Small Business Identity Theft: Warning Signs and Protective Measures
When you think of tax identity theft, you may think of the problem as affecting individuals only. This is not the case. Business identity theft is a very common form of tax identity theft. Business identity theft involves the illegal impersonation of a legitimate business for criminal gain.
Business identity theft is unexpected, inconvenient, and frustrating. So, how does it work, who does it affect, and what are some warning signs of it? We’ll tell you here.
How Does Small Business Identity Theft Work?
Identity thieves use a business’ information to file fraudulent tax returns or obtain credit cards or a line of credit.
And the criminals are more sophisticated than ever before. Why? They know the tax code, filing procedures, and how to steal informative business information.
Who Does Business Identity Theft Affect?
Business identity theft affects all types of business structures, including partnerships, S corporations, and sole proprietorships.
What Are The Signs of Business Identity Theft?
Business filers should be alert for signs of identity theft at all times – even when tax season is over. Here are some of the red flags of business identity theft:
- The IRS rejects an e-filed return or extension due to a duplicated Federal Identification Number.
- You receive an unexpected tax transcript.
- You receive an IRS notice that doesn’t relate to anything you or your tax advisor has submitted.
- You don’t get expected mailings from the IRS.
New Procedures to Protect Businesses in 2018
For your upcoming 2018 tax return, there are new measures that can help validate your business’ tax returns in advance. New this year, the IRS will ask businesses who file a tax return to help verify their identity. They will ask questions related to:
- The person authorized to sign the return
- Payment history
- Parent company information
- Past deductions
- Filing history
Business identity theft can happen to any business, big or small. It also affects multiple business structures. If you do happen to be a victim of business identity theft, follow these three steps
- Collect information: If any or all of the red flags above have been experienced, take notes and gather information about your case. It’s important 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 security gaps.
- File a formal report: Connect with your tax advisor who will help report the fraud with the IRS. You can also work with them to submit a complaint with the Federal Trade Commission.
- Alert credit bureaus: Be sure to place a fraud alert with one of the three major business credit bureaus: Experian, Equifax, or TransUnion.
If business identity theft happens to you, try not to be discouraged and remember if you understand the warning signs associated with the theft, you are preventing your business from further damage.