Scam Alerts!
   By Terri M. Blair

Small-business startups have plenty to worry about – getting leads, finding customers, making sales. Now there’s an addition to the list: Watch out for scams.

Here are of some of the most common schemes shysters use to get hold of your hard-earned money.

Fake directories
Startup businesses are starved for marketing exposure. That makes them easy targets for scam artists pitching ads for a directory.

The scheme has variations, but generally goes something like this: A salesperson contacts you about a business directory that’s being compiled. You’re told that the printed directory will include businesses in your trade area and that it will be distributed to consumers. The cost for placing an ad looks good – cheaper than the local Yellow Pages.

So you pay your money. Then the salesperson disappears, and you never see the directory. You’ve just been duped.

There are legitimate business directories out there. But you won’t know them from the counterfeits unless you check them out. If you’re approached, ask to see the most recently published directory. Get the name, address and telephone number of the company or organization that is publishing the directory. Call and ask how many will be distributed, when and to whom.

Also flip through the directory. Call several of the businesses listed. Find out if the directory was a cost-effective marketing tool for them.

Tax scams
Every year the IRS publicizes a list of tax scams aimed at small-business owners. Here are a few of the most recent.

• Promoters that claim they can cure your tax debts for pennies on the dollar. These scoundrels prey on business owners and individuals that are in debt to the IRS. You pay the promoter, who then advises you to file an Offer In Compromise (OIC) with the IRS. An OIC is an agreement between a taxpayer and the IRS that resolves the taxpayer’s debt. But an OIC is considered a last resort. It’s available only after other payment options have been exhausted. If you owe more taxes than you can pay, contact a legitimate tax professional.



• Another tax scam is aimed at employers. Promoters of the scam claim that as an employer, you don’t have to withhold federal income tax or other employment taxes from wages paid to employees. Wrong. Recent court cases have resulted in criminal convictions of these promoters. But, employer participants could also be held responsible for back payments of employment taxes, plus penalties and interest. Don’t fall for the con.



• If you get an e-mail that claims you’re under IRS investigation for tax fraud, hit the delete key. The e-mail says that you can help the IRS investigation by providing private information, such as Social Security numbers, driver’s license information and bank and credit card numbers. It then directs you to an official-looking Web site.
  
  Don’t get conned. The Web site is a fake. The IRS doesn’t use e-mail to contact taxpayers about issues related to their accounts. Official IRS contact usually includes a letter on IRS stationery in an IRS envelope. IRS letters also contain a contact phone number. If you receive a suspect e-mail, contact the IRS at (800) 829-1040.



• Finally, there’s the tax scam that targets home-based businesses. The con artists claim that they can show you how to deduct all of your personal expenses as business expenses. It’s a sham. And it’s considered illegal tax avoidance. Get advice from a tax professional about legitimate tax deductions for your home business.

Cramming scams
Late last year the Federal Trade Commission charged a Web cramming operation with billing small-business owners for so-called free Internet services, failing to disclose terms of the sales agreements and billing some companies that had turned down the offer. Cramming refers to the practice of billing businesses for services that were never authorized. The bogus charges usually appear on businesses’ telephone bills. So when your business telephone bill arrives, review it promptly for any signs of cramming.

Consultant or con artist?
There are legitimate small-business consultants who can help you build a stronger company. And then there are con artists who bill themselves as consultants. Learn to tell the difference. Before you hire a consultant, investigate his or her credentials, including education, certifications through trade organizations and experience. Ask for references. A true consultant will gladly give them to you.


(Posted August 2004)

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