Are Remote Employees More Prone to Tax Fraud in 2021?
Let’s face it, remote work is here to stay. Many businesses still struggle to make the leap to a fully remote staff, citing issues with trusting that the employee is going to do what is right. An employee who is going to steal from a business or commit tax fraud is going to do it whether they are working in the building or they are working offsite. It’s not the environment that creates the fraud, it’s the employee.
Working remotely can lead to fatigue around online meetings and being away from people, but it doesn’t make these people more likely to commit tax fraud. The key is finding a way to hire staff who can be trusted. This starts with the interview process and in choosing individuals who show integrity in all aspects of their life.
Background Checks
This means you may need to do a full background check to include a peek into their tax status. But, what is tax fraud? You may be thinking of huge investment companies with CEOs and CFOs getting hauled off to jail. The truth is that tax fraud encompasses many different things.
One type of tax fraud is tax evasion. Some people intentionally do things to avoid paying taxes or to avoid paying as high of taxes. This can include hiding assets, lying about how much you made on your taxes, and more. Tax fraud is defined as someone who intentionally fails to file a return, fails to pay tax debts, and even falsely claims certain deductions on the return.
Businesses must hire people in financial positions who have the integrity to keep your company going. Businesses that engage in tax fraud are found to have failed at filing payroll reports, not reporting cash payments made to employees (including gifts), and using payroll services that don’t give the necessary funds to the IRS.
These issues are true whether an individual works from home or works on site. The trick is hiring remote staff who aren’t a high risk. Some risk factors for tax fraud include: being irresponsible with personal finances, having significant debt that they can’t pay for, foreclosures, hiding large sums of money, or a history of financial crimes or previous tax fraud.
Here are the best ways to reduce the risk of hiring a remote worker who commits tax fraud:
Look at Their Taxes
Well, as much of their taxes as you are legally allowed to in your industry. You want to be sure they filed every year. And you should know if they paid any tax debts on time or not. Checking the tax status of your employees is one way to be sure you aren’t hiring someone who will commit tax fraud either in their personal lives or at work.
Unfortunately, if someone gets arrested for personal tax fraud, it may put your company at risk. Even though the employee may not have committed any financial crime at work, it may put you under investigation which can be a lengthy and time-consuming process.
Run a Full Background Check
Has the person ever been convicted of a crime? What crimes? What were the circumstances surrounding it? These are just a few questions you should ask about someone’s criminal history. If they’ve ever committed a financial crime, they may not be the best option for your business. This is especially true if they would be in a position to have visibility into or access to any company funds.
There are other crimes that might be important red flags as well. Domestic violence has an interesting connection to tax fraud. People who commit DV-related crimes may be more likely to do illegal things with money. Additionally, if they work from home, you don’t want to hire someone who could be at risk of committing a violent crime while on the clock. Background checks help protect you from these issues.
Pull Credit Reports
Credit reports give you an interesting perspective on how people handle money. If someone is making $50K per year and holds significant debt, you may want to think twice on hiring them. Unfortunately, higher debt loads are an indicator of how people manage their personal finances. If they cannot handle their own money well, they should not be trusted with other people’s money either.
Credit reports can show what debts are in arrears and more. If you choose to interview someone with a poor credit report, be prepared with a lot of questions about the circumstances around their credit. These can give you insight into whether the debts were created through irresponsibility or not.