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Business Owners – Don’t Be a Mark for Cyber Criminals This Tax Season

Tax-related identity theft, without question, is on the rise. The good news is that the IRS has made a commitment to continue efforts to combat tax return theft and refund fraud – when combined with the help of eagle-eyed tax practitioners, business owners can breathe a little easier come filing time.

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Tax-related identity theft, without question, is on the rise. The good news is that the IRS has made a commitment to continue efforts to combat tax return theft and refund fraud – when combined with the help of eagle-eyed tax practitioners, business owners can breathe a little easier come filing time.

Tax-related identity theft, without question, is on the rise – and in the wake of the novel coronavirus pandemic, cyber criminals are finding new ways to scam businesses and individuals literally every day. The good news is that the IRS has made a commitment to continue efforts to combat tax return theft and refund fraud – when combined with the help of eagle-eyed tax practitioners, business owners and individuals can breathe a little easier come filing time.

Cyber criminals are not known to make hollow threats; identity thieves are virtually flaunting their data-stealing prowess. Therefore, businesses – no matter their size – should intensify their cyber security protections.

With the July 15 filing extension right around the corner, businesses and individuals alike are now particularly ripe for the picking. Cyber criminals are displaying an increasingly sophisticated knowledge of tax codes and filing practices, making it easier to obtain valuable information to file fraudulent returns.

It may be impossible to completely thwart hack attacks, but there are specific signs that can indicate whether a business has been targeted. Businesses, partnerships, and estate and trust filers should contact the IRS immediately if any of the following issues arise.

If a request for file extension is denied because a tax return with the Employer Identification Number (EIN) or Social Security Number (SSN) is already on file, that’s a red alert. The same if an electronically filed return is rejected due to a duplicate EIN or SSN already filed with the IRS.

Be aware of an unexpected tax transcript receipt or IRS notice that doesn’t match up with anything submitted by the filer. And if expected and/or routine correspondence from the IRS isn’t received, it could be because a cyber thief has changed your business’ address.

For those business owners who rely on tax professionals to prepare and file their returns, take some comfort in knowing that the IRS has taken several steps in recent years to keep those cyber criminals at bay. Tax software products now share many data elements with the IRS and state tax agencies; as such, suspicious tax returns are more easily identified.

Moreover, the IRS now encourages tax practitioners to use tax preparation software that asks a series of security questions to better protect the business filer. The information sought includes total income amount from prior year filings, parent company information, and previous estimated tax payments made.

For individuals who find themselves victims of identity theft, whether due to COVID 19 fraudulent scams or other cyber criminal activity, the following steps are recommended:

  • Call the companies where you know the fraud occurred
  • Place a fraud alert and get your credit reports
  • Report identify theft to the Federal Trade Commission (FTC)
  • File a police report with your local police department
  • Close new accounts opened in your name
  • Remove bogus charges from your accounts
  • Correct your credit report
  • Consider adding an extended fraud alert or credit freeze

If you receive an IRS notice in the mail that says someone used your Social Security number to get a tax refund, follow the instructions provided in the letter. Additionally:

  • Complete IRS Identity Theft Affidavit (Form 14039)
  • File your tax return, if applicable, and pay any taxes you owe
  • Place a fraud alert with one of the Credit Bureaus
  • Get copies of your credit report and check for anomalies

Depending on your personal situation there may be additional steps that need to be taken for certain special accounts. For more information, visit www.identitytheft.gov/steps.

 

Disclaimer: Any written tax content, comments, or advice contained in this article is limited to the matters specifically set forth herein. Such content, comments, or advice may be based on tax statutes, regulations, and administrative and judicial interpretations thereof and we have no obligation to update any content, comments or advice for retroactive or prospective changes to such authorities. This communication is not intended to address the potential application of penalties and interest, for which the taxpayer is responsible, that may be imposed for non-compliance with tax law. 

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