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Businesses Can Also Be Disrupted By Tax Identity Theft

business-tax-identity-theftA lot of attention is paid to individual tax identity theft — when a taxpayer’s personal information (including Social Security number) is used to fraudulently obtain a refund or commit other crimes. But businesses can be victims of tax identity theft too.

Significant consequences
Business tax identity theft occurs when a criminal uses the identifying information of a business, without permission, to obtain tax benefits or to enable identity theft schemes to be perpetrated on individuals. An identity thief could use an Employer Identification Number (EIN) and file a fraudulent business tax return in order to claim a refund or refundable tax credits. Or they could report income and withholding for fake employees on false W-2 forms. Then, he or she can file fraudulent individual tax returns for the “employees” to claim refunds.

In many cases, businesses don’t even know their information has been stolen until they’re contacted by the IRS. The consequences can include significant dollar amounts, lost time sorting out the mess, and damage to your reputation.

Signs your business could be a victim
There are some red flags that indicate possible tax identity theft. For example, your business’s identity may have been compromised if you receive:

  • A notice from the IRS about fictitious employees.
  • An IRS letter stating that more than one tax return has been filed in your business name.
  • A notice from the IRS that you have a balance due when you haven’t yet filed a return.

Steps to take
If you receive a letter or notice from the IRS that leads you to believe someone fraudulently has used your business EIN, respond immediately to the contact information provided. Contact us for more information about how to proceed.© 2016

Adam Traywick, CPA

Adam Traywick, CPA, runs Adam Traywick, LLC, a CPA firm in Fort Worth, Texas. He has more than 20 years of experience in tax and accounting. Adam and his team work mostly with trades and home-service businesses, along with hair salons, real estate investors and insurance agencies. The firm handles bookkeeping, payroll, tax preparation and tax planning all year, and the team stays in touch with clients throughout the year so April holds no surprises.

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