The IRS is putting an increased emphasis on identity theft protections for business returns as a result of an increase in fraudulent business tax returns in recent years. The IRS will be asking tax professionals to gather more information on their business clients to assist the IRS in authenticating that the tax return being submitted is actually a legitimate return filing and not an identity theft return.

IRS Commissioner John Koskinen cautioned:

We know that cybercriminals are planning for the 2018 tax season just as we are. They are stockpiling the names and SSNs they have collected. They try to leverage that data to gather even more personal information. This coming filing season, more than ever, we all need to work diligently and together to combat this common enemy. We all have a role to play in this fight.

The IRS explained that there are some signs that may indicate identity theft, including:

  • A request for an extension is rejected because a return with the Employer Identification Number (EIN) or Social Security Number is already on file.
  • An e-filed return is rejected because a duplicate EIN/SSN is already on file with the IRS.
  • An unexpected receipt of a tax transcript or IRS notice that does not correspond to anything submitted by the filer.
  • Failure to received expected and routine correspondence from the IRS.

To help curb identity theft, tax professionals will begin gathering additional information and asking additional questions, including:

  • The name and SSN of the company individual authorized to sign the business return. Is the person signing the return authorized to do so?
  • Payment history: Were estimated tax payments made? If so, when were they made, how were they made, and how much was paid?
  • Parent company information: Is there a parent company? If so, who?
  • Additional information based on deductions claimed.
  • Filing history: Has the business filed Form(s) 940, 941 or other business-related tax forms?

The IRS is also cautioning taxpayers and tax professionals about an ongoing scam to steal Forms W-2. Identity thieves are creating fake Forms W-2 to accompany fraudulent returns. Going forward, all Forms W-2 will now include a “Verification Code” box. The code is 16 digits and will assist the IRS in authenticating the Forms W-2.

The IRS is also warning all tax professionals and entities holding personally identifiable information to be especially alert to cybercriminals impersonating clients to steal sensitive information from their files. The IRS is urging all tax professionals incorporate verification steps regarding email requests for personal information and to watch out for phishing emails.