Tax identity theft may seem like a problem only for individual taxpayers. But, according to the IRS, increasingly businesses are also becoming victims. And identity thieves have become more sophisticated, knowing filing practices, the tax code and the best ways to get valuable data.<\/p>\n
How it works<\/strong><\/p>\n In tax identity theft, a taxpayer\u2019s identifying information (such as Social Security number) is used to fraudulently obtain a refund or commit other crimes. Business tax identity theft occurs when a criminal uses the identifying information of a business to obtain tax benefits or to enable individual tax identity theft schemes.<\/p>\n For example, a thief could use an Employer Identification Number (EIN) to file a fraudulent business tax return and claim a refund. Or a fraudster may report income and withholding for fake employees on false W-2 forms. Then, he or she can file fraudulent individual tax returns for these \u201cemployees\u201d to claim refunds.<\/p>\n The consequences can include significant dollar amounts, lost time sorting out the mess and damage to your reputation.<\/p>\n Red flags<\/strong><\/p>\n There are some red flags that indicate possible tax identity theft. For example, your business\u2019s identity may have been compromised if:<\/p>\n Keep in mind, though, that some of these could be the result of a simple error, such as an inadvertent transposition of numbers. Nevertheless, you should contact the IRS immediately if you receive any notices or letters from the agency that you believe might indicate that someone has fraudulently used your Employer Identification Number.<\/p>\n Prevention tips<\/strong><\/p>\n Businesses should take steps such as the following to protect their own information as well as that of their employees:<\/p>\n\n