In the hectic year-end rush between Thanksgiving and Christmas, it’s easy to lose track of a far less exciting “holiday”: National Tax Security Awareness Week (December 2 – December 6), whose fourth arrival the IRS announced earlier this month. But while tax security awareness may not seem important to the average taxpayer, the IRS has good reason for pushing this issue into the spotlight ahead of the upcoming tax season. According to the Internal Revenue Service, “Identity thieves are displaying a sophisticated knowledge of the tax code and industry filing practices” – knowledge that, the IRS claims, they are putting to use to “file fraudulent returns,” using “valuable data” stolen from employers and business entities.
What is Tax-Related Identity Theft?
December of 2019 brought with it the Fourth Annual National Tax Security Awareness Week: a nationwide, collaborative effort between the IRS, various state tax agencies, and the wider tax industry to educate U.S. taxpayers about the dangers (and warning signs) of tax-related identity theft.
In general, identity theft involves any unauthorized or improper use of another person’s information, such as an address or Social Security Number (SSN), to illegally obtain goods, services, or funds. Each state has its own identity fraud laws, in addition to federal laws prohibiting identity theft (18 U.S. Code § 1028) and aggravated identity theft (18 U.S. Code § 1028A). When identity theft involves the filing of false or fraudulent tax returns – an act which is a criminal offense in its own right – it is called “tax identity theft” or “tax-related identity theft.”
What Are Some Common Warning Signs of Tax Identity Theft Against Business Owners?
Tax identity theft can strike at anyone, including children, senior citizens, deceased individuals, and – as the IRS recently cautioned against – employers and business owners. If you operate a business, be on the lookout for the following signs of tax-related identity fraud, which the IRS highlighted as part of National Tax Security Awareness Week:
- An expected IRS notice never arrives, because your “address” has been updated by another taxpayer.
- The IRS rejects your electronically filed return, or rejects your request for a tax filing extension, because your SSN or Employer Identification Number (EIN) is already in use by another taxpayer.
- You received an IRS notice or tax return transcript that does not seem to correspond to your business activities, match with your financial information, or make chronological sense.
How Can I Protect My Small Business Against Tax Identity Fraud?
If you are a business owner, you should take the IRS’ warning seriously and remain vigilant for signs of tax-related identity theft. The best way to protect your small, midsize, or large business is to work with a trusted tax professional, like the California business tax lawyers and accountants at the Tax Law Office of David W. Klasing. Serving California, out-of-state, and international entities, our experienced business tax lawyers work with LLCs, corporations, sole proprietorships, and partnerships, providing services that range from tax planning and preparation to IRS fraud defense and tax audit representation.
For its part, the IRS has also “taken steps to help protect Form 1120-series filers” (i.e. corporate filers), including sharing data with “tax software products” used to prepare and file returns. While that’s good news for the victims of tax identity theft, it should also remind readers that the IRS can easily obtain taxpayer data through its many information-sharing agreements – not only with software companies, but also banks, financial services, and government agencies around the world.
For more information about identifying and responding to tax-related identity fraud, you may find the following government resources useful:
- FTC Overview of Tax-Related Identity Theft
- IRS Taxpayer Guide to Identity Theft
- Report Tax Identity Theft to the Federal Government
IRS Business Tax Attorneys for Corporations, Partnerships, LLCs, & Sole Proprietorships
If you are a business owner, you may be vulnerable to tax-related identity theft. Review your cybersecurity measures – and your history of tax compliance – to make sure that you are protected. If you believe that your business was targeted for tax fraud, or if you have received an IRS notice that does not make sense, get help right away by contacting the award-winning corporate tax attorneys at the Tax Law Office of David W. Klasing. Contact us online to set up an appointment or call 24 hours at (800) 681-1295 for assistance.
In addition to our staffed main offices in Irvine, the Tax Law Offices of David W. Klasing has unstaffed (conference room only) satellite offices in Los Angeles, San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland, Carlsbad and Sacramento.
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