Small business tax identity theft: What to do if it happens to you

When you think of identity theft, you may think of the problem as affecting only individuals, but this isn’t the case. Small business identity theft is more common than you’d think. It involves the illegal impersonation of a legitimate businesses for criminal gain.

So, what is business identity theft? Identity thieves use a small business’ information (without consent) in hopes of obtaining credit cards, a line of credit, or getting you or your employees’ tax refund (via filing fraudulent tax returns).

Read on as we explore the answer to “what are some examples of business identity theft?” as well as outline some warning signs of business identity theft cases.

What are some examples of business identity theft?

preventing business identity theft

How can tax identity theft occur for businesses? Unfortunately, the tactics will sound similar to those that you might experience as an individual.

We’ll outline a few of those here:  The top two types are general forms of identity theft, while the third is an example of business tax identity theft.

  • Phishing campaigns: With phishing campaigns, identity thieves pose as your business and send an email to your employees in hopes they’ll fork over their personal data, financial details, and passwords.
  • Fake invoices: A small business tax identity theft could impersonate a vendor or contractor, then send you an invoice requesting payment.
  • Tax identity theft: An identity thief could steal your business’ identity, then file a fraudulent tax return to receive your tax refund. When a tax refund is compromised, you could also incur IRS penalties or audits in your business’ name.

What are some red flags of small business identity theft in terms of taxes?

Business filers should be alert for signs of tax identity theft throughout the year, not just during tax season. Here are some small business identity theft warning signs:

  • The IRS rejects an e-filed return or extension due to a duplicated Federal Tax Identification Number (such as an SSN or EIN).
  • You don’t get expected mailings from the IRS.
  • You receive an unexpected tax transcript.
  • You receive an IRS notice that doesn’t relate to your business or has a fake employee name.
  • You get an IRS notice about a defunct, closed, or dormant business after all account balances have been paid.
  • Your return is accepted as an amended return, but you haven’t filed a return yet.

Have a business identity theft case? Here’s what to do…

Small business identity theft can happen to any business size or entity structure. In the event you become a victim of small business identity theft, follow these steps:

  1. Collect information: First, take notes and gather information about your case. It’s essential to understand and document the timeline and extent of the fraudulent activity, as you will better understand the timeframe during which your business was vulnerable to fraudsters.
  2. File a formal report: Your tax professional can help report the fraud with the IRS, the Federal Trade Commission, and even law enforcement if applicable.
  3. Alert credit bureaus: Be sure to place a fraud alert with one of the three major business credit bureaus: Experian, Equifax, or TransUnion. You can also freeze your account to prevent further fraudster action.

Tax identity theft protection for businesses

It may ease your mind to know that others are working to protect your personal information to help you prevent small business identity theft. The IRS outlines how they protect business filers on their website.

Additionally, Block Advisors is committed to protecting your information. See our privacy notice for details.

Need the help of a tax experts? Get connected with one of our small business certified tax pros.

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