The calendar has flipped to a New Year, which means – gasp – tax season is right around the corner. That means both individuals and businesses need to get their records in order to settle up with old Uncle Sam.
But did you know tax season is also a prime time for business identity theft?
It’s true. Company Alarm is focused on preventing identity thieves from hijacking businesses through the filing of fraudulent documents with your state. But that’s not the only form of business identity theft.
One of the most common forms of identity theft – whether it’s targeting businesses or individuals – is the filing of fraudulent tax returns. That’s when a criminal uses your personal information or identifying information for your business, such as your Employer Identification Number or EIN, to file a fake tax return and then pocket the refund.
A major headache
For individuals, such crimes can be a major headache. One of Company Alarm’s team members had a false tax return filed in his name almost a decade ago. It took him more than two years to get the IRS to acknowledge that the return filed in his name was illegitimate and to stop pressuring him to pay back the refund.
Businesses victimized by the crime face the same difficulties. And, sadly, American businesses are falling victim to this form of business identity theft in greater and greater numbers.
In 2015, the IRS discovered 350 fraudulent tax returns filed for businesses. A year later, that number jumped to 4,000. The following year? About 10,000.
For those keeping track at home, that’s a 2,757 percent increase. In just three years.
It’s not a stretch to say that every business in America is vulnerable, especially since states publish lists of identifying information for businesses on their websites.
Protecting your business
So, what can you do to protect yourself and your business?
No. 1: Safeguard your business information as much as you can. Yes, many states publish your business’s name and address on their websites. But typically your EIN is not included – and that bit of information is essential for criminals to file a fraudulent tax return in your business’s name.
So, your top priority should be to keep your EIN confidential.
Don’t publish it on your website. Don’t leave the number laying around on a Post-It Note on your desk when the cleaning crew comes in. Don’t hand it out willy nilly.
If one of your employees needs it for an application of some kind, call them over the phone and tell them the number verbally. Or walk over to their desk and enter it on the form for them. Don’t email it. E-mail is vulnerable to hacking.
Keep your number in a secure location where only you can access it. Don’t keep copies of the number internally in multiple places. When you send it out, make sure you’re sending it securely.
In short, treat your business’s EIN like you would your own Social Security Number. Because that’s basically what an EIN is, your business’s Social Security Number.
No. 2: Don’t delay filing your taxes. As we like to say at Company Alarm, time is a criminal’s best friend.
The longer you wait to file your taxes, the more time you give criminals to swoop in and file a fraudulent return before you do.
If you file your legitimate return with the IRS and then a criminal tries to file a fake one after you, that’s almost certainly not going to cause a problem. Your legit return is already queued up.
But if a criminal beats you to the punch, you’re going to be spending years trying to convince authorities that your return is the real one.
The best solution is simple speed. Once your records are in order, file. Don’t wait.
Andy is a serial entrepreneur with business and property interests in more than half a dozen states. He became passionate about business identity theft after one of his own companies was hijacked and he lost control of a $5 million piece of land in Las Vegas. A native of Vietnam, Andy came to the United States at age 12 and built his network of businesses from scratch over more than two decades of work.
Company Alarm is dedicated to helping business owners protect what they have worked so hard to build. Our monitoring software is designed to prevent cybercriminals from exploiting loopholes to hijack your company and assets. To sign up for this low-cost, value-added protection, click here.