Payroll Scam: 5 Things the IRS Wants You to Watch Out For!
Whether you are on the receiving end or the distributing end of payroll, the one thing you should be aware of, especially as a business entrepreneur is a payroll scam. Forbes reported that approximately 27% of businesses are affected by payroll fraud, and that it happens more often in smaller business and organizations. So if you’re managing a start-up business, you might want to pay close attention to these 6 important signs of payroll scams.
1. Consistent Underpaid Checks
Should an instance like this occurs, you can be sure that your employee will notice and report the error right away. Something like this can serve as a red flag to any other discrepancies in the payroll system. It could be a simple one-time error, or it might be the key to uncovering a massive payroll scam. An error like this not only has the ability to close your business, but also put you in a bad position with the IRS.
2. Being Overpaid
In this case, only the recipient will notice this right away. There have been cases where they’ve reported it to human resources and there are instances where some figure it’s simply free money. They just keep quiet. The problem with this is that these kinds of things eventually get uncovered and the recipient usually has to pay the money back.
3. Check Timecards
Even for salaried employees, hours still need to be tracked to keep up with vacation time, and any salaries or bonuses that are due. So if for any reason, the hours on a timesheet aren’t adding up properly, remember that this too can affect a paycheck, causing employees to be under or overpaid.
4. 1099 Employee
1099 employees are businesses that work independently. You’re paying them to provide a service for a small period of time. These temporary employees are not full-time, so you’re not responsible for collecting any kind of taxes from the pay. Compensation is paid before taxes and it’s the independent contractor’s responsibility to pay the Internal Revenue Service (IRS) taxes from their wages. For a payroll scammer, this would be a most convenient way to steal money. All they would need to do is make up a company name on an invoice. This is sometimes referred to as the Ghost Employee. Beware of the worker who never was! However, it’s up to your bookkeeper to make sure that all of your invoices are legit.
5. Incompetent Bookkeeper
This leads to the next discrepancy. If you have a bookkeeper who doesn’t appear to be organized, then you can definitely expect an error in your books—payroll wouldn’t be an exception either! Whether your bookkeeper seems like a nice person is irrelevant. When it comes to keeping your business books in order, you need to make sure that every department within your business is managed properly. Because, at the end of the day, the IRS will be sending the business owner a letter of notice—which is you!
So, if you’ve just gotten a letter from the IRS or suspect that your business might be a victim of payroll fraud, contact the professional experts at Success Tax Relief. Call 877-825-1179 or contact us online.