Beware of CTA Scams Targeting Business Owners

Scams exploiting the Corporate Transparency Act are on the rise, targeting unsuspecting business owners with fraudulent forms and fees such as form 5102 and form 4022.  IMPORTANT:  These forms do not exist and there is no fee associated with BOI filing.

the Corporate Transparency Act - purpose and Requirements

The Corporate Transparency Act (CTA) is a landmark piece of legislation aimed at combating money laundering, terrorism financing, and other illicit activities by increasing transparency in corporate ownership. Under the CTA, certain corporations and limited liability companies (LLCs) are required to report beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN). This is intended to help law enforcement and other authorities track criminal activities linked to shell companies.

Business owners should be aware that the CTA does not impose fees for compliance. Any legitimate communication regarding CTA requirements will come from FinCEN, not from third-party entities demanding payment for form submissions.

Scams relating to BOI Reporting

Recently, scammers have been capitalizing on the Corporate Transparency Act by sending fraudulent emails and letters to business owners, falsely claiming that they must fill out forms 5102 or 4022 and pay a fee. These forms do not exist and are not required by any government agency.

These scams often use official-looking logos and language to deceive recipients into thinking the requests are legitimate. It's important to remain vigilant and verify any unsolicited communications you receive regarding your business's compliance obligations.

Here’s what you need to know: 

• These fraudulent forms may be titled "Mandatory Beneficial Reporting Form" and appear to come from the “Annual Records Service” or “US Business Regulations Dept.” While the forms seem official, these are not actual government entities. 
• They request business information and payment.  It may also include threat of penalty for false information. 
• Genuine Beneficial Ownership Information (BOI) reporting is conducted exclusively through the Financial Crimes Enforcement Network (FinCEN) website for no charge. 
• FinCEN never sends unsolicited correspondence or payment requests via mail. 

scams: Identify, report, and protect 

Scammers mislead you about tax refunds, credits and payments. They pressure you for money, personal, financial or employee information. IRS impersonators try to look like the IRS.  Here are a few red flags to help you identify a scam:

• A big payday - If it sounds too good to be true, it probably is. Bad tax advice on social media could urge you to falsify tax forms or credit claims.
• Demands or threats - Impersonators want you to pay “now or else.” They threaten arrest or deportation.
• Website links - Odd or misspelled web links can take you to malicious sites instead of IRS.gov.
• No appeal -Impersonators don’t let you question or appeal the amount of tax you owe.  Know your taxpayer rights.

• Initial contact - The IRS does not make initial contact by email, text or social media to request personal or financial information.

If you feel like you have identified a potential scam, make sure to report it.  Most of scams can be reported through the Form for Report Suspected Abusive Tax Promotions or Preparers.  Here is a link to the form:  Form 14242.   Additionally, you should inform your CPA or legal advisor about the scam and maintain records of all suspicious communications in case it results in any subsequent investigations.

To protect your business from future scams, educate yourself and your employees about common scam tactics and red flags. Implement procedures for verifying the legitimacy of any unsolicited communications that request sensitive information or payments.  Regularly update your business's cybersecurity measures and keep software and systems up to date to help guard against potential cyber threats. Finally, staying informed about the latest scam alerts from reputable sources can help you stay one step ahead of fraudsters.