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Identity Theft And Payroll Tax Filing: Being Aware And Prepared

Posted by Leslie Ruhland on Nov 21, 2017 10:16:40 AM
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It has been recently disclosed that more than 145 million Americans have had their personal information stolen from a variety of places. And it's certainly not the first time.


It's not yet certain how cybercriminals can or will use this data, or attempt to profit from from it, but the potential is sobering for victims of this type of cybercrime. And the tax filing season is particularly prone to security breaches.

IRS Announces National Tax Security Awareness

The Internal Revenue Service, along with state tax agencies and the tax industry, will once again host National Tax Security Awareness Week. Now in it's second year, the events are designed to encourage both individual and business taxpayers to take additional steps to protect their tax data and identities. The focus is to be prepared in advance of the 2018 filing season.

National Tax Security Awareness Week begins on Monday, November 27, and will focus on one issue each day during the week. The topics are issues that pose a threat to individuals and businesses and steps will be provided to help them to better protect themselves from cybercriminals.

The IRS, state tax agencies and the tax industry, have recently enacted a series of defenses that have made significant impact on tax-related identity theft. And, while the IRS and states have put many new defenses in place to help protect taxpayers from identity theft, they've also acknowledged that they need help from individual taxpayers, from tax preparers and from businesses in order to guard against identity theft.

According to an announcement by the IRS,

[Event partners] and other consumer, business and community groups will be hosting a series of more than 20 events across the country to raise awareness during National Tax Security Awareness Week. This is especially timely as the holiday season brings out not only online shoppers but online thieves seeking to trick people into disclosing sensitive information that could be used to help file fraudulent tax returns.

Identity Theft and Improving Cybersecurity

The recent protections put in place by the IRS have worked well to protect taxpayers, and there are some key indicators of identity theft on tax returns which have seen a 60 percent decrease since 2015.

The IRS emphasized that these protections are far more helpful if cyberthieves only have names, addresses and Social Security numbers, as was stolen in recent incidents. However, the growing concern is that these individuals will try to leverage this basic information to obtain more specific financial details from taxpayers and tax professionals. Ultimately, they would use this information to file fraudulent tax returns.

Some of the things people will be encouraged to learn during National Tax Security Awareness Week are topics such as the basic steps needed to protect themselves and their tax data online. These include using security software, creating strong passwords and having data encryption.


In addition, people can learn what steps they should take if they become a victim of a data breach, such as putting a freeze on credit accounts and recognizing the signs of a tax-related identity theft. Other educational topics being covered during the week include how cybercriminals use phishing emails to bait victims into disclosing information.

Employers and small businesses are subject to identity theft, too, and should take steps to protect themselves. During National Tax Security Awareness Week they will be informed about a dangerous W-2 scam that has made identity theft victims of thousands of employees. This is critical during payroll tax filing, as well.

The IRS and their partners emphasize that there are three key steps people should take to protect their tax and financial information:

  • Learn to recognize and avoid phishing emails, threatening phone calls and texts from thieves posing as legitimate organizations such as banks, credit card companies and government organizations, including the IRS. Do not click on links or download attachments from unknown or suspicious emails.  
  • Always use security software with firewall and anti-virus protections. Make sure the security software is always turned on and will automatically update. Encrypt sensitive files such as tax records stored on computers. Use strong passwords.
  • Protect personal data. Use strong, unique passwords for each online account. Don’t routinely carry Social Security cards, and make sure tax records are secure. Treat personal information like cash; don’t leave it lying around.

Cybersecurity, Identity Theft, and Your Employees

The main purpose of most identity theft, of course, is to use that information to steal money. Whether this comes in the form of fraudulent credit card purchases, loans, or even tax refunds. The end result is that the victims lose money and face the potential of future loss and victimization.

Cybercrime is on the rise and increasing every year. In fact, according to the 2017 Identity Fraud Study, released by Javelin Strategy & Research, they found that $16 billion was stolen from 15.4 million U.S. consumers in 2016, compared with $15.3 billion and 13.1 million victims a year earlier. In fact, in just the past six years identity thieves have stolen over $107 billion from hapless victims.

As a consequence, cybersecurity has become a national issue, a reality underscored by the National Cybersecurity Protection Act of 2014. This act, which was passed and was enacted in December 2014, requires that federal agencies notify affected individuals “as expeditiously as practicable and without unreasonable delay” of the discovery of any data breach.

Currently, forty-seven states along with Washington D.C., Guam and Puerto Rico have all enacted data breach notification statutes of their own. One interesting aspect of these laws is that they increasingly place the responsibility of cybersecurity and the protection of personal information on employers.

A recent example occurred in 2014 when Kaiser Foundation Health Plan, Inc. settled a suit, California v. Kaiser Foundation Health Plan, Inc., with the California Attorney General, who alleged that Kaiser had violated state breach notification law by its “unreasonable delay” in advising affected individuals of an information breach.

This occurred after Kaiser learned that a hard drive containing personal information of Kaiser employees had been sold at a thrift store. Although it did not admit liability, Kaiser agreed to pay $150,000 in penalties and costs, and agreed to non-monetary terms such as employee training, review and updating of encryption and related policies, and conducting related periodic audits with reports to the AG’s office.

Outsourcing Payroll as a Process Option

As a business owner, HR or payroll manager you have a number of options for your payroll functions. Software that can be installed in-house, or cloud-based programs, offers a good alternative.

On the other hand, Paperless Payroll Management Solutions by Accuchex, also known as “Green Payroll”, combines tax payment and direct deposit. With direct deposit and online access and there is no need to have a payroll package delivered every check date.

Outsourcing and online payroll can save staff time, money and can be the best payroll solution for your business.  In addition, many payroll services offer related services like tax filing, insurance solutions, retirement planning, and HR functions.

You can be assured that the accountability and liability for payroll compliance rests with your vendor, freeing you from the constant pressure of staying fully informed and compliant with the ever changing - and growing - rules, regulations, and legislation.

In addition, all wages and tax payments are sent electronically and online access lets you view, print and save all payroll data. Employees have access to their wage history by logging into their own portal; access to complete wage history ensures they will always be able to view their information at their convenience.

Reliability, full-service options, and reputation are the hallmarks of a quality payroll management service provider. If you are currently looking to invest in outsourcing you get your Free Download: Payroll Outsourcing Guide to help you make an informed decision or call Accuchex Payroll Management Services at 877-422-2824.

Free Download: Payroll Outsourcing Guide

Topics: payroll tax filing, social security number, IRS, income tax reporting, cybersecurity, identity theft

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