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Small businesses are easy state tax scam targets
3 ways entrepreneurs can spot fake tax notices and liens

Tax scams that invoke the Internal Revenue Service get a lot of attention. That's understandable.

The tax code is complicated and the IRS is a source of fear for most Americans. That combination makes it easy for crooks pretending to be with the federal tax agency to scare us into paying them to resolve a purported tax bill.

But there are 43 other official government tax collectors out there, and crooks know that they also can use state taxes to scare us into sending them our money.

Multitasking demands of being an entrepreneurMultitasking small business owners make good targets for state tax focused con artists.

And entrepreneurs are especially easy tax scam targets at the more-local governmental levels.

Official data open to crooks, too: Criminals have access to names, addresses and contact information contained in state, county and local public databases, often posted online, of newly registered or incorporated business entities.

Armed with that info, all the tax con artist has to do is send a notice to the new entrepreneur warning of a fake tax bill or lien. This fraudulent document typically will offer the small business owner the opportunity to solve the purported tax problem by simply sending the crooks money.

Unless your business is an accounting or tax service, chances are you tend to take the word of tax officials -- or those pretending to be tax officials -- when it comes to your tax responsibilities. That's understandable, although not necessarily the best way to operate, but that's a topic for another post.

The bottom line here is that the crooks know some small business owners will freak out when they get a tax notice ostensibly pertaining to their business. And those frantic entrepreneurs will simply do what they believe is the right and tax responsible thing and pay to clear up the fake tax bill.

Fake Massachusetts tax lienThe Massachusetts Department of Revenue has seen enough of these fake tax collection efforts that it created a special online page to warn taxpayers. This is an example of a bogus tax notice that Bay State tax officials have posted as a warning.

Bad move, both from a business and tax standpoint.

Instead, if you have a tax adviser or attorney, take any tax notice to your trusted professional as soon as you get it. Your lawyer or tax expert should be able to allay any fears you have about a potential tax debt. And if you really do owe, let your attorney or tax pro take the lead in clearing up the matter.

3 ways to spot a fake tax notice: But so that you don't lose any more sleep -- you're stressed enough, what with all the 24/7 work you're doing to make your new business a success -- take a close look at any supposed tax notice or lien yourself before handing it off to your advisers.

If it's fake, you'll likely spot signs that indicate the supposedly official tax document is phony.

Here are 3 quick ways to check whether the letter you've received is a scam or a legitimate tax notice:

  1. Always read the fine print. Does the notice say it's from the state or other government entity tax office? Or is the sender is not affiliated with any government agency? Some states do contract with private debt collectors, so it's possible the document could come from them other than the government office. But it should say that it is operating as an official agent of the state that purportedly is trying to collect.
  2. Note the tax amount in question. Does the notice list an alleged tax amount due as "TBD," aka to be determined, or say that "results may vary"? Any real notice from a state or more local tax office will give you the amount the official tax collector believes you owe. And the legitimate tax offices usually won't suggest a settlement amount that differs dramatically from that amount in a notice, especially not at the initial stage of a tax collection action.
  3. Do not call the number on the notice. Similarly, never click on an internet link, be it sent electronically or listed in a written document, if you're unsure of the sender's identity. Instead, go straight to the real source. Look up your state (or other) tax agency's phone number and call that office directly. If you do have an outstanding tax bill, you can get an update on your account when you talk to the real tax collector. Your call also will alert that office that crooks are trying to steal from you and, since you do owe, from the state, too.

By being skeptical of tax notices, both at the state and federal levels, you can ensure that you don't become a tax identity theft victim. And you might be able to help tax investigators and other law enforcement officers catch some of these criminals.

Federal tax scam crooks caught: As I noted last this week at my other tax blog, a call to a fraud hotline helped federal agents on May 23 nab some individuals who allegedly had been stealing from taxpayers using the pervasive IRS impersonation scam.

Those 5 arrested in the IRS telephone tax scam are charged with stealing almost $2 million from more than 1,500 victims.

Bankrate Taxes Blog logoAlso over at Bankrate Taxes Blog last this week, I looked at a former Romanian king who's seeking a property tax exemption for his castle.

Go ahead. Insert your own "a man's home is his taxed castle" joke here.

Michael I, who sat on Romania's throne from 1927 to 1930 and again from 1940 to 1947, reportedly owes close to $1 million U.S., including penalties, on his 17th-century castle in Savarsin.

The 94-year-old former monarch disputes that tax amount. Plus, argues Michael, he should be exempt from the property tax under the country's law that provides such tax relief to military veterans like him.

I usually post my additional tax thoughts over at Bankrate on Tuesdays and Thursdays. This week, however, with folks wanting to get an early start on the long Memorial Day holiday, I posted on Wednesday.

Regardless of when my posts there go live, you can find highlights here at the ol' blog the following weekend. Or when I want to get a jump on the weekend, too, during that same week. 

Thanks for sticking around this Friday to check in. Now go on, get outta here and start enjoying your three-day weekend!

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