Top 5 Ways That Employers in 2021 Can Mitigate Tax Fraud

Tax Season is over, but that doesn't mean you get to stop thinking about it. Tax fraud can destroy your entire business, even if you yourself didn't commit it. Part of the hiring process requires you to investigate your potential employees and discover if they have anything in their past that would cause you to question their integrity. Employers need to be aware that tax fraud is a big issue and it can impact their business.

When you hire people to take care of the financial parts of your business you are entrusting a lot to them. You want people who operate with integrity in any area of their lives to mitigate the potential for tax fraud. Additionally, before you hire anyone, you want to be sure they don't have their own personal history of tax fraud. To minimize your risk, you want to do these 5 things:

File Payroll Taxes

One of the easiest ways for your business to get caught up in tax fraud is by not paying payroll taxes. It might seem easier to just pay your employees in cash, but it's your responsibility as an employer to pay these taxes throughout the year. Don't expect your employees to report all their income if you don't track it yourself. Employers need to be aware that their failure to provide this information to the IRS is not the responsibility of the employee. Whether accidental or intentional, the penalties for this kind of tax fraud are high.

Credit Check

How much debt is your employee carrying? Is it carried on lots of high balance credit cards? Is it mostly in student loans? Or is the bulk of their debt held in their home mortgage? A credit check can tell you a lot about the habits of your potential employees. If it seems like this person spends a lot of time living beyond their means with their own money, they are more at risk of doing the same with your business resources.

A credit check is one pre-employment check that can help you learn enough about your potential staff to make a final decision. If you're on the fence between two employees, choosing the one with a better financial track record will reduce your risk of someone on your team committing tax fraud.

Credit Score

It's important to check the credit scores of your potential employees to see how they fare. While a lower score is not a deal-breaker, it's definitely an opportunity for a conversation into what this person is doing. Credit scores can give you insight into how the person manages their personal finances before you even ask them questions. For employees in financial industries, this is especially important. While a moderate or lower score isn't necessarily bad, when combined with other factors it can give you insight into the responsibility level of your employee.

Background Check

Many companies are running background checks on their employees as a condition of employment. This helps them determine if there are any crimes on the record that would disqualify them from employment. Employer background checks can help you spot violent crimes and also financial crimes. Tax fraud, tax evasion, and fraud are all reasons to avoid hiring a potential candidate. Odds are if someone did it before they would do it again, and this time, maybe not get caught.

Another thing to look for in a background check is domestic violence crimes and other assault crimes. You don't want a volatile employee working for you. Additionally, repeat domestic violence offenders are also known to commit financial crimes.

Tax Status

The last way to mitigate tax fraud in 2021 is to make sure your potential employees are all up to date on filing their tax returns and paying any tax debts due. Those who repeatedly file late or haven't filed in years are a risk to you and your company. Their tax status also helps you determine if they've been honest about past salaries as well. The tax status is simply a way to check that your employees don't have a history of tax evasion and can help you spot tax fraud.

The truth is you can never prevent tax fraud 100% at your business. But you can reduce the risk by hiring employees who are trustworthy and reliable.

© 2021 Booms Beat, All rights reserved. Do not reproduce without permission.
Share Connect Tweet 0 Comment Email


Real Time Analytics