Tax Return Identity Theft: Big Concern for Small Business

Most people who own a small business are well aware that they have to be careful about identity theft and other threats to their security. This has never been more true than it is right now. In fact, the IRS recently issued a warning to small businesses that fraudsters are working overtime to try and get sensitive information from small businesses and then use that information to open credit cards and file fraudulent tax returns.   

While criminals are likely to file all kinds of tax forms with the fraudulent information they obtain, the most commonly filed fraudulent forms include:

l  Form 1120

l  Form 1120S

l  Form 1041

l  Schedule K-1

Typically, what criminals will do is obtain stolen employer identification numbers. From there, they will often use those numbers to fill out falsified W-2 forms and other forms, all in an effort to obtain refunds and open lines of credit.

While small businesses should do everything within their power to protect themselves against identity theft, they should also be aware of the warning signs that identify theft has already occurred. That way, they can report suspicious happenings to the IRS.

Some signs to look out for include:

l  A rejection of an extension to file request due to already having a return on file even though no return has been submitted

l  A rejection of an e-filed return due to a return already being on file, when no return has been filed

l  Receipt of a Letter 5263C or 6042C, a warning of possible identity theft

l  Receipt of tax transcripts that are not in line with submitted returns

l  Not receiving regular correspondence from the IRS due to a falsely changed address or other contact information

Sadly, identity theft is alive and well, but by following these tips and working hard to protect your business, you can keep yourself from becoming a victim.

What to do if Identity Theft Happens to You

We all know that identity theft happens, but, if we’re being honest, most of us don’t think it will ever actually happen to us. In truth, though, absolutely anyone, no matter how careful they are, can be a victim of identity theft.

If this unfortunate crime does happen to you, you’ll probably be notified via a letter from the Internal Revenue Service (IRS). The letter will tell you if a false income tax return was filed in your name and/or with your social security number. If that does happen to you, you might feel shocked and

upset, but it’s important to move past your emotions and act quickly, especially since there are a lot of things you can do to make things right once again, and the sooner you do those things, the less hassle and trouble involved.

Step #1: Tell Everyone What’s Happened

First things first, if you find out (or even suspect) that you have been the victim of identity theft, you need to let absolutely everyone related to your finances know. To start with, notify your accountant, financial advisor, or any other professional financial services you utilize. For best results, send over a copy of the IRS letter or suspicious communication you received. Actually mail this information in too just in case your email or other online communications have been hacked.

You’ll also want to send some kind of response to the IRS. Pay attention to the directions you receive on your notification letter, and follow them exactly. The IRS is a very busy agency, so they don’t have a lot of time for people who can’t follow basic directions. In most cases, you’ll need to complete and send in the IRS’ Identity Theft Affidavit (Form 14039).

Step #2: Contact the Credit Bureaus

In the United States, there are three major credit bureaus, and they are all connected. So, fortunately, if you contact just one of these bureaus and set up a fraud alert, all of the others will be informed as well. However, if you want to be extra cautious, there is no harm in contacting all of three bureaus, whose contact information you can find below.

l  Equifax: (866) 349-5191

l  TransUnion: (800) 680-7289

l  Experian: (888) 397-3742

Step #3: Get in Touch with the Federal Trade Commission

The IRS isn’t the only organization that cares about your experience with identity theft or that needs to know about it. You will also need to fill out the appropriate forms with the Federal Trade Commission (FTC). Just like the IRS, this organization has its own identity theft complaint/affidavit form that you will need to fill out.   #IdentityTheft

Related articles

• Consumer Reports: Protecting your Social Security number (abc7chicago.com)

Stop Tax Identity Theft In its Tracks

Imagine after sending in your annual tax return, you receive a notice from the Internal Revenue Service saying that another return has already been filed using your name and Social Security number-and claiming a refund. Sound impossible? It can happen if you become one of a growing number of victims of tax return identity theft. According to one estimate, tax-related identity theft cases have soared more than 650% since 2008. At the least, this crime can lead to a

delay in your refund, but the consequences may be much more serious. In addition, you may face a larger problem with identify theft if the scammer is also running up credit card debt or taking out loans in your name.

To avoid becoming a victim, we recommend steps such as safeguarding your Social Security number and other financial information, keeping an eye on changes to your credit ratings and taking precautions with electronic transfers of confidential information. Be sure to contact us if you believe you have been a victim of identity theft or would like advice on the best ways to secure your financial information.