Is your business susceptible to payroll fraud?

Although you may not want to hear it, all businesses can be hit with payroll fraud. Find out how it happens and what you can do about it.

Unless a small business owner handles all aspects of computing and paying payroll, there is room for fraud. Even if your company has only a few employees — it does not guarantee your funds will be safe.

How payroll fraud happens

Perhaps one of the easiest payroll fraud techniques is the overpayment of withholding or payroll taxes. Your bookkeeper simply overpays the government. When the refund check arrives, the employee deposits it to his or her personal account.

In some cases, the employee will have an account at a different bank but in the company name. Such an account could be used for the fraudulent deposit of other company receipts as well.

The greater the number of employees, the easier it is for someone to pull off a scam. Perhaps the payroll clerk has invented a fictitious employee or falsifies hours or commissions for a cooperating employee who shares the stolen funds. Or perhaps the employee holds the payroll deposit funds in his or her own interest-bearing account until it is time to make the payroll deposit to the government.

How to prevent payroll fraud

Small businesses can be exceptionally susceptible to payroll fraud because they often lack anti-fraud controls that larger organizations have in place. Here’s a few ways you can work toward preventing this type of fraud:

  • Get outside help. A payroll review by an independent accountant may help prevent employee schemes.
  • Divvy up duties. Even in small companies, it is possible to divide office tasks to make employee theft more difficult.
  • Limit payroll access. Figure out who needs to have access to payroll data. That list will likely be very small. Make sure it stays that way.
  • Offer direct deposit. No paper checks means less opportunities for employees to handle funds, meaning greater security all around.
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The holidays: A time for mistletoe and … fraud?

Don’t let a thief turn you into a festive fool this season. Follow these tips to avoid holiday shopping fraud, whether you’re buying online or at your local mall.

It’s not surprising that identity thieves and con artists love the holidays. More shoppers, more deals and more buying motivation makes the season rife with opportunities to steal. But you don’t have to let the holiday spirit cloud your shopping safety judgment.

Here are a few tips to avoid fraud, whether you’re shopping online or at your local mall:

  • Shop on websites you trust. During the holidays, your e-mail inbox may be filled with unsolicited messages urging you to “click here.” Don’t. Scammers set up websites that mimic legitimate stores. They want your personal information so they can steal from you. Stick to reputable stores and sites and you’ll be better off.
  • Background-check your choice charities. Many legitimate church groups and nonprofit organizations engage in fundraising activities during the holidays. If you’re confident that the group is above-board, go ahead and donate. But if something seems off – hold on to your money.
  • Be attentive — especially at the mall. Large shopping centers offer scammers ample opportunities to steal. Don’t be fooled by someone selling a typically expensive product for way less money than it’s worth. Make sure you keep track of your purse, wallet and shopping bags. And be aware of your surroundings when you leave the mall. If you don’t feel completely safe walking alone through a dark parking lot, ask a security guard to escort you.
  • Purchase gift cards wisely. These little pieces of plastic can be great stocking stuffers, but they’re also prime targets for crooks. Scammers have been known to copy numbers from gift cards hanging in store displays. They then call a toll-free number to learn when the card is activated and use the card number to make purchases. One way to avoid this is to buy from retailers who keep gift cards behind the checkout register.
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Is it time to update your beneficiary list?

Simply said, your beneficiary designations are important. It’s just as important to keep your list up to date. Consider making it a priority or things might not go as you planned.


It’s not uncommon to lose track of your beneficiaries, including which accounts have them, and who you designated. However, it is important to keep them current.

Make your beneficiary designations a priority

When you designate a beneficiary for an account, that person inherits the assets in the account, regardless of what your will says. That’s why updating your will periodically may not be enough.

Typically, you’ll have beneficiaries for each of your IRAs, your 401(k) or other retirement plans, annuities and insurance policies. Your designations could be out of date just because of life’s changes. Since you made your initial choices, you may have married, had children or divorced. Some of the beneficiaries you chose could have died, divorced or married. Their circumstances could have changed so you no longer want them to be the beneficiary.

Tax laws change frequently as well, and they can have an impact on your choices. Choosing the wrong beneficiary, or failing to name a contingent beneficiary, can affect the long-term value of your IRA assets after you die. That’s why it’s important to review your choices with tax consequences in mind.

How to update your designations

At a minimum, you should have copies of your beneficiary designations in one place. If you don’t, call the trustees of your retirement accounts and your insurance agent and request copies.

Then review the documents and decide what changes you’d like to make. Make an appointment to review your decisions with your tax- and estate-planning advisor. Discuss matters such as naming secondary beneficiaries and whether to name your estate as a beneficiary (which is sometimes not a good idea).

Finally, send your changes to the account trustee, ask for a confirmation, and keep copies in your records. If you have questions about tax consequences or other tax matters related to your estate, call our office.

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