Make Smart Business Decisions: Avoid Tax Fraud In 2021

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Being an investor, an entrepreneur, and a business owner means there are a lot of different decisions you need to make. When you hire an employee or outsource any part of your financial business to someone else, you need to be sure you are protected from tax fraud. Tax fraud can cause you to lose everything you’ve worked for, all your investments, and all your assets. It starts with making smart business decisions for you and the people you hire.

You can mitigate the risk of tax fraud by hiring people who are trustworthy, reliable, and good with money. People who have a bad track record with finances in their own lives are at a greater risk of being bad with other people’s money. You can run the following checks to help you and your business avoid tax fraud.

Background Check

This will only check whether or not someone has been caught with a crime. But in your financial business, it’s vital to know who can pass a background check for a job. If they have financial crimes, tax fraud, or anything of the sort in their background check they aren’t right for your business. There may be extenuating circumstances that would warrant a conversation versus writing them off, but in general if they’ve committed financial crimes in the past, they are too much of a liability.

Additionally, look for other crimes such as domestic violence. This can make them a volatile choice for your business no matter what their skills or experience look like. You don’t want to risk hiring someone who could be hauled off your business in handcuffs.

Credit Check

Another important check to help you avoid tax fraud is to run a credit check on your employees. You’ll want to look at not only the credit score, but what’s behind it. Do they have several high-balance credit cards that are maxed out? Do they have medical debt? Do they have a high mortgage payment? Do they appear to be irresponsible with money, or does their credit look more like a victim of unfortunate circumstances such as a medical emergency?

A credit check for employees is a great way to gain insight into their financial habits. These habits are easily transferrable, whether good or bad, to your business. You want people who show evidence of having great financial acumen by the way they handle their own finances. A credit check is a great tool to help you reduce the risk of tax fraud.

While you’re checking their credit, make note of their credit score. Most people who work in financial industries need to have higher credit scores. Something at least average would be important. You would put yourself in greater risk of tax fraud by hiring someone with a terrible credit score. But this shouldn’t be the only indicator as things like divorce, death in the family, and medical debts can impact credit scores and make it go down.

Tax Filing Status

Is the person or business you want to work with up-to-date on their taxes? Did they pay their tax debts on time? Do they have a gap in filing their taxes? What is the reason for this gap? These are all important questions to ask potential employees and businesses you want to work with. If someone is notorious for late filing or having a lot of tax debt it could be a red flag. The important thing for you as an investor, entrepreneur, and business owner is that you hire and work with people who have a good track record.

It’s important to hire reliable employees and contractors who won’t put your business at risk of tax fraud. These are just some of the ways to help you avoid it in 2021 and beyond. The people who work for you should submit things on time for deadlines, understand the importance of it, and actively work to help you avoid any appearance of fraud. If you have untrustworthy employees, they will increase the risk of tax fraud and you will be held responsible. Smart business decisions always include making smart financial decisions. And hiring the best employees is an investment in your company now and in the future.