace of mind and assistance with combating scammers.

How to Identify a Phone Tax Scam

The classic method of IRS scams is via telephone. Below are a few things that the IRS will never do over the phone, according to their website.

• Demand immediate payment
• Call about taxes owed without first mailing a bill
• Ask for credit or debit card numbers over the phone
• Require you to use a specific payment method for your taxes, such as a prepaid debit card
• Threaten to involve local police or other law-enforcement groups

Because of all these easy giveaways, identifying a phone scam is fairly straightforward.

How to Identify a Mail Tax Scam

Catching a mail scam is a little trickier, but still possible, even if you don’t know much about the IRS or taxes. The tips above are all important to remember when identifying a mail scam, but with mail it gets more complicated. Check out this page on how the IRS contacts taxpayers and then read the tips below that are specifically tailored toward scam mail.

• Check the return address. Official IRS notices and correspondence will come from an Internal Revenue Service address. Look up the address on the piece of mail and see if it’s an actual IRS or Treasury office.
• Check the payment info. If the letter is asking for a payment, find where they say who to make the check or money order out to. Any checks to the IRS should be made out to the United States Treasury. Some scam letters ask for payments to the “I.R.S.” which is incorrect.
• Check the explanation. The IRS will always have a specific, detailed explanation of what the notice is about. If a balance is due, they will explain why. Some scammers (like below) say vague things such as, “As a result of examination we have made adjustments,” which fails to convey any real information.
• Check the notice/letter number. Every IRS notice or letter has a notice (CP) or letter (LTR) number on either the top or the bottom right-hand corner. Use this page to search for your notice in the IRS database.

How to Identify an Email Tax Scam

Email scams are probably the easiest to identify because the IRS does not initiate contact with you without your consent. They will also not ask you to send any personal information via email and will instead redirect you to a secure IRS online if they do contact you by email. The safest thing to do if you spot an email claiming to be from the IRS is delete it. You will get a notice in the mail if it is legitimate. Read this page about IRS email contact and be sure to follow these tips on scam emails.

• Do not click any links
• Do not open any attachments
• Do not reply
• Do not send personal information (SSN, credit card number, driver’s license number, etc.) via email

If You Are Targeted in a Tax Scam

If you suspect you may be targeted by scammers trying to impersonate the IRS or another government body, contact our tax experts immediately, no matter how insignificant the amount may seem.

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Any contact claiming to be from the IRS via phone, mail, or email, should be treated with caution.

Read more from the FTC about the forms that these scams may take.

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• Senior Accountant – West Columbia, SC Office
• Specializes in the following: tax return preparation, financial statement preparation, business valuations, fraud investigations, and other litigation support services

Experience

• Intern at Burkett Burkett & Burkett, Certified Public Accountants, P.A. in January 2008
• Staff Accountant at Burkett Burkett & Burkett, Certified Public Accountants, P.A. in June 2009
• Senior Analyst at SCANA Corporation August 2016 – January 2018
• Senior Accountant at Burkett Burkett & Burkett, Certified Public Accountants, P.A. in January 2018

Professional and Civic Activities

• South Carolina Association of Certified Public Accountants – Member
• American Institute of Certified Public Accountants – Member

Education

• Columbia College – Graduated: 2008 – SC Bachelors of Arts in Accounting, Magna Cum Laude
• Columbia College – Graduated: 2008 – Honors Program
• University of South Carolina – Graduated: 2009 – SC Masters of Accountancy

The post Katie Hoey first appeared on Burkett Burkett & Burkett Certified Public Accountants, P.A..

Individual taxpayers, their dependents, and businesses who filed an electronic South Carolina tax returns between 1998 and 2012 may be eligible for CSID Identity Protection services.

For more information or to learn how to enroll, click here.

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According to the Treasury Inspector General for Tax Administration, the IRS discovered more than 1.8 million tax-related ID thefts during 2012, which is 4 times the number that took place in 2010.  This year the IRS also noted identity theft on the very top of the list that they release every year entitled “The Dirty Dozen”, which outlines the top 12 tax scams.  Though the tax season has passed, the scammers are still out there, working hard.  It is good idea to familiarize yourself with what to look for in the coming months and in future tax seasons so you can avoid falling prey to their identity theft tactics.

One of the most important things to keep in mind is that the IRS will not contact you by email asking for your personal and financial information.  If you receive an email asking you for information or sending you to a suspicious website, you should avoid opening any links or attachments, and either delete the email immediately or report it to the IRS.  Identity thieves have begun imitating real IRS communications with fake emails and websites to lure unsuspecting victims.  For example: you may receive a message stating that your tax return was received, but that more information is needed by the IRS to complete it.  Some emails may direct you to a website that looks like the official IRS website, but is fraudulent, and then prompt you to enter your personal and financial information in order to complete your tax return.

Approximately one-quarter of tax filers do so in the last week leading up to the tax filing deadline, and with the upswing in cases of tax identity theft, many find that their taxes have already been completed, fraudulently.  The IRS has taken steps in recent years to help prevent scams, and the Identity Protection Specialized Unit is a large department within the IRS devoted to helping victims get these cases resolved. However, navigating through this process can be tedious and cumbersome, and it may be helpful for victims to solicit the help of a trusted tax advisor.

If you are a victim and you choose to employ the help of your tax advisor, you will still need to diligent about checking your bank statements and credit reports.  Once your personal or financial information has been compromised, there is always a possibility that someone may use it, and the sooner you notice it, the less damage they can do.

If you are uncomfortable about communication you have received from the IRS, or if you have any questions about your taxes and identity theft, you can contact your tax advisor for help.

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