Identity theft, unfortunately, is a mainstream concept. Almost everyone knows someone who has been hit by it. Sometimes it’s in the form of a couple fraudulent charges on a credit card and you can remedy the problem fairly quickly.
But when it hits major shopping hubs that we visit every day, like Home Depot and Target, it becomes that much more nerve-wracking for the average consumer.
We’re now learning that the tax dollars we’ve already paid may have been at risk. The Treasury Inspector General for Tax Administration recently reported a loss of $3.6 billion for the IRS because of identity theft in 2011. The U.S. Government Accountability Office (GAO) estimates it paid $5.2 billion in fraudulent refunds in 2013. They prevented another $24.2 billion.
The identify thieves, apparently, use stolen taxpayer information to claim refunds.
We, of course, want to prevent this kind of activity, and companies and the government are looking for ways to make sure everyone’s information is as secure as possible.
So the question becomes, what’s the next step in prevention?
Changing the W-2 for Employers
The GAO’s recommendation is that Congress change the deadline for submitting employer W-2s to January, instead of the current deadline of March 31 for electronic forms and February 29 for paper forms.
The change would also require small businesses to submit the form electronically. The way it works now, only businesses with more than 250 employees have to file electronically.
Why would this help? Because the identity thieves are stealing taxpayers ID and Social Security information prior to the IRS having a chance to confirm forms that are mailed in.
The GAO report on the issue said that to meaningfully increase W-2 e-filing, the 250-employee threshold would have to be lowered to include those filing just 5 to 10 W-2s. There would also be a $0.50 cost savings per e-filed W-2.
How much this would help stem the problem – and how big a burden it would be for small business owners to keep up with – remains to be seen. And the GAO said in its report that the IRS has not fully assessed the impact of such a change.
The important thing for small business owners is that they are able to quickly and accurately pull together tax documentation as it relates to paying their employees. Using a payroll service or an accountant that can help them keep up with the many complications involved in tax management is a great way to be prepared.