Posted by: Heather Shy on February 21, 2020 at 12:00 pm
With tax season comes tax scams. Every year, we publish the latest IRS warnings on how to protect your identity, and your business. Here’s our 2020 update on tax scams and how to protect your business, including 3 new scams you need to know about.
Please share this article with your payroll, finance, and HR staff.
New Tax Scam Warnings for 2020
Protect your tax software accounts by using multi-factor authentication (MFA). We’ve written about MFA before, and this year the IRS is encouraging tax professionals and taxpayers to use any MFA feature offered on their tax preparation software.
Avoid “ghost” tax return preparers. Basically, a ghost preparer will do your taxes for you, but refuse to sign the return. They may also require cash payments, falsify your return, and misdirect your refund into their own bank account. Always review your return carefully, no matter who prepares it!
Protect Yourself and Your Business From These Classic Tax Scams
Small Business Identity Theft
Did you know that identity thieves also target small businesses? They use the information they exploit to open new lines of credit or file fraudulent tax returns.
Identity thieves also use stolen Employer Identification Numbers (EINs) to create fake W-2s. Then, they file fraudulent individual tax returns. Thieves use stolen EINs in other scams as well.
To prevent some of these issues, the IRS is asking businesses and tax preparers for additional information to help verify the legitimacy of the return. Providing this information helps protect your business.
How can you tell if you’ve been hit? The IRS advises all small business owners to be on alert for any of the following:
- Extension to file requests are rejected because a return with the Employer Identification Number or Social Security number is already on file.
- An e-filed return is rejected because a duplicate EIN/SSN is already on file with the IRS.
- An unexpected receipt of a tax transcript or IRS notice that doesn’t correspond to anything submitted by the filer.
- Failure to receive expected and routine correspondence from the IRS because the thief has changed the address.
If you experience any of these issues, contact the IRS right away.
The W-2 Scam Continues to Threaten Small Businesses
We’ve been writing about the W-2 scam since 2016. It continues to threaten because it works. The IRS calls this “one of the more dangerous email scams for tax administration.” Here’s how the scam generally unfolds:
- Payroll, accounting, or human resources staff receive an email that appears to be from an executive or other leader in the company. (Note: It is extremely easy to fake an email address to look like it’s coming from someone other than the sender.)
- It often starts with a casual greeting such as, “Hey, are you in today? Can you do me a favor?”
- Once the conversation is underway, the “boss” will ask the target to send them W-2 information for all company staff.
- Once that data is sent, every worker is at risk for tax-related identity theft.
Because of the nature of W2 scams, it can take weeks to detect. Often the thieves will file fraudulent tax returns within just a couple of days using the information obtained. That’s why it’s particularly important to set policies for sharing employee financial information. (This also applies to wire transfers and gift card requests, other sneaky tactics that scammers use to defraud small businesses.)
The IRS recommends requiring verbal confirmation before emailing W-2 data. Another helpful policy is to have two people review and verify any W-2 request before sending.
The IRS has instructions on how to report a W-2 scam here.
Don’t Leave Your Network Security to Chance!
Cybersecurity is not just for the big guys. Even small and medium-sized businesses must protect themselves from scams and viruses. Affordable solutions exist for businesses of every size. Whether you’re unsure where to start, or know what you need, contact TAZ Networks today for assistance setting up the right network security for your business.