Tax Tip 2018-188: Employers should be aware of W-2 scam, protect employee information

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Issue Number:    Tax Tip 2018-188


Employers should be aware of W-2 scam, protect employee information

Small businesses should be on-guard against a growing wave of identity theft and W-2 scams. Employers hold sensitive tax data on their employees – such as Form W-2 data – which is highly valued by identity thieves.

All employers are targets for the W-2 scam. This scheme has become one of the more dangerous email scams. Here's how it works:

  • These emails appear to be from an executive or organization leader to a payroll or human resources employee.
  • The message usually starts with a simple greeting, like: "Hey, you in today?"
  • By the end of the email exchange, all of an organization's Forms W-2 for their employees may be in the hands of cybercriminals.
  • Because payroll officials believe they are corresponding with an executive, it may take weeks for someone to realize a data theft has occurred.
  • Generally, the criminals are trying to quickly take advantage of their theft, sometimes filing fraudulent tax returns within a day or two.

This scam is such a threat to taxpayers that a special IRS reporting process has been established. Here's an abbreviated list of how a business should report these schemes. They should:

  • Email dataloss@irs.gov to notify the IRS of a W-2 data loss and provide contact information. In the subject line, type "W2 Data Loss" so that the email can be routed properly. The business should not attach any employee personally identifiable information data.
  • Email the Federation of Tax Administrators at StateAlert@taxadmin.org to get information on how to report victim information to the states.
  • File a complaint with the FBI's Internet Crime Complaint Center. Businesses and payroll service providers may be asked to file a report with their local law enforcement agency.
  • Notify employees. The employee may then take steps to protect themselves from identity theft. The Federal Trade Commission's www.identitytheft.gov provides guidance on general steps employees should take.
  • Forward the scam email to phishing@irs.gov.

More information:
Taxes. Security. Together.
Publication 4524, Security Awareness for Taxpayers
Protect Your Clients; Protect Yourself
Tax Security 101

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