About
Foundational Principles In the Community Diversity, Equity & Inclusion Technical Excellence Alumni TIAG Membership
Careers
Why Cohen & Company Our Culture Total Rewards & Benefits Intern & Entry Level Opportunities Experienced Opportunities
Contact
Akron, OH Baltimore, MD Chicago, IL Cleveland, OH Detroit, MI Milwaukee, WI New York, NY Philadelphia, PA Pittsburgh, PA St. Clair Shores, MI Youngstown, OH
Client Portal
Services Industries Knowledge Center People

About Our Services

We offer tailored solutions — whether private company or owner; public or private fund, adviser or fund service provider; or Fortune 1000 enterprise. Learn how we can help you.

Learn More

Assurance Services

Employee Benefit Plan Audits Internal Controls Investment Company Audits Private Company Audits SOC Readiness & Compliance

Tax Services

Federal Tax Planning & Compliance High Net Worth & Wealth Transfer International Filings & Structuring Investment Company Tax State & Local Tax Tax Credits & Incentives Transaction Tax Planning

Advisory Services

Business Valuations Data & Insights Digital Finance Solutions IT Strategy & Implementation M&A Advisory Outsourced Accounting Solutions Risk Assurance & Advisory Transaction Services Turnaround & Restructuring

Our Industry Expertise

Our industry experience means you can find professionals who speak your language and bring earned insights to the table. Learn how we can help you.

Learn More

Key Industries

Digital Assets Investment Companies Manufacturing Private Companies Private Equity Real Estate & Construction Technology & Life Science
VIEW THE COMPLETE LIST

Knowledge Center

Our team wants to help your team stay up to date. Browse our thought leadership, events and news for insights and a point of view on business-critical topics.

Learn More

Insights

Browse valuable articles and publications our experts have written to help you and your organization answer key questions — and consider new ones.

Read Our Insights

Events

Join us in person and online for events that address timely topics and key business considerations.

Explore Our Events

News

Find out what is happening at Cohen & Company, from industry recognitions and growth updates, to where we are contributing to important media stories.

Read Our News
People
Foundational Principles In the Community Diversity, Equity & Inclusion Technical Excellence Alumni TIAG Membership
Why Cohen & Company Our Culture Total Rewards & Benefits Intern & Entry Level Opportunities Experienced Opportunities
Akron, OH Baltimore, MD Chicago, IL Cleveland, OH Detroit, MI Milwaukee, WI New York, NY Philadelphia, PA Pittsburgh, PA St. Clair Shores, MI Youngstown, OH
Client Portal
Back to Insights

Tax Identity Theft on the Rise: What You Need to Know

by Laura White

August 03, 2016 Federal Tax Planning & Compliance

Earlier this year, the U.S. Federal Trade Commission (FTC) reported there was an almost 50% jump in identity theft complaints in 2015. The primary driver of that spike, by far, was tax identity theft. The FTC received 490,220 complaints about identity theft last year, with tax identity theft accounting for 221,854 of the complaints.

Individual Tax Identity Theft
To date, most of the attention has been paid to individual victims of tax identity theft. According to the IRS, it occurs when someone uses a stolen social security number (SSN) to file a tax return claiming a fraudulent refund. The victim may be unaware of this until he or she attempts to file a return and learns that one has already been filed. Alternatively, the IRS might send a taxpayer a letter saying it has identified a suspicious return with the taxpayer’s SSN.

In addition, a fraudster might use another’s SSN to obtain a job. The employer then reports that person’s income to the IRS under the stolen SSN. The victim, obviously, won’t include those earnings when filing his or her tax return, so IRS records will indicate that the victim underreported income.

IRS Actions
Tax identity theft is a top concern for the IRS. The agency will be implementing new provisions and is working with states and the payroll industry to put new safeguards in practice.

Most notably for employers, the Protecting Americans from Tax Hikes (PATH) Act signed in late 2015 now requires employers to file W-2, W-3 and 1099 forms by January 31 of the year following the tax year. The idea is that it will be easier for the IRS to catch discrepancies between legitimate forms filed by employers and those filed by fraudsters seeking refunds based on false forms.

The earlier deadline takes effect for forms filed in 2017 for the 2016 tax year. With these forms now due to be filed with the IRS a month earlier than in the past (or, for electronic filers, two months earlier), employers will need to pull together the necessary information more promptly.

Risks for Businesses
Thieves are going after employer identification numbers (EINs), which is a startling proposition for the many businesses that put far more effort into protecting SSNs than their EINs. A fraudster could use a stolen EIN to report false income and withholding on a W-2 and file for a refund. Moreover, the legitimate business could find the IRS coming after it for payroll taxes that were reported as withheld but not remitted.

As with SSN theft, EIN theft victims may not discover something’s amiss until they file their tax returns and receive IRS notification that they had already filed for that tax year. They also might be tipped off by receipt of an IRS notice regarding nonexistent employees.

Tips for Preventing Tax Identity Theft
Businesses should bear in mind — and remind their employees and customers — that the IRS does not initiate contact with taxpayers by email, text messages or social media to request personal or financial information.

For additional guidance on this topic, read our blog “Tax Identity Fraud Still Major Concern.”
 

We want to hear from you! We encourage you to comment below on this blog post, share it on social media or contact Laura White at lwhite@cohencpa.com or a member of your service team for further discussion.

About the Author

Laura White, CPA

Director, Tax
lwhite@cohencpa.com
216.774.1178

Sign Up for Our Emails & Events

Receive insights from our specialists in a variety of areas and timely information on upcoming events directly to your inbox as they go live in our online Knowledge Center.

Subscribe Today
Subscribe to our newsletter
About Contact Submit RFP Privacy Policy
LinkedIn Twitter Facebook
© 2023 Cohen & Company