Imagine waking up to find out that someone has hijacked your business’s identity -- racking up debt, filing fraudulent tax returns, and putting your financial future at risk. Business identity theft is a growing threat, with criminals using stolen Employer Identification Numbers (EINs) to commit fraud. The IRS is stepping up its game to prevent these crimes, but business owners and tax professionals must also take action. The good news? With the right awareness and preventive steps, you can protect your business from falling into the wrong hands.
Warning Signs That Your Business May Be a Target
Identity thieves don’t usually announce themselves, so spotting the warning signs early is crucial. If a business receives unexpected IRS notices—such as multiple tax returns filed under the same EIN, surprise tax bills, or refund offsets, it’s time to investigate. Other red flags include denied credit applications for unknown reasons or sudden, unauthorized changes to business records. If something seems off, don’t ignore it; take action immediately to prevent further damage.
What to Do If Your Business Falls Victim
If you suspect business identity theft, speed is your best defense. Start by filing a complaint with the Federal Trade Commission (FTC) at identitytheft.gov. Then, contact major credit bureaus (Equifax, Experian, and TransUnion) to place fraud alerts on your business accounts. Close any financial accounts that were fraudulently opened and notify the IRS using Form 14039, the Identity Theft Affidavit. Continue filing taxes on paper if necessary and contact the IRS’s identity theft assistance line at 1-800-908-4490. Staying proactive can prevent thieves from doing further damage.
How to Keep Your Business Safe
Prevention is key when it comes to business identity theft. Encourage clients to implement strong security measures, such as using updated security software, having strict password policies, and training employees to recognize phishing scams. Businesses should also limit access to sensitive financial data and regularly check their business registration records for unauthorized changes. A little caution now can save a lot of trouble down the road.
The IRS Is Cracking Down—Here’s How
The IRS is getting smarter about spotting fraudulent filings, nullifying returns filed under stolen EINs, and using advanced fraud detection systems. Businesses can also benefit from tools like Identity Protection Personal Identification Numbers (IP PINs), which add an extra layer of security. The IRS works closely with financial institutions and law enforcement agencies to track down fraudsters, making it harder for criminals to operate undetected.
Tax Professionals: Your Role in the Fight Against Fraud
As a tax professional, you are on the front lines of business identity theft prevention. By staying current on IRS security measures, educating clients about best practices, and assisting with fraud response, you can help protect businesses from serious financial consequences. Encourage clients to monitor financial statements regularly, store tax documents securely, and take identity theft seriously.
Business identity theft is a growing concern, but with awareness, preventive measures, and quick action, businesses can avoid becoming victims. Taking steps today—like securing sensitive data and responding to suspicious activity—can save thousands of dollars and countless headaches in the future. Don’t wait for fraud to happen—take charge now and keep your business safe!
Hayley Bales, EA
February 2025
Tax Protection Plus
References
Internal Revenue Service. Business Identity Theft: What You Need to Know. U.S. Department of the Treasury. https://www.irs.gov.
Internal Revenue Service. Identity Theft Information for Businesses, Partnerships, and Estates. U.S. Department of the Treasury. https://www.irs.gov/identity-theft.
Federal Trade Commission. Identity Theft: A Recovery Plan. U.S. Government. Last modified 2024. https://www.identitytheft.gov.
National Taxpayer Advocate. Annual Report to Congress: IRS Identity Theft Victim Assistance. Washington, D.C.: Taxpayer Advocate Service, 2024.
Security Summit. Protecting Taxpayers: The IRS and Partners Fight Identity Theft. U.S. Department of the Treasury. https://www.irs.gov/securitysummit.