Tag Archives: phishing

Payroll Fraud Schemes Every Business Should Know

According to the Association of Certified Fraud Examiners, nearly 30 percent of businesses are victims of payroll malfeasance, with small businesses twice as likely to be affected as large businesses. Here are four scary payroll fraud schemes you need to know:

  • Ghost employees. A ghost employee does not exist anywhere except in your payroll system. Typically, someone with access to your payroll creates a fake employee and assigns direct deposit information to a dummy account so they can secretly transfer the money into their own bank account.
  • Time thieves. Time stealing happens when employees add more time to their timecard than they actually worked. Sometimes multiple employees will team up to clock each other in earlier than when they arrive or later than when they depart for the day.
  • Shape-shifting commissions. In an attempt to bump up a commission payment or attain a quota, sneaky sales employees may alter a sales contract to their benefit. A typical tactic used by a dishonest salesperson is to make a booked sale appear larger than it is and then slide a credit memo through the system in a later period. Companies with complicated commission calculations or weak controls in this area are the most vulnerable.
  • External swindlers. A popular scam, known as phishing, starts with a fraudster impersonating a company executive through email or over the phone asking an employee with access to payroll data to wire money or provide sensitive information. These imposters can make the correspondence look very real by using company logos, signatures and email addresses.

Tips to combat payroll fraud

Being aware of the threats is a start, but you also need to know how to stop them. Here are some tips to reduce your company’s payroll fraud risk:

  • Better internal controls. While most employees are trustworthy, giving too much control over your payroll to one person is not a good idea. Separating payroll duties and formalizing an approval process protects both your business and your employees.
  • Review payroll records. Designate someone outside of the payroll-processing department to periodically review the payroll records. Have them review names, pay rates and verify that the total payroll matches what was withdrawn from the business bank account.
  • Perform random internal audits. During an internal audit is when you can really get into the details to look for potential payroll fraud. You can do an in-depth review of the whole payroll system or select a random sample of dates and employees. Keep the timing of the audit under wraps to prevent giving someone the chance to cover up their misdeeds.

Managing your business payroll is a daunting task by itself, and actively protecting against fraud adds additional complexity.

IRS Announces Dirty Dozen Tax Scams – Part 1

Each year the IRS announces “Dirty Dozen Tax Scams” they encounter regarding frivolous tax arguments and fraud. While six of the “scams” are related to, “don’t cheat we have our eyes on you,” the other six are scams that all of us should be on guard to detect. Here are the largest three scams:

Identity theft – Identity theft tops the list of the dirty dozen this year. This reflects a truly bad year for the IRS. The IRS has acknowledged the theft of taxpayer’s private information three times in the past eighteen months. Thankfully, the IRS is taking precautionary measures to curtail this huge problem. For example, they are limiting the number of direct deposits it will make to any single account, working with states and tax preparation software vendors to put more controls in place, delaying the early processing of tax refunds, internal tracking within software programs, and continual checking for heavy filing activity. Some states will even be requiring driver’s license numbers on their tax forms. For people who have already had identity problems, there are taxpayer single use tax ID’s that change every year. If you wish to know more, here is a link to the IRS identity protection page: IRS Identity Protection: Prevention, Detection and Victim Assistance

Phone scams – Phone calls from thieves representing themselves as IRS agents continue to get more sophisticated. These thieves often have some personal information, the caller ID may show as coming from the IRS and the scam may involve numerous phone calls instead of a single contact. Some are even automated phone calls! Threats range from arrest warrants to deportation to law suits. Remember, never give information over the phone to someone claiming to be from the IRS when they call.

Phishing – This recurring scam involves receiving fake emails and creating websites that look like the real deal. The IRS will not send you billing information or refund information via email. Do not click on any link from an email received from the IRS unless you requested it. Remember the IRS does not initiate contact through emails.

Look for the second part of this article next week for more info!