Learning that you are a victim of identity theft can be a stressful event. Identity theft is also a challenge to businesses, organizations, and
government agencies, including the IRS. Due to this new norm, individuals and businesses alike have to take many different precautions in order to protect information and detect ID theft at its earliest possible stage. First, let’s look at a few ways businesses and government agencies are working to protect and detect electronic thievery.
Small businesses can deter ID theft by using an EIN instead of a personal social security number. If the business becomes the victim of ID theft, using an EIN will help ensure the the theft isn't tied to the business owner’s personal identity. Keeping personal and business finances separated is always a good idea and can make it easier to detect the possibility of fraudulent activity.
Trusting other businesses and organizations with your information is something we cannot do flippantly. It is perfectly reasonable to ask vendors about their information security practices. If they cannot answer questions to your satisfaction, it is wise to be cautious about what information you entrust to them.
Additionally, the IRS and state governments are putting in place more and more practices that will help protect information and detect fraud more efficiently than in the past. These practices affect both individuals and businesses. On the business side, they are requiring businesses to file income statements (W2 & 1099’s) electronically by January 31, 2017 so that the files are available to cross reference with tax returns as they are filed. This requires additional processing time for both businesses and the government agencies.
***Business Owners Please Note: Oklahoma is no longer accepting paper copies of 1099’s. These must be electronically filed on the OKTAP system. If you plan to have DP Financial & Tax prepare and file these forms, we MUST have all of your information in office by January 20th. Please call our office for additional information***
On the personal side of things, we have all been affected by changes due to fraudulent activity. From receiving new credit/debit cards with a chip, to wondering if your information was compromised with the latest breach; taking precautions has become a part of everyday life. Because we are more aware of the possibility of fraud, we are more cautious, but here are a few additional things that may help make your personal information more difficult to be intercepted by thieves.
Protect your records. Do not carry your Social Security card or other documents that may have this and other sensitive information with you. Only provide your Social Security number to people that you know and only when necessary. Changing passwords to online systems frequently and having an 8 character password keeps these accounts safer, also.
Don’t fall for scams. Very few reputable companies call and ask for money. The IRS WILL NOT call you to demand immediate payment, nor will it call about taxes owed without first mailing you a bill. Beware of threatening phone calls from people claiming to be from the IRS. If you have no reason to believe you owe taxes, report the incident to the Treasury Inspector General for Tax Administration at 1-800-366-4484.
IP PIN - If a taxpayer is identified by the IRS as being a victim of ID theft, or a taxpayer reports that they have been a victim, the IRS will issue an IP PIN. This is a unique six-digit number that is reported on the victim tax return. It communicates to the IRS that the return belongs to the legitimate taxpayer and is not a fraudulent return. If you are given one of these codes, it is imperative that it is kept safe and not shared except with your tax preparer.
Protecting Children - Be aware that even children are susceptible to identity theft. This is due to the fact that they are not actively applying for credit, but have a social security number. They could be a victim for years before they actually find out they have fraudulent accounts in their names; resulting in years of work to clear up confusion. It is a good idea to pull a credit report on your children periodically, to verify their identity is safe-guarded.
If you suspect or know of an individual or business that is committing tax fraud, the IRS website has information on how to report it; simply visit IRS.gov and follow the chart on “How to Report Suspected Tax Fraud Activity". If you become victim or aware of other types of identity theft, be sure to report it to your local police department.
In this technologically advanced society, people can and do dig to find our information in order to use it for their financial gain. This includes the tax industry. Being aware of how these thieves work and being vigilant to protect your information may thwart the effort of a bandit looking to pick your pockets.
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