Help Protect Your Business Against Tax Scams
For fiscal year 2021, the Criminal Investigation Division of the IRS identified $2.19 billion in tax fraud schemes1. With a few tips and tools, this year we aim to help you protect your business.
Help Prepare Your Business Against Scams This Tax Season
Tax season is an ideal time for your business data or employee information to be stolen. Stolen business Employer Identification Numbers (EINs) have long been used to perpetrate tax fraud by creating false W-2 or 1099 documents or to fraudulently claim certain benefits, such as fuel tax credits. However, in the past couple of years there has been an upswing in the filing of fraudulent Forms 1120 and 1120-S2.
Safeguarding your EIN number and filing your business taxes early can be effective against tax fraud and identity theft.
Common Tax Scams Targeting Businesses
W-2 Phishing Scams
Fraudsters send an email pretending to be a high-level corporate employee requesting information about employees’ W-2 forms. The emails typically ask for Form W-2 information and an earnings summary of all W-2 employees. The emails might also ask for an updated list of employees with their personal details including social security number, home address, and salary.
Unemployment Benefit Scams
Fraudulent unemployment claims have risen sharply in the last year3. Criminals use stolen identities and IRS-issued EINs to file these fraudulent claims and collect benefits in multiple states.
Other Phishing Scams
- Email phishing scams are designed to trick taxpayers into thinking these are official communications from the IRS or others in the tax industry, including tax software companies. The IRS has identified a new email phishing scam that aims to steal tax software preparation credentials3. The fraudulent email appears to be from the IRS warning the recipient that their tax account has been put on hold. The goal is to steal login credentials or install malware onto your computer by luring you to click on a link.
- Be alert to emails from the Taxpayer Advocacy Panel (TAP), which is a volunteer board that advises the IRS on systemic issues affecting taxpayers. Other than your email address and the state in which you live, TAP never requests, and does not have access to, any taxpayer’s personal and financial information4.
- Urgent or threatening phone calls or messages claiming to be from the IRS. These messages typically demand prepaid gift cards or wire transfers, which the IRS does not use for tax payments5.
- Text messages purporting to be from the IRS. The IRS does not initiate contact with taxpayers by email, text message, phone, or social media; they send letters by U.S. mail. Officials say there are very few circumstances when the IRS will come to a business6.
How to Report Tax Fraud as a Business
- To report theft of W-2 information and/or social security numbers, visit irs.gov.
- Forward any suspicious tax-related email to email@example.com.
- Send a screenshot of any unsolicited SMS or text message claiming to be from the IRS to firstname.lastname@example.org.
- To report identity theft, file a complaint with the Federal Trade Commission at identitytheft.gov.
- Report fraudulent phone calls to the Federal Trade Commission using their online form at ReportFraud.ftc.gov.
- Contact your financial institutions and close any financial or credit account that might have been opened without your permission or compromised by thieves.
- File a Business Identity Theft Affidavit if your company’s EIN has been used to file fraudulent unemployment benefit claims.
How to Help Avoid Tax Scams
- File your business taxes as early as possible during tax season. Fraudsters using stolen information tend to file false returns early hoping to obtain refunds before the legitimate taxpayer files their return.
- Only give out company information when absolutely necessary—especially on websites and social media sites—and keep track of who you give it to.
- Do not click any links or open attachments in emails claiming to be from representatives of the IRS.
- Respond promptly when former employees file unemployment benefits. Notify the IRS immediately if an unemployment claim is filed for an individual who was not an employee.
- Before giving out information, verify email or other requests that appear to come from your tax professional and payroll/human resources personnel. You can confirm the source by calling the number of your accountant or staff.
- Properly dispose of any documents that contain sensitive business and customer information.
- Secure company networks, computers, and devices with firewalls and the latest anti-virus software.
- Establish and enforce security policies to protect company and employee information.
How the IRS Contacts Businesses6
- The IRS will not initially contact you by phone call, text message, social media, or email to ask for personal or business financial information or to obtain payment for a tax bill. The IRS will write to you first, possibly multiple times. If you are unsure about a tax bill, call the IRS at (800) 829-1040.
- The IRS will not give you an ultimatum to pay immediately or demand that you wire money.
- The IRS will not demand that a business pay taxes without the opportunity to question or appeal.
- The IRS will not threaten to send police or other law enforcement to your place of business.
- The IRS will not ask you to pay your debt using gift cards or prepaid debit cards. They also will not ask you to pay with alternative currency, such as bitcoin.
- The IRS works with four private debt collection agencies for certain unpaid tax debts. When debt is assigned to one of these agencies, the IRS will inform the taxpayer or business via letter. No other private agency is authorized to represent the IRS to collect overdue taxes.
- In the case of a personal visit from someone claiming to be from the IRS or other government entity, check for official credentials in the form of a pocket commission and HSPD-12 card. No one making a personal visit will demand immediate payment, especially to a source other than the U.S. Treasury.
1IRS-Criminal Investigation. 2021. IRS-CL Fiscal Year 2021 Annual Report. https://www.irs.gov/pub/irs-pdf/p3583.pdf. Accessed March 2, 2022.
2IRS. 2018. “Security Summit warns employers: Be alert to identity theft and W-2 scams.” Accessed March 2, 2022. https://www.irs.gov/newsroom/security-summit-warns-employers-be-alert-to-identity-theft-and-w-2-scams.
3IRS. 2021. “Identity Theft and Unemployment Benefits.” https://www.irs.gov/identity-theft-fraud-scams/identity-theft-and-unemployment-benefits. Accessed March 2, 2022.
4IRS. 2022. “Latest Spearphishing Scam Targets Tax Professionals.” https://www.irs.gov/newsroom/latest-spearphishing-scams-target-tax-professionals. Accessed March 2, 2022.
5Taxpayer Advocacy Panel. 2022. Privacy Statement. https://www.improveirs.org/privacy-statement/. Accessed March 2, 2022.
6IRS. 2022. “IRS Warning: Scammers Work Year-round; Stay Vigilant.” https://www.irs.gov/newsroom/irs-warning-scammers-work-year-round-stay-vigilant. Accessed March 2, 2022.
7IRS. 2018. “Avoid Scams: Know the Facts on How the IRS Contacts Taxpayers.” https://www.irs.gov/newsroom/avoid-scams-know-the-facts-on-how-the-irs-contacts-taxpayers. Accessed March 2, 2022.
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