A great deal 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 also be victims of tax identity theft.
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 individual identity theft schemes. For example, a thief
could use an Employer Identification Number (EIN) and file a fraudulent
business tax return to claim a refund or refundable tax credits. 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 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.
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