“Payroll is a key player in the IRS’ ongoing fight against identity theft,” said Tamara Powell, acting director for Return Integrity Operations at the IRS’ Small Business/Self-Employed Division. Powell addressed attendees at the APA Congress’ general session about the evils of identity theft and the steps the IRS and its partners—including payroll providers—are taking to stop it.
How ID theft has evolved
Powell noted that when tax-related identity theft began, it was mostly individual operators. Often, she said, the first time taxpayers knew their identities had been compromised was when the IRS told them. Now, according to Powell, there are sophisticated criminal syndicates who sell their stolen information on the dark web.
This has changed the IRS’ approach to combating them. In fact, these syndicates start planning their “tax season” long before the IRS starts planning its tax season, she added.
This year, the IRS was able to stop a little under a million phony returns. But once one door closes, ID thieves pry open another. That explains the W-2 phishing attempts that occurred this tax season, she added. Often, these emails will start off chatty from the company’s “CEO”—“Hi, how was your weekend”—and then go in for the kill—a request that you send employees’ names and Social Security numbers in a PDF document.
“Criminals will continue to use the W-2 scam as long as it’s effective, which it is,” Powell said. So you should build defenses into your year-end processes, she advised.
Proactive steps to fight ID theft
If you’re scammed, the IRS wants to know about it. You can email the IRS at firstname.lastname@example.org. The IRS will contact you regarding the personal identifying information that was stolen.
For several years the IRS has had a program under which certain employers file their W-2s by Jan. 31 with it, instead of the Social Security Administration. That program will continue, despite the accelerated W-2 filing deadline that was contained in the PATH Act.
In addition, she said that the W-2 verification code pilot will continue on this year’s W-2s. The IRS has recommissioned Box 9 for this purpose.
And in response to a question from the audience, Powell noted that the IRS is beginning to address corporate ID theft. As a first step, the IRS has added 37 new filters in its Business Master File.