The bad guys are not just in the movies. They are out there every day causing trouble for individuals and businesses. Like the song says in the musical The Music Man, “Oh yes, we’ve got trouble.” The trouble is tax-related identity theft. No small matter!
What is the Problem?
Tax-related identity theft is when a criminal files a fraudulent tax return using stolen business identity information with the intent to receive the business’ tax refund. Or, identity information is stolen to conduct other disruptive and false financial activities.
What are the Potential Negative Outcomes?
Identity thieves can use stolen information to open new forms of credit, leaving the business liable for purchase debts. The outcomes of tax-related identity theft are serious, including destroyed credit rating, reputation damage, loss of revenue, inability to pay for business expenses, tax liabilities and even business failure.
How do the Bad Guys Do It?
Perpetrators could steal the identity information of a business by:
Hacking into bank accounts
Manipulating credit reports
Filing fraudulent business documents
Falsely accessing tax information
5 Actions to Protect Against Tax Identity Theft
To protect against tax-related identity theft and to avoid countless hours of struggle and potentially significant costs, use these 5 actions:
Use a business employer identification number or EIN. That will be separate your business from your personal social security number. And, be sure to keep all business and personal finances and accounts separate.
Carefully secure all sensitive files, both online and offline. Use a secure mailbox, shred documents that you don’t need, lock-up sensitive files or documents and keep all online documents password-protected. Use strong internet and computer security protections and keep them updated.
Create solid internal processes and controls. Provide access to specific documents or data areas only to specific individuals. Establish and frequently review record keeping and all financial data management processes.
Review the data management practices of all vendors and financial partners to make sure their practices and processes are secure. You have a right to protect your data.
Check your financial statements and your business profiles regularly, so that you are constantly on alert for any potential fraud. You can also retain credit reporting agencies, such as Experian, to help you monitor your accounts. Your bank should also alert you to any possible fraudulent activities.
If You Have Been Compromised
If your business has been compromised by tax-related identity theft:
Report it to the fraud department of the credit agencies.
Close accounts you think have been compromised.
Obtain new credit cards.
Notify your banks and lenders.
Notify the FTC, local police and the Internal Revenue Service
Seek Professional Financial Assistance
To protect yourself, seek professional assistance. Contact Busch CPA, one of the leading full-service CPA firms serving the greater Chicagoland area. We provide expert tax management, accounting, and financial reporting statement services to serve you wisely.