News & Resources

Identity verification crucial during tax season

Apr 02, 2011 Brian Bradley

Businesses must always be on the watch for fraudulent practices by customers, employees and hackers. Tax season - when sensitive information is flying between consumers, businesses and the Internal Revenue Service - can be a particularly busy time for fraudsters. Identity thieves are particularly busy looking for business and individual tax returns, so business owners should be sure they take added precautions to protect data and prevent themselves from becoming victims of fraud. Here are a few tips from Kimberly Lankford of Kiplinger's Personal Finance. Owners should be skeptical of emails from tax preparation firms, and should never respond to emails claiming to be from the IRS - they don't send messages about tax returns, Lankford says. Identity verification is vital whenever sharing information such as Social Security numbers or bank account numbers over the phone or online. Companies must also be careful of who they work with. Conduct a background check on (or at least check the references for) any tax preparer. "Scammers have been known to set up shop as accountants and collect your personal information," ID-theft expert Robert Siciliano told Lankford. "They'll get your refund, but they'll also open up new credit cards and bank accounts in your name," he warned. Keeping tax files and other sensitive documents secure is a solid defense against information theft. Ensure the company's computer network has up-to-date anti-virus software. Activating passwords to see private data can also prevent unauthorized access. Security technology company Identity Finder also suggests encrypting all tax, bank and Social Security information sent electronically. E-filing has encryption benefits, including a faster return of your refund, the elimination of a vulnerable paper trail and reduced chance of filer error, according to Clear out the web browser cache after you complete filing, and don't do taxes on a public computer. If sending the tax form through the postal service, bring the return directly to the post office and send it through certified mail. Be sure the business owner receives all the mail during tax season, so end-of-year statements and other tax correspondence don't fall into the hands of an unscrupulous employee or ID thief. Ask a tax professional what documents must be kept for future reference, and shred the rest. In the event a business receives a suspicious letter or email claiming to be from the IRS, contact the agency to determine its legitimacy. Alert the Treasury Inspector General for Tax Administration if the notice was sent by a fraudster.