IRS Imposters Strike Again

Automation, including the magic of email, is a fantastic thing. That is, until criminals use that magical email to scam you out of your hard-earned money. Far too many email “phishing” scams exist. You’ve probably gotten at least one message luring you to click on a link to funds in a bank you’ve never banked with. That’s bad enough. To me, the most insidious phishing scams come from IRS imposters. Another one recently unleashed itself on U.S. taxpayers.

Last week, the IRS alerted taxpayers and the tax professional community to a new scam. They had received a high volume of taxpayer submissions to [email protected] about unsolicited emails from IRS imposters. Taxpayers reported various email subject lines, like “Automatic Income Tax Reminder” or “Electronic Tax Return Reminder.” That kind of subject line coming from what appears to be the IRS would scare anyone into opening and responding!

These taxpayer-reported emails include an IRS.gov-like link appearing to be about the taxpayer’s refund, electronic return or tax account. The emails contain a “temporary password” or “one-time password” to “access” the files and obtain the refund. But you can guess what happens next…when the taxpayer tries to access the file, it turns out to be malicious and infects her or his computer or device. Or, it asks for bank account and other personal information to access or transfer funds. Bad news, either way.

Protect yourself! Remember that the IRS does not send emails about your tax refund or sensitive financial information. Most IRS communication is still through the good old-fashioned USPS. Essentially, that means you should be suspicious of ANY email from the IRS. If you want to be absolutely sure, the easiest way to check for phishing is to place your cursor over the sender’s name, revealing the sender’s e-mail address. An address that doesn’t look legitimate is a scam. 

No matter what, do not reply to any unsolicited email, texts or social media from the IRS (or anyone else, for that matter) to request money or financial information. This includes requests for PIN numbers, passwords or similar access information for credit cards, banks or other financial accounts. 

Just in case you receive an email claiming to be from the IRS that contains a request for delinquent tax balances or financial information, immediately do the following:

  1. Don’t reply, open any attachments or click on any links. 
  2. If it’s too late and you did something from #1, visit the IRS’ identity protection page.
  3. Forward the email as-is to the IRS at [email protected]
  4. Delete the original email.

Tax scams are a year-round business, so taxpayers need to be on-guard at all times for IRS imposters. Need to report an IRS imposter? See Report Phishing and Online Scams for more details.

Got an IRS Notice – Now What?

Open Manilla folder with a calculator, check book and pen on one side, and a stack of paper that says "Tax Withholding and Estimated Tax" on the other. A cup of coffee is placed above the folder on a dark background.
Photo by Kelly Sikkema on Unsplash

You’re flipping through the mail when you see it. An envelope with an IRS return address. OMG! What’s this about? Whether you set it aside for a while or rip it open immediately, you eventually see it – a Notice from the IRS with news that you may not want to hear.

Now what? Your IRS Notice will explain the reason they are contacting you and give you instructions on how to handle the issue. Sure, you might have made a mistake on your return, but you might just need to clarify some information. Let’s break this down into a little Q&A to simplify things. You’re already nervous about this, right?

Why was I notified by the IRS?

The IRS sends Notices to taxpayers who have a balance due, are due a larger or smaller refund than originally reported, their return has been changed or additional information is needed. Notices may also communicate the need to verify taxpayer identity or a delay in processing the return. Each Notice contains a lot of valuable information about the issue. Read it carefully.

How should I respond?

Typically, you only need to respond if you don’t agree with the information in the Notice, if the IRS requested additional information, or if you have a balance due. If the income or payment information the IRS has on file doesn’t match the information you reported on your tax return, check your return to see if you made a mistake. It happens. Just pay the amount due, or at least as much as you can.

What if I don’t agree?

Yes, sometimes the IRS makes a mistake or does not understand the information from your filed tax return. If that’s the case, make copies of any schedules or other documentation that clarifies your situation. Complete the Notice Response Form and include any explanation to help the IRS understand what you are sending. Don’t assume that the IRS will be able to interpret your documents without a brief explanation.

When should I respond?

IRS Notices generally require you to respond by a specific date. There are two main reasons you’ll want to meet that deadline – to minimize the accrual of additional interest and penalty charges, and to preserve your appeal rights if you don’t agree. Keep copies of all Notices and your response (with support documents) in your tax records, in case you need to refer to them later.

Getting an IRS Notice is nerve-wracking, but ignoring it will only make it worse. Read the Notice carefully and respond with an explanation by the due date if you don’t agree. Made a mistake? Pay the amount due, or as much as you can, to reduce additional interest and penalties. When you know what to do, getting an envelope with an IRS return address won’t make your heart skip a beat.

Cybersecurity Depends on Your People

In spite of investing tons of money on security, organizations still fall victim to data breaches. Why? Because security doesn’t work if people don’t use systems securely. Click on a link in the wrong e-mail and all of that security investment goes out the window. Recent news events and surveys of IT security professionals reveal that the biggest cybersecurity risk comes from people. Your systems are only as safe as the security knowledge of your least knowledgeable worker.

As a tax professional, I have a figurative Bull’s Eye on my back, especially when it comes to phishing e-mails and other hacking attempts. But I’m not “special”. Phishing e-mails are among the most popular mechanisms for hackers to lure you or your workers to unknowingly expose your systems to attack. Phishing attacks are used to obtain bank account information, wire instructions, system logon credentials and personal identifying information.

Systems can also be at risk from actions, or lack of action, on the part of systems users with administrative privileges. A prime example is when a System Administrator fails to change the manufacturer’s default password to a unique password. A door to that system is easy to open if a hacker knows or guesses the default password, leading to unauthorized access and vulnerable data. Make sure your business follows best practices to change default passwords upon installing or updating applications.

Training and periodic reminders are essential to enhance awareness and keep workers on their toes. Traditional training, like webinars and documentation, make people aware of cyber threats and vulnerabilities. Use real life examples from the news to illustrate risks that workers should look out for. A few scary, true stories about accessing and stealing sensitive data will open their eyes. It’s a great way to help your workers recognize when they are the target of phishing or another scam.

Organizations can be vulnerable to hackers in spite of large investments in security. Your systems are only as safe as the knowledge of your least knowledgeable worker. News events and industry surveys reveal that people present the greatest cybersecurity risk. Organizations can mitigate the people risk with training, periodic reminders and by following best practices to change manufacturers’ default passwords. 

Five Years in Business and Going Strong

Hard to believe that it’s been five years since I quit my job and expanded my side-hustle into a full-time business. The time has passed quickly. With some diligence and good luck, I’ve been able to achieve my goals so far. Anniversaries are cause for celebration and reflection — a good time to assess progress, revel in accomplishments and set new goals. Also time to reflect on what it took to get here. 

Businesses that want to celebrate many anniversaries and accomplishments have some common attributes. These include investing a lot of time and effort on these four important activities:

Making a Plan 

A business plan is a road map to get where you want to go and help to keep your “Eye on The Prize”. Unless you know what you’re reaching for, you can’t grab it. Set your overall objectives and describe the detailed steps to achieve them. Set interim milestones along the way to help measure your progress and see when adjustments are needed.

Executing Your Plan

Actively work through the detailed steps in your plan. It’s exhilarating to achieve goals and move forward. Executing your plans also gives you opportunities to get more information. Use new information to adapt your plan and make course corrections. Also listen to how your network receives your message and adjust your wording to get your message across better.

Outsourcing for Expertise

Be realistic about aspects of your business where you do not have the necessary expertise or it would take too much time away from your core business to do it yourself. Legal, accounting, and social media are some areas where finding vetted help is essential to get things done correctly and free up your time to work with your clients.

Giving to Your Network

Answering general questions in your area of expertise and presenting at workshops gives to your network and establishes your credibility. Sharing tips and perspective helps to establish your brand and draw people to you and your business. Being generous is often its own reward, over the long run.

The last five years of being in business full-time have been hard work, fun, and rewarding – all at the same time. It takes a lot more than investing in these four activities to be successful. But businesses that invest in planning, executing, outsourcing where appropriate, and giving back develop a strong foundation for many anniversaries and accomplishments to come.

Tackling Finances in Your Business Plan

More than half of the new businesses that start this year won’t be around in two years. They will be out of business. A big reason for that sobering statistic is under-funding, starting with financial projections in the business plan. Projecting the financial needs for a new business is not the time for being overly optimistic or taking wild guesses.

So how do you tackle the financial section of your business plan? By applying three assumptions:

Revenue Targets Take Time to Achieve

Even with a huge demand for your business in your market, achieving projected revenues will take time. Ramping up and making contacts does not happen overnight. Top potential revenue will not happen in the first year. Developing one to five-year projections will illustrate revenue growth revenue and when expenses are expected to be covered. Showing when you will be profitable heads off questions before they are asked.

Expenses Will Be More Than You Think

Research costs for labor, materials, space, transportation, equipment, etc., based on market rates and required quality. Worker costs should include the employer portion of payroll taxes (i.e., 0.0765%), benefits, licenses, training. Don’t forget back-office infrastructure, like payroll services, billing, financial management and reporting, tax preparation. Marketing could be expensive, depending on location and industry.

You’ll Need a Funding Cushion

Failure from under-estimating costs and over-estimating revenue can be avoided by building in a financial cushion. Initial funding needs should include an amount equal to six months or more of estimated expenses to cover payroll and overhead in the months when revenue is not enough to cover it. Of course, that’s on top of funding for equipment, legal fees and other start-up costs.

Tackling the finances in your business plan is not easy. Don’t take the easy way out by guessing or painting a rosy picture that probably won’t come true. Avoid being one of the new businesses that fails within two years by applying these three assumptions about revenue, expenses and funding.