Business owners and lawyers need to keep a close eye on what they report to regulators and how they handle those documents.
The Federal Trade Commission and the Justice Department have taken the lead in making sure that people are following the rules, says Dan Hesse, a partner at Hogan Lovells who specializes in business law.
“We need to be very careful to say that our advice to the government is valid, and we are taking steps to ensure that,” he says.
In the meantime, many business owners have been using a range of tricks to get their business off the ground.
A key strategy is to use multiple names, including one for your company that sounds similar to others.
But sometimes, the business is very different.
“You can find a lot of these scams that involve using a name with the word ‘company’ and then changing it to another name,” says Hesse.
A common tactic is to file multiple separate business reports.
“Sometimes it’s a very clever way to get a scammer to look at you and figure out that it’s someone who isn’t legitimate,” he adds.
“If you think it’s somebody who is legitimate, you should file a separate report and report it to the proper authorities.”
When you report a business as legitimate, it may also result in the report getting published in a legitimate newspaper.
The government also requires businesses to send an annual report to the IRS.
The reporting period for a business is typically six months, but many companies choose to wait until the end of the year.
If you’re worried that your business is in the red, you can file an exemption.
The IRS will then consider your report and decide whether it is acceptable.
There is a provision in the law that lets you ask for an exemption if you think you may be subject to more than one fraudulent report.
“It’s a loophole that has been exploited,” says John P. Sullivan, an associate professor of business ethics at the University of Colorado at Boulder.
“I think it is a pretty strong deterrent, especially for business owners who are looking to start a new business.”
The IRS does require businesses to keep all of their paperwork in a secure location.
It also requires them to keep records of transactions and payments.
That includes information like how much you owe and the payment method.
If the business files a separate tax return and then later loses money due to the losses, the tax return will be canceled and the business will be subject for a new tax assessment.
If a business loses money and the IRS cancels its tax return, it must file a new one.
“So the business can’t just file a refund because the business lost money,” says Sullivan.
“The business has to make a claim.
They have to file a claim.”
The law does allow businesses to choose not to file the tax returns, but it is not mandatory.
A few states do not have their own reporting requirements.
“They could make a point of not filing their taxes,” says Robert T. Zimroth, a professor at the Wharton School at the City University of New York.
But in many states, including California, Delaware, New Jersey, Pennsylvania and Virginia, the reporting requirements are more stringent than the federal law.
That could leave a lot to be desired for businesses.
“This is a very strong incentive for people to avoid reporting to the federal government,” says Pankaj Kaul, a senior associate at the Tax Foundation, a non-profit organization that advocates for lower taxes.
“Many people who don’t want to file for fear of being audited can file a tax return but have no fear of having their business be audited.”