ASK THE CALIFORNIA EMPLOYMENT TAX AND PAYROLL TAX ATTORNEY – CYBER ATTACKS AND W2 SCAMS ON SMALL BUSINESSES
By Robert S. Schriebman
In the closing days of 2021, the IRS held a series of meetings with state tax agencies and the nation’s tax industry to warn tax professionals, small businesses and the public in general about the latest cyber attacks and schemes to steal sensitive information. One meeting focused on cyber-attacks and W2 scams being perpetrated on small businesses. The result of this meeting was the publication of IRS press release IR-2021-241 published on December 3, 2021. The press release warns that more than 70% of cyber-attacks are focused on businesses with a 100 or fewer employees. The objective of the crooks is to obtain credit card data and business identity information especially W2 data on employees. The press release sets forth recommendations form the Federal Trade Commission and introduces employers to a new identity theft form that will allow the IRS to move faster to protect small businesses. Finally, the press release sets forth an example of how an imposter can obtain vital W2 information.
Federal Trade Commission Recommendations
IRS press release IR-2021-241 sets forth five FTC recommendations to protect small businesses:
- Set security software to update automatically;
- Back up important files;
- Require strong passwords for all devices;
- Encrypt devices; and,
- Use multi-factor authentication.
IRS Form 14039-B
This Form is entitled Business Identity Theft Affidavit. Filing this Form will allow the IRS to respond much faster and to work with the injured business to control damage caused by the filing of fraudulent tax returns. This Form should be used under the following circumstances:
- Use this Form when an electronically filed return is rejected because of a previous filed return
- Use this Form when the business has been notified about a tax return that was never filed.
- This Form should also be used whenever notices received of a filed W2 that the business never filed.
- The Form should be used when notified of an IRS balance due that was never owed.
Imposters Seeking W2 Information
W2 theft is on the rise. An example given in the IRS press release tells of a thief posing as a high-ranking company executive which has emailed the company’s payroll department requesting a list of employees and copies of their W2s. The thieves’ objective is to file fraudulent returns seeking bogus refunds. When the employees file their returns, their refund claims may be rejected because a prior refund has already been issued to the crooks. This is big business for the thieves!
A Recent W2 Theft in My Community
In my community, there is a high-end grocery store that is part of small chain operating in Southern California. Recently, thieves posing as high-ranking executives entered the store and demanded that the manager provide a list of employees and copies of W2s. Without verifying their credentials, this data was handed over to the thieves.
The IRS has released a series of press releases warning tax professionals and the public of tax scams involving the holiday season, fake charities, and the continued Covid crisis. As these are published, you will be notified.
Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 50 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments. Mr. Schriebman is in private practice. He is not affiliated in any way with the EDD and he is not employed by the EDD or any other agency of the State of California.
Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.
Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House.
Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and California Taxation Practice and Procedure,” both published by Commerce Clearing House.
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