6 Tips for Businesses to Avoid Committing Financial Fraud

%24 LEGAL OR – ILLEGAL? 6 Tips for Businesses to Avoid Committing Financial Fraud TAXES I lower my business's tax burden by using independent contractors instead of hiring employees. LEGAL! Companies must pay Social Security and other payroll taxes for employees, but not for independent contractors. Understand the differences between contractors and employees. CONTRACTORS EMPLOYEES 1 Determine how Follow set schedule Must follow directions Consider themselves Set own hours Consider work gets done themselves employed by independent of the business throughout the work process the business 2. My business keeps money in a foreign subsidiary to lower its tax burden. € LEGAL! This is considered a form of tax avoidance, which is legal. Tax evasion, however, is illegal. LEGAL TAX AVOIDANCE ILLEGAL TAX EVASION Underreporting Hiding Claiming charitable giving Claiming business expenses Reporting revenue losses Overreporting income expenses revenue PROFITS 3. My nonprofit organization spends its excess money on community development projects. LEGAL! 2$ Follow the IRS guidelines closely to maintain an organization's nonprofit status. Nonprofits can use excess money to develop programs that benefit the community. They cannot use the money in ways that benefit specific persons, such as board members, managers, or permanent employees. My business deducts losses before reporting revenues to the IRS. ILLEGAL! LOSSES The IRS requires that businesses report gains and losses separately. Make sure you follow tax form directions correctly or hire a reliable tax preparer to do the job for you. BANK PAYROLL 5 IT DEPENDS! My business uses a payroll service so it isn't held responsible for deductions. SOs If you know that your payroll service provider isn't following the law, then you could be found guilty, too. Simply hiring someone else to do the work doesn't always relieve you of responsibility. Use a payroll service provider authorized by the IRS to avoid potential fraud. Toccasionally take money from employee withholding accounts (such as pension accounts) to pay my business expenses, but I always replace the money as soon as possible. ILLEGAL! Money put into employee withholding does not belong to the business. According to the Employee Retirement Income Security Act (ERISA), you can't use the money even if you repay it quickly. Employees can also sue you for accessing their withholdings. nsult a lawyer to better regulates the retirement funds of private businesses. derstand how ERISA Sources E New England College • http://www.irs.gov/uac/Employee-vs.-Independent-Contrac- tor-%E2%80%93-Seven-Tips-for-Business-Owners • http://www.irs.gov/pub/irs-pdf/p4221pc.pdf • http://www.irs.gov/publications/p17/ch16.html • http://www.irs.gov/uac/Payroll-Service-Providers • http://www.dol.gov/compliance/laws/comp-erisa.htm#overview • http://www.dol.gov/ebsa/faqs/faq_compliance_pension.html • http://www.irs.gov/Businesses/SmallI-Businesses-&-Self-Employed/Outsourcing-Payroll-Duties • http://business.time.com/2013/01/24/should-uncle-sam-be-do- ing-more-to-get-his-hands-on-the-1-7-trillion-u-s-companies-hold-overseas/?iid=biz-main-lead • http://apps.irs.gov/app/understanding Taxes/whys/thm01/les03/ac1_thm01_les03.jsp • http://apps.irs.govlapp/understandingTaxes/whys/thm01/les03/medialws_ans_thm01_les03.pdf • http://www.forbes.com/sites/taxanalysts/2013/09/17/tax-avoidance-just-isnt-what-it-used-to-be/ http://accounting.nec.edu/ %24 %24 %24 O 0 0 0 0 o o o o o o