As if small business owners didn’t have enough to worry about, welcome, small business identity theft.
Earlier this month, the IRS issued a warning to employers and small business owners alerting them to a growing new threat by cybercriminals to target sensitive company and employee information. Once obtained, these criminals then use the information to open credit cards (both in the name of the business and its employees) and to file fraudulent tax returns for “bogus refunds.” Theft of employee identification numbers (EINs) has long been a problem, but, only recently have thieves turned to filing fraudulent business returns.
The trouble is, stealing from a small business is relatively easy. All that’s really needed to submit an application for a loan, a tax return, or valuable hardware to run a business is the EIN, and any supporting information can commonly be found on a business’ website. Small businesses, particularly startups, don’t often have volumes of previous credit transactions to serve as proof of creditworthiness, and with few safeguards in place to their data, they are easy targets.
So, let’s turn to the three questions you’re likely (hopefully!) asking at this point:
- How do I prevent becoming a victim of business identity theft?First and foremost, protect your data. Keep all your documents safe and secure, even if they’re in the Cloud, and dispose of unnecessary information using a shredder. Never provide your federal tax ID to anyone unnecessarily, and don’t send EIN, account numbers, financial documents, or personal information via email or an unsecured website. Monitor your business credit reports carefully (a monitoring system alerting you to abnormalities is worth every penny), and avoid creating any type of “master” user account and password that contains access to all of your company information. If that account got hacked, you’d be done for.As far as protecting your returns, the IRS, state tax agencies, and tax return preparers are asking taxpayers to provide additional information to verify that a return is legitimate. Those steps include “know your customer” questions, including who signed the return (name and SSN), the company’s tax payment and/or filing history, the company’s parent company, and additional information about the claimed deductions. Sole proprietorships that file Schedule C, Profit or Loss From Business, and partnerships may be asked to provide driver’s license information.The IRS also suggested that business taxpayers protect against identity theft by adopting the recommendations for cybersecurity from the National Institute of Standards and Technology.
Finally, file as early as possible in the tax season.
- How will I know I’ve fallen victim to business identity theft?The IRS noted that, just as with individual income tax returns, business, partnership, and trust and estate return filers should be aware of these signs that their identity has been compromised:- The IRS rejects an extension to file request because a return with the EIN or Social Security number (SSN) is already on file.
- The IRS rejects an e-filed return because there is a return with a duplicate EIN/SSN already on file.
- The taxpayer received a Letter 5263C or 6042C, which notifies taxpayers they may be an identity theft victim.
- The taxpayer unexpectedly receives a tax transcript or IRS notice that does not correspond to anything the taxpayer submitted.
- The taxpayer fails to receive expected and routine correspondence from the IRS because the identity thief has changed the taxpayer’s address with the IRS.
- What steps do I take to get my business back on track?There are a number of resources available online to direct your actions with your bank and credit card companies if your financial data has been compromised. But, how do you handle the IRS?First, give us a call. We can help you report your breach to the Treasury Inspector General for Tax Administration and any state revenue agencies. We’ll file the necessary forms like this one on your behalf with IRS. Just do it quickly. The faster we start resolution, the faster you’ll be back to work.
Stay safe out there.
