How Alabama Businesses Can Protect Themselves from Identity Theft

Date: December 06, 2017

Is your small business alert to identity theft? Individuals are not the only ones at risk; businesses can also have their identities stolen, with their sensitive information used to open new lines of credit, obtain credit cards, or file fraudulent tax returns. As part of National Tax Security Awareness Week (November 27 to December 1), the IRS, state tax agencies, and private-sector tax professionals issued a series of reminders and warnings for small business owners about this issue.

A press release from the Alabama Department of Revenue noted that identity thieves have a sophisticated knowledge of the tax code and industry filing practices, which they’re using to obtain the information needed, such as stolen Employer Identification Numbers (EIN) or Social Security Numbers (SSN). In the past year, the IRS has seen a sharp increase in the number of fraudulent Forms 1120, 1120S, 1041, and Schedule K-1 filed.

The IRS advises watching for these signals and contacting the IRS if you experience any of them:

  • Your requests for an extension to file are rejected because a return with your EIN or SSN is already on file.
  • An e-filed return is rejected because of a return with your EIN/SSN already on file.
  • You receive an unexpected receipt of a tax transcript or IRS notice that doesn’t correspond with anything you submitted.
  • You aren’t receiving expected and routine correspondence from the IRS because the thief has changed your address.

Also take note of these new procedures put in place to protect businesses in 2018. The IRS and state tax agencies are asking that businesses and tax professionals provide additional information to help verify the legitimacy of the return. This information/these questions include:

  • The name and SSN of the company executive authorized to sign the corporate tax return. Is this person authorized to sign the return?
  • Payment history. Were estimated tax payments made? If yes, when were they made, how were they made, and how much was paid?
  • Parent company information. Is there a parent company and if yes, who?
  • Additional information based on deductions claimed
  • Filing history. Has the business filed Form(s) 940, 941, or other business-related tax forms?
  • Driver’s license number—for sole proprietorships that file Schedule C and partnerships that file Schedule K-1 with Form 1040

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