Among life’s inevitabilities, taxes are firmly planted — with income taxes becoming a permanent fixture in the U.S. in 1913. It was then that the 16th Amendment to the Constitution was created, giving Congress legal authority to tax the incomes of both individuals and businesses.
With that single requirement grew many guidelines (updated regularly by the Internal Revenue Service) — along with numerous tax-related risks that could threaten to close your business, tax identity theft tops the list. Dealing with this profusion of factors can seem chaotic to any small business owner. But while taxes are inevitable, business tax identity theft doesn’t have to be. Stick to these tax basics to avoid business tax identity theft from wreaking havoc on your small business.
Find a Trusted Tax Preparer
In addition to staying on top of updates and changes to tax laws via the IRS, it can be very beneficial to work with a certified tax preparer—whose job it is to follow these laws and ensure taxes are filed accurately. Invest time to research a tax preparer first by checking with the Better Business Bureau and obtaining references from trusted fellow business owners.
Get Ahead of Deadlines
No surprise here. Meeting IRS deadlines saves you frustration and money. 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 vie to file your business taxes before you. So filing early is always an important measure to prevent business tax identity theft.
Consider that in 2013, the Treasury Inspector General for Tax Administration (TIGTA) estimated that stolen Employer Identification Numbers (EINs) could lead the IRS to issue nearly $2.3 billion in fraudulent tax refunds. At that time, TIGTA also projected that there would be approximately $11.4 billion fraudulent refunds (based on stolen EINs) distributed for the five years following the report.
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 your fines.
You Made How Much?
No doubt; it literally pays to be organized when dealing with the IRS. Simply put: track and report your income accurately. Beyond averting potential tax penalties, keeping your business invoices, receipts and sensitive documents in order puts you another step ahead of criminals. For one, identity thieves seek this information to file taxes in your business’ name to get ahold of your refund.
Additionally, maintaining careful storage of your vital paperwork and data also helps you identify if something becomes askew. Any changes to your information that don’t line up could indicate intrusion by an identity thief. A valuable option is to take advantage of a business identity protection service that offers encrypted digital storage, such as the Online Identity Vault™ powered by EZShield®. Having secure electronic copies of your personal and business documents gives you a critical backup whenever and wherever you need it.
Someone Calls You “Boss”
Whether you have one employee or a dozen, payroll is a crucial part of your business’ equation. So, in addition to paying your employees their wages, you are also paying and reporting both federal and state payroll taxes. Accurate reporting includes income, amounts withheld and amounts paid on behalf of your employees. And, of course, this also encompasses keeping a secure, up-to-date record of this information.
While payroll taxes are predominantly a responsibility to the IRS and your employees, this process also keeps you aware if any information has been falsely reported. Misinformation could be a sign that your business has been compromised by tax identity theft. Criminals may intercept your records to file taxes under your business name or use your EIN to claim a fraudulent personal refund.
These four tax-related identity theft basics may not seem so basic — highlighting just how complex taxes can be; but when you’re aware of the issues and how to deal with them, you have just the right tools to bring taxes and business tax identity theft down to a manageable size.
Along with these basics, stay informed about identity crimes, including breaches and scams that target small businesses. The more you do to secure your business information, the more your hard-earned profits will stay in your pocket.
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.