Want to Keep Your Small Business Going Strong? Avoid Tax Identity Theft

*Originally posted March 21, 2016. Updated December 30, 2019*

As the calendar turns to another year, businesses and individuals will soon be facing the inevitability of yet another tax season. And, while filing taxes isn’t something entirely avoidable, the risk of business tax identity theft can easily be minimized. According to the IRS Security Summit, businesses small and large are ideal targets for data thieves every tax season due to their abundance of personal information that can be used to file fraudulent returns. With ever-changing tax reform and regulations, it may be hard for your company to keep up processes while ensuring all sensitive documents are secure. Stick to the following tax preparation tips to avoid letting business tax identity theft wreak havoc on your business:

Find a Trusted Tax Preparer

To delegate the extra work and responsibility that comes with filing taxes and distributing sensitive information, working with a certified tax preparer can be very beneficial. Often Small to Mid-Sized Businesses (SMBs) themselves, tax professionals remain among the most coveted targets for identity thieves because of their treasure trove of sensitive tax information belonging to companies and individuals. In 2018, the Internal Revenue Service (IRS) received five to seven reports per week from tax professionals that experienced data theft. 

Take the time to research tax preparers before doing business, first by confirming their Preparer Tax Identification Number with the Better Business Bureau and then by obtaining references from trusted fellow business owners. Tax professionals are required to review and update their data protection plans, so your business files don’t become a victim of their data breach.

Get Organized and File Early

Beyond averting potential tax penalties, keeping your business invoices, receipts, and sensitive documents in order puts you another step ahead of criminals. Identity thieves seek any chance they can to obtain confidential information to file taxes in your business’ name and intercept your business tax refund as well as your employees’. Maintaining careful storage of your vital paperwork and data helps you identify if something becomes askew. 

As if it were not enough of a driving force to avoid monetary penalties associated with filing late, business tax identity theft adds an extraordinary amount of pressure as thieves race to file your business taxes before you. Filing early can be an important measure to avoid business tax identity theft. If you are delaying your filing due to inability to pay, contact the IRS as soon as possible to discuss payment options. The IRS makes it clear throughout their website that they will work with taxpayers to figure out the best course of action to reduce or eliminate any fees or fines.


Red flags indicating your business identity has been stolen:
  • You’re rejected from requesting a tax extension or sending an e-filed return because a return with your company’s EIN is already on file.
  • Your business receives an unexpected tax transcript receipt or IRS notice that doesn’t correspond to your return.
  • You fail to receive expected communication from the IRS because fraudsters have changed the address on your application.

Don’t Fall for Phishing Scams

Phishing scams remain a year-round threat to taxpayers. Your human resources and finance teams are the first line of defense when tracking and reporting your employees’ incomes accurately. If documents containing Personally Identifiable Information (PII) were to get in the wrong hands, your team must be prepared to react with a breach response plan.

Educate employees to recognize and avoid phishing emails, threatening phone calls and texts from thieves posing as legitimate organizations such as banks, credit card companies, and government organizations, including the IRS. Having secure electronic copies of your personal and business documents gives you a critical backup whenever and wherever you need it.

Along with these basics, stay informed about identity crimes, including the latest newsdata breaches, and scams that target businesses of all sizes. The more you do to secure your business information, the more your hard-earned profits will stay in your pocket.

Get ahead of criminals all year long by implementing our three-part Spring Cleaning for Your Small Business series:

Tips to Protect Your Small Business from Business Tax Fraud

  1. Keep up to date with the latest tax scams: The IRS keeps a running list of scams for consumers and businesses to be aware of, called “The Dirty Dozen.”
  2. Create a system of checks and balances. Have a trusted member of your executive team or an independent tax agent double check your processes.
  3. Invest in a private, secure Wi-Fi network for your business. Password protected Wi-Fi deters hacking into your business devices.
  4. Conduct regular security training and testing. Ensure employees are following your security protocols and reward those who are keeping devices secure.

Continue following Fighting Identity Crimes to get the latest breach and scam updates, ID protection news & tips from our industry experts!

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Building Barriers Against the Top Three Business Fraud Threats

**Originally published July 7, 2015, updated July 22, 2019**

Fraudsters are always in the market for a lucrative new target. So, what’s the most information-rich, security-poor victim they can exploit? A small business, of course.

According to the Association of Certified Fraud Examiners (ACFE), an organization on average loses a whopping 5% of their revenue to fraud each year — that’s potentially a global total loss of $4 Trillion dollars. And small businesses are impacted disproportionately harder by fraud, with a median loss of $200,000 for businesses with less than 100 employees. That’s almost twice as much as the median loss for companies with more than 100 employees ($104,000.)

Thankfully, there are a few tricks small business owners can use to combat potential fraud. And the best place to start is by looking at the main entry points of exploitation: occupational fraud, cyberattacks, and identity theft.

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The Six Simple Secrets for Preventing Tax Identity Theft

How to Prevent Tax Identity Theft

Tax identity theft is a growing concern. And with filing season upon us, you may find yourself a little on edge — for good reason. 

The IRS anticipates losing $21 billion to fraudulently filed tax returns in 2016, up from $5.8 billion just two years prior. Why such steep growth? Because thieves are realizing that this rather lucrative scheme takes relatively little effort to execute.

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