When sharing sensitive business information with the Internal Revenue Service (IRS) or personal tax preparers, it is imperative to stay vigilant to avoid tax-related identity theft. If and when thieves get ahold of Social Security numbers (SSN), credit card numbers, or bank account numbers, they can file tax returns to claim fraudulent tax benefits, among other crimes.
Common signs of tax-related identity theft include—but are not limited to—more than one tax return being filed with your SSN, the inability to e-file tax returns, receiving letters, calls, transcripts, or notices from the IRS that you did not request, and IRS records showing that you have received payment from employers you’ve never worked for. Educating yourself so you can recognize these signs is an important step to preventing a stolen identity.
While individuals often discover identity theft upon filing their tax returns, there are steps one can take year-round to proactively protect themselves—and their businesses.
For starters, keep your Social Security card and tax records in a secure place. Encrypt sensitive files and emails with strong password protection. Also, make sure to shred any tax records or sensitive documents you wish to get rid of.
For those who file tax returns electronically, there are extra layers of protection to consider, such as using security software, anti-virus protection, and firewall protection. If you use tax preparation software, use multi-factor authentication, which requires two or more credentials in order to log into your account.
Also, be aware of phishing emails, calls, and texts from someone claiming to be from the IRS. The IRS will generally correspond via written correspondence, rather than via email, phone calls or text messages. Never give out sensitive personal or business information to someone you do not know or who appears suspicious.
To combat identity theft, the IRS—in conjunction with state tax agencies and the tax industry—developed the Security Summit (the Summit). The Summit is organized into six separate work groups, each addressing different areas including authentication, financial services, information sharing, strategic threats, communication and taxpayer awareness, and tax professionals. Since the organization was formed in 2015, the instance of tax-related identity theft has continually decreased but remains a risk to those who aren’t careful.
Reporting Identity Theft
If you suspect a stolen identity, continue paying your taxes and filing your returns as you would normally and contact the Federal Trade Commission (FTC) online at IdentityTheft.gov or by calling 1-877-438-4338. Individuals and business owners should also file Form 14039 and place a credit freeze on their accounts. Respond immediately to any legitimate notices received by the IRS and file a report with your local police department.
For e-filers whose returns are rejected because of duplicate filing under the same SSN, complete an IRS Identity Theft Affidavit, which can be mailed directly to the IRS or submitted online at www.identitytheft.gov.
Remember to regularly review your business registration information online—for both active and closed businesses—and monitor your credit reports on an ongoing basis for any suspicious activity.
Taking a proactive approach to avoid the implications of tax-related identity theft is important. To learn more about other signs of identity theft—or for help reporting a suspected stolen identity—contact RDG+Partners at 585-673-2800.