Income tax identity theft through which identity thieves using the Social Security numbers of their victims file phony income tax returns and claim refunds continue to be a major problem for both the IRS and victims who experience long delays in getting their legitimate refunds after the crime is discovered. However, individuals are not the only ones affected by tax identity theft at the IRS. According to a recent report by the Treasury Inspector General for Tax Administration (TIGTA) businesses are becoming victims of business identity theft through which criminals use businesses’ identifying information to claim tax benefits. Business identity theft was first recognized by TIGTA in a report issued in 2015 and since that initial report the IRS has created 25 business identity theft filters and three dynamic selection lists to identify potential business identity theft tax returns. The good news is that last year these measures by the IRS identified 20,764 phony business tax returns, preventing bogus claimed refunds of 2.2 billion dollars. The bad news is that, according to the TIGTA report, the IRS neglected to evaluate employment tax returns for identity theft thereby missing 20,764 bogus returns and losing 200 million dollars to this type of fraud. TIGTA also found a number of other failings of the IRS in preventing business tax identity theft.
TIGTA made 10 recommendations to improve the detection and prevention of business identity theft including expanding the use of business identity theft filters to employments returns and the IRS has agreed with eight of the recommendations and partially agreed with the other two recommendations. As for individual companies, they also should make data security a priority and recognize that their tax identification number is as valuable to an identity thief as a Social Security number. Security software is only part of the solution. A detailed security plan is essential to the operation of a business today and with small to medium sized businesses increasingly being targeted by identity thieves, data security should be a major concern of all companies.
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