Every small business owner should beware of the tax frauds that are preying on their business. Tax scams are the demise of many small businesses and can lead to criminal investigations on tax evasion, identity theft, and much more. Find out the 5 tax scams that every small business owner should know.
Starting a small business is exhilarating – gaining new consumers, generating a cash flow, and finally creating a name for yourself. However, there are several tax frauds that are preying on small business owners. Here are the top 5 tax scams that small business owners should be aware of.
1) Identity Theft: Identity theft can be seen as a small business’ worst nightmare. An identity thief may be planning to get a job or your tax refund by simply stealing your Social Security Number. The CRA uses your Social Security Number to ensure that your filing is precise and complete, consequentially making them very meticulous when handling your information.
Have you ever gotten an e-mail from the “CRA” asking for personal information? If you thought that was fishy, then you were right. That fishy feeling correlates heavily with actual phishing. Phishing refers to the act of acquiring sensitive and confidential information through deceptive electronic means. Bottom line: The CRA is smarter than you may think – keep your information confidential. Do not be a victim of tax fraud and learn more about what precautionary measures you must take for identity theft protection.
2) Fake Charities: Giving back is always a positive feat for small businesses, especially if you want to accelerate expenses to make donations, therefore, easing tax pain. However, let us remind you of Adegboyega Adenekanad Adebukunola. Yes, it is a mouthful. This gentleman was a tax preparer who provided a lot of clients with tax, financial, and accounting services. In 2013, Adegboyega Adenekanad Adebukunola was caught by the CRA with over $858,000 in false charitable donation claims on 129 income tax returns.
Make sure you are keeping a close eye on where your charitable donations are going: are they a registered charity under the CRA? What do they support? Are there credible resources for this charity? Asking these questions will help you avoid fraudulent charity scams.
3) Offshore tax avoidance: Somewhere deep in the Caribbean may seem like a beautiful vacation destination – but not for your money. Offshore accounts have been using their tax evasion appeal to lure in taxpayers, however, do not bite the bait. Tax evasion has immense consequences; if your tax preparer is tempting you with the notion of dodging taxes, then it is time to dodge their services.
4) Falsifying Income: Thinking of altering your income to improve your tax standing? Yes, theoretically it may seem great, however, the legal consequences are too harsh to bear. It is your legal responsibility as a taxpayer to provide accurate information on your tax return; lack of doing so can lead to a criminal investigation. See how criminal investigations affected these celebrities involved with tax evasion.
5) Abusive Tax Shelters: “Donate $200 to this charity, and get back triple in charitable tax receipts” – sound too good to be true? Then most likely it is. Abuse of tax shelters is becoming a well-recognized scheme that is resulting in loss of tax revenue for the Canadian and Provincial government, not to mention undermining the credibility of legitimate charitable sectors.
The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.