In 2017, the IRS reported the business identity theft increased 250%. So what is business identity theft? Business identity theft is similar to having a personal ID stolen. It’s when a criminal uses stolen business information and data and pretends to be the business owner or an officer with intent to hurt or defraud the business.
Being more complex than an average business fraud, business identity theft involves impersonating the business, which can be damaging to the owner and the business leaving the business left to clean up the mess. Any type of business or organization can be a target.
How could business identity theft affect your small business?
If someone successfully impersonates your business, the potential here is endless. Similarly to a personal ID theft, the impersonator can borrow money and open credit cards under your business name. Once a loan is granted, the criminal can redirect the funds to their own account and the business may be on the hook to pay for it.
Fake tax returns can be filed to target refunds. One way a criminal can commit a tax fraud with a small business is by filing a fake employee tax return using the business’s EIN. A W-2 is created with the fake employee showing too much tax was withheld, allowing them to collect a refund. Later the IRS will note that the amounts paid by the business will not match what the IRS calculates. This can lead to a long and expensive IRS investigation to the business and business owner.
Here are some simple steps that can be taken to help protect your business:
· Lock down your computers. Be sure that you’re using up-to-date anti-malware programs and virus protection. This is one of the top ways criminals can obtain sensitive data.
· Use complex passwords. Numbers, letters, and symbol combinations unique to each log in and change them frequently. Don’t store them on sticky notes or excel as they are not safe. Password programs can help keep these items encrypted and safe.
· Control debt limits. If you don’t need a $20,000 credit card line, then keep the limit smaller. A smaller limit will lower the amount a criminal can spend.
· Limit access to sensitive information to those who need it.
· Don’t limit fraud prevention to electronic information. Sensitive information can also be stolen from paper records. Shredders can help destroy mail or business information that is no longer needed.
· Train employees. A negligent employee is a common source for small business data breaches. Proper training can help reduce that risk.