How to Protect Your Business from COVID-19 Phishing Scams

Sep 14, 2020

As the coronavirus (COVID-19) pandemic continues to impact businesses globally, cybercriminals are taking advantage of this crisis, through phishing tactics, for their financial gain. Phishing is the fraudulent attempt of a cybercriminal to act as a trusted source to gain sensitive information, typically resulting in financial gain for the criminal. Since January 1, 2020, the Federal Trade Commission has received more than 90,000 reports related to COVID-19 fraud with a total loss of $114 million since the beginning of the year.

Business owners already have the day-to-day operations of managing employment needs, fulfilling client orders, and running back-office tasks to manage; the list goes on and on. Having to worry about a phishing attack shouldn’t be one of those added tasks. However, a surge in COVID-related fake emails with dangerous attachments, links, and requests for personal information is our reality.

As teams work remotely, businesses have increased their use of web-based meetings. An example of a COVID-19 phishing scam involves the use of Zoom websites. Scammers are sending fictitious Zoom web address links, that when launched, download viruses that compromise the company’s data. These scams result in expensive fixes to restore company networks.

The Federal Bureau of Investigation (FBI) recently issued an alert warning which urged individuals to be on the lookout for the following red flags:

  • Unexplained urgency
  • Last-minute changes in wire instructions or recipient account information
  • Last-minute changes in established communication platforms or email account addresses
  • Communications only in email and refusal to communicate via telephone or online voice or video platforms
  • Requests for advanced payment of services when not previously required
  • Requests from employees to change direct deposit information

Here are some basic rules and best practices to protect you and your employees from falling victim to these scams:

Exercise caution – Don’t open emails from unfamiliar email addresses or contacts. Or if you receive an email that appears to be from a trusted source, but appears ‘odd’ call and verify with the sender the authenticity of the email.

Avoid clicking on links and opening attachments – Verify a link by hovering your mouse button over the link to see where it leads. Sometimes, it’s obvious the web address is not legitimate. But keep in mind phishers can create links that closely resemble legitimate addresses. Delete the email and notify your IT department.

Get information about government actions regarding COVID-19 from reputable sources – For the most current information, visit the CDC and WHO websites.

Do not reveal personal or financial information – Emails seeking personal information like your Social Security number or login information is a phishing scam. Never respond to solicitations for this information. If you receive an email saying your shipment has been assigned a new ‘tracking id’ and you are asked to click the link to verify the update. Do not click the link. Instead, go to the website of the delivery service and enter the tracking id to verify if a change was made.

Do not use open or unsecure Wi-Fi for working remotely – Never use public wi-fi. When working remotely it is best practice to have a mobile wi-fi device that you can securely connect to.

Connect with your IT department – If you receive a suspicious email, forward the entire email as an attachment to your IT team. If you click on a link or open an attachment in a suspected phishing email, report any incident immediately.

If you are concerned about your company’s security controls or your phishing risk, connect with our team. We can assess your systems and provide value-added recommendations to protect your organization.

Tiffany Pollard, CISA
Risk Services Practice Leader, William Vaughan Company
Tiffany.pollard@wvco.com | 419.891.1040

Categories: COVID-19, Risk Services


IRS Modifies 1099 Forms & (Re) Introduces 1099-NEC

Sep 01, 2020

The IRS is making some significant changes to the 1099 process. Beginning with the 2020 tax year, a new 1099-NEC form will be used for reporting non employee compensation (NEC) payments. Previously NEC was reported in Box 7 of the 1099-MISC form. These payments will now be reported in Box 1 of the new 1099-NEC form. The 1099-NEC made an appearance in the 1980’s and is now making a comeback to alleviate deadline confusion caused by separate deadlines for Form 1099-MISC that report NEC in box 7 and all other Form 1099-MISC for paper filers and electronic filers. Companies will start reporting on the new Form 1099-NEC in January 2021.

There are several parts of the new 1099-NEC form worth noting:

  • Box 1 is where you key in the dollar amount of non employee compensation.
  • Box 4 is used for any amount you held back to comply with backup withholding requirements.
  • Boxes 5-7 are used to report any state withholding.

In addition, the removal of NEC payments on the 1099-MISC form has resulted in a reordering of information and corresponding boxes. These changes are listed below:

  • Box 7 is where you will now key in payer-made direct sales of $5000 or more
  • Box 9 is where you will report crop insurance proceeds
  • Box 10 is used for gross proceeds to an attorney
  • Box 12 is for Section 409A deferrals
  • Box 14 is for reporting non qualified deferred compensation income
  • Boxes 15, 16, and 17 is where you will report state taxes withheld, the state identification number, and the amount of income earned in the state.

The deadline for both paper and electronic filing of the 1099-NEC form for 2020 is February 1 for both the recipient and the IRS. The 1099-MISC is due to recipients by February 1 while they are due to the IRS by March 1 for paper filing and March 31st for electronic filing.

For up-to-date information on these changes, you can visit the IRS website or connect with us at 419.891.1040.

By: Aaron Gray, Accountant

Categories: Tax Compliance


Processing Delays Within the IRS Generates Balance Due Tax Notices

Aug 28, 2020

The Internal Revenue Service and State tax departments have experienced delays in tax return processing due to the COVID-19 pandemic. A current delay in the processing of payments received is affecting both Individual and Trust income tax filings. Taxpayers across the country have received tax notices from both the IRS and State tax departments that are citing tax amounts due with penalties and interest tacked on even though the taxpayers timely paid the tax amount due with their filings. Situations have occurred where the payment due was electronically withdrawn or check cashed, but the payment has not been applied to the account appropriately. Other situations have occurred that the payment check was received by the taxing agency but not yet cashed. Either way – the tax payments being applied to these accounts have a definite lag time. The lag time, however, was not stopping the tax departments from sending out balance due notices.

On August 21, the IRS posted an update on their website about these notices and that they are suspending future mailings until they have caught up on processing the mail and payments they have received. In addition, they will be providing penalty relief for any dishonored checked that they’ve received from March 1 to July 15 due to the processing delays. While the policy to suspend these future mailing has been put in place, there could still be mailings that were sent out prior to this policy that are still moving through the USPS system.

What Should You Do if You Received One of These Notices?

  • Let your tax preparer know if you’ve received one of these notices so they are aware of the situation.
  • Make sure you have documentation of the payment that you made. It should equal the balance the notice is showing due before penalties and interest. If this is not the case, your tax preparer can assist with looking into the variance for you.
  • If you sent the payment via certified with return receipt, hold onto the receipt records.
  • Finally, closer to the due date of the notice unless the IRS has released additional guidance, either the tax preparer with a valid Tax Power of Attorney or the taxpayer should call the tax agency to confirm the payment is finally applied to the account and nothing further is due.

The tax departments are currently inundated with phone calls and their call centers are not able to keep up with the volume. Our advice would be to give time for them to apply the payments and for the departments to clear up their processing delay.

Categories: COVID-19, Other Resources


Interest Payments For On-Time Tax Filers

Aug 19, 2020

Nearly 14 million Americans will receive an interest payment check from the IRS sometime this week. Here’s what you need to know:

What happened?
Due to the recent pandemic, this year’s tax filing deadline was pushed back to July 15 which is considered “disaster-related postponement.” As a result, the IRS, by law, must pay interest calculated from the original April 15 filing deadline to anyone who filed their individual return by the postponed deadline. Please note, businesses do not qualify for an interest payment.

What does this mean for me?
If you met the July 15 tax deadline and either received a refund in the past three months or anticipate receiving a refund, you will be receiving an interest payment! Funds will be directly deposited into the same bank account your tax refund was deposited otherwise you will be receiving a check in the mail. The amount of Interest is paid at rates set by law with the average payment being $18.

What is the taxability of these payments?
You must report the interest as taxable income on your 2020 federal income tax return you will file next year. In January 2021, the IRS will send a Form 1099-INT to anyone who receives interest totaling at least $10.

Next steps?
If you have questions regarding your interest payment check, please contact your William Vaughan Company advisor or contact us at 419.891.1040. We’d be happy to help!

Categories: COVID-19, Tax Planning


Accounting for PPP Loan Proceeds

Jul 20, 2020

Many businesses have received Paycheck Protection Program (PPP) loans and are now asking the question, “How do I account for the proceeds and potential forgiveness related to the PPP loan?”

The legal form of a PPP loan is debt, and regardless of the expectation of forgiveness, following the guidance under ASC 470, Debt will always be an appropriate option. However, the PPP loan does include a forgiveness component, resulting in many businesses wondering if the funds could be recorded as a grant. Currently, U.S. GAAP does not contain specific guidance on how business entities should account for government assistance. The AICPA has suggested that businesses can reference other guidance such as International Accounting Standard (IAS) 20 as an accounting framework for forgivable loans. A not-for-profit entity that received a government grant should apply ASC 958-605.

How does accounting work under both scenarios?

Debt
Balance Sheet
In accordance with ASC 470 Debt, upon receipt of the funds, a liability should be recognized for the full amount and will generally be classified as a long-term liability. Interest should be accrued at 1% beginning on the date the loan was received and continue over the term of the loan.

Income Statement
Any amount that is forgiven and the entity is legally released from its obligation, would be recognized as a gain in the income statement as an extinguishment of debt. This includes any interest which is forgiven.

Cash Flow
Receipt of the loan proceeds and any repayment, the Company would present as financing activities. Any funds that are ultimately forgiven would be disclosed as a noncash finance activity. Interest paid should be presented as a cash outflow from operating activities.

Disclosures
The disclosures in the financial statements, at a minimum, should indicate the accounting treatment, terms of the agreement, and where the loan amounts are recorded in the financial statements, similar to other debt.

Grant
For those entities that are reasonably assured that they will comply with the eligibility and forgiveness criteria for the full loan, grant accounting could be an appropriate option. These entities should consider the guidance under IAS 20.

Balance Sheet
Upon receipt of the forgivable loan, a short-term liability for deferred income should be recognized. As the entity incurs the eligible expenses, the income should be recognized and the liability should be reduced.

Income Statement
In accordance with IAS 20, grant income can be presented as a credit in the income statement either as a reduction to the related expenses or it can be presented in other income.

Cash Flows
Grant proceeds received, that are expected to be forgiven, should be presented as operating activities in the cash flows statement.

Disclosures
The disclosures in the financial statements should indicate the accounting policies applied, such as funds received, amounts included in both deferred income and recognized in income during the period, how deferred amounts will be recognized, and any unfulfilled conditions. The disclosure should also reference where the loan amounts are recorded in the financial statements.

Conclusion
If an entity does not anticipate meeting the PPP eligibility and loan forgiveness criteria, the loan should be accounted for as debt. In certain scenarios, in which the entity is reasonably assured of meeting the loan eligibility and forgiveness criteria for the full loan, it may be appropriate to account for the proceeds as a government grant. Whatever option the entity decides to follow, the financial statement disclosures should be straight-forward and inclusive.

The SBA has indicated it intends to issue additional guidance to help address questions from borrowers and lenders. All entities that received a PPP loan should continue to monitor for any developments which could impact their accounting for the loan. Should you have questions about your specific situation, please contact your William Vaughan Company advisor or reach out to our contributor, Juli Seiwert in our firm’s audit department.

Juli Seiwert, CPA

419.891.1040

juli.seiwert@wvco.com

 

Categories: Audit & Accounting, COVID-19