As the 2019 tax season approaches, the IRS and its Security Summit partners joined to warn small businesses to be cautious regarding an increase in identity theft and W-2 scams, according to www.irs.gov. The Security Summit includes the IRS, state tax agencies and the tax community, including tax preparation firms, software developers and tax professional organizations, among others; total membership includes the IRS, 42 state agencies and 20 industry offices.
As with individuals, small businesses can have their identities stolen and their sensitive information used to open credit card accounts or used to file fraudulent tax returns for bogus refunds. Employers also hold sensitive tax data regarding employees, such as Form W-2 data, which is highly valued by identity thieves.
The IRS has identified an increase in the number of fraudulent Forms 1120, 1120S and 1041, as well as Schedules K-1. The fraudulent filings apply to partnerships and estate and trust forms.
Additionally, employers in public and private sectors are targets for the W-2 scam that has in recent years become one of the more dangerous email scams for tax administration. These emails appear to be from an executive or organization leader to a payroll or human resources employee. It may start with a simple, "Hey, you in today?" and, by the end of the exchange, all of a company's Forms W-2 for its employees may be in the hands of cybercriminals.
Because payroll officials believe they are corresponding with an executive, it may take weeks for someone to realize a data theft has occurred. Generally, the criminals are trying to quickly take advantage of their theft, sometimes filing fraudulent tax returns within a day or two. This scam is such a threat to taxpayers that a special IRS reporting process has been established.
