Business Identity Theft

                                    Business Identity Theft


Recently, a bookkeeper was updating the company checking account in QuickBooks and found several checks totaling close to $12,000.  All the checks were made out for amounts in excess of $2000 each and cashed against the company checking account.  The problem was no one in the company issued these checks.  After several phone calls to their bank, copies of the checks in question were faxed over to the bookkeeper.  Someone had checks printed that appeared to be the same as their company checks.  The signature was similar to the owner’s signature but was not his.  By googling the names of the payees it was found that each had some type of criminal record. 

The bank basically told the company, “too bad, it’s not our problem.  How could we possibly know that these checks were not originals?”  They were cashed at five different branches.  Of course the bank promised to work with the client in trying to resolve the issue but the bank was not willing to reimburse the client for the missing funds. 

The company proceeded to report this to their local police department.  The police simply handed them an identity theft report and ask them to complete it.  They were told that more than likely nothing would come of it.  The company was also told that they needed to file similar reports in each town that a check was cashed. 

Surviving in today’s rough economic times is tough enough but to compound that with a situation as described above, could put some small businesses out of business.  What if that business was relying on that money to meet its payroll obligations?  How long do you think employees would stick around if their paychecks start bouncing?  What if the business needed those funds to make its payroll tax deposits?  Payroll taxes are trustee taxes.  That means even if the business was to file bankruptcy, the payroll taxes are not forgiven.  The owners or officers of a company are personally liable for the payroll taxes.  The IRS and other taxing authorities determine who the “responsible parties” are and can and do put liens on personal assets until the payroll taxes are paid in full. 

What can a business do?  One suggestion might be to open a separate bank account just for payroll.  I can already hear the moan and groans.  Yes, it means reconciling another account and yes it means a little bit work but it’s a matter of risk.  If you are willing to risk your personal assets even though you are incorporated because someone cleaned out your checking account and the company cannot make payroll or pay its tax liability then don’t bother.  It you want to minimize your risk, simply transfer the gross pay plus employment taxes to a separate bank account each pay period.  Automatic deposits of employees pay directly into their personal checking or savings account as well as electronic payment of payroll taxes mean very few if any checks are actually written on that account.  That means less risk of fake checks ever being written on that account. 

 Don’t make running your business any tougher than it has to be.  Take steps to safeguard your check supply as well as your business identity.




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