Tax Scams Targeting Your Small Business

Employer Identification Number

Guard Your Business’ Tax Information

With the continued adoption of going “digital,” small and mid-sized businesses (SMBs) have become increasingly vulnerable to cybercrime. This transformation, combined with fewer checks and balances inherent with a smaller team, is one of the primary reasons why SMBs are ideal targets for data thieves every tax season.

By making minor tweaks to their tried and tested fraud techniques, criminals can dupe small business owners and employees into falling for comparable cons each year. Here are some data scams targeting small businesses to be aware of as we approach the 2021 tax season.

Paycheck Protection Program (PPP) Fraud 

As a lifeline in turbulent times, the Paycheck Protection Program (PPP) was established by the Coronavirus, Aid, Relief and Economic Security Act (CARES Act) and implemented by the Small Business Administration (SBA) with support from the Department of the Treasury. The program was designed to blunt the economic impact of the pandemic by providing SMBs with the resources to maintain payroll, hire back employees who were laid off, and cover applicable overhead. 

Since it’s roll out in April 2020, PPP loans were hounded by extensive instances of fraud. As the loan program continues to help U.S. businesses through the beginning of 2021, the SBA as implements revised rules to reduce fraud and abuse. The Office of Inspector General is warning SMBs to be on the lookout for the potential fraud schemes related to PPP loans:

  • Beware of phishing scams and fake websites utilizing the SBA logo. Fraudsters create these to attempt to gather your Personally Identifiable Information (PII) and sensitive business information, to obtain personal banking access, or to install ransomware on your business devices.
  • Ignore emails, calls or text from the SBA initiating contact for a loan or grant. If you are proactively contacted by someone claiming to be from the SBA, suspect it is a scam.
  • If you are in the process of applying for a PPP loan and receive an email asking for personal or business information, double check that the referenced application number matches your actual application number.

Business-Related W-2 Scams

The IRS recently warned SMBs of the rising threat of W-2 scams, where hackers lure payroll and human resources professionals to share sensitive tax information via a bogus email. By the end of the email exchange, your employees’ W-2 Forms could be in the hands of cybercriminals, leading to company-wide tax fraud.

In another scam, companies applying for Employer Identification Numbers (EINs) are being tricked into signing up through fraudulent websites. Like your Social Security Number, your EIN is required for business bank, loan, and credit accounts as well as state and federal tax filing. Only apply for your EIN by filing a SS-4 Form through the IRS.

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.

Scams Targeting Tax Preparers

Tax preparers are often small businesses, helping consumers and SMBs in their community to prepare on time and accurately. Their database is a treasure trove of tax information, making them a target for scammers, cybercriminals, and identity thieves this tax season.

The IRS requires tax preparers to create and endorse a security plan to protect client data and their computer networks from the threat of a hack. If using a tax professional to prepare your business return, be sure to confirm their credibility by asking for their Preparer Tax Identification Number. And, don’t trust your business’ information to anyone without first verifying their CPA status.

Tips to Protect Your Small Business from Tax Scams

  1. Create a system of checks and balances. Have a trusted member of your executive team or an independent tax agent double check your processes.
  2. Train employees to recognize W-2 phishing scams. The IRS will never call or email you for tax-related information. They will first contact your organization via carrier mail.
  3. 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”.

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The views and opinions expressed in this article are those of EZShield Inc. alone and do not necessarily reflect the opinions of any other person or entity, including specifically any person or entity affiliated with the distribution or display of this content.

Donna is the Chief Marketing Officer of Sontiq, the parent company of the EZShield and IdentityForce brands. She is responsible for global marketing initiatives...
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