Small Businesses: Be Alert to Identity Theft

Small business identity theft is a big business for identity thieves. Just like individuals, businesses may have their identities stolen and their sensitive information used to open credit card accounts or file fraudulent tax returns seeking bogus refunds. To mark “National Tax Security Awareness Week,” the Delaware Division of Revenue, along with the IRS and the nation’s tax industry have joined together to warn small businesses to be on-guard against a growing wave of identity theft against businesses and employers.

In the past year, the Internal Revenue Service noted a sharp increase in the number of fraudulent Forms 1120, 1120S and 1041 as well as Schedules K-1. The fraudulent filings include forms filed relating to partnerships, estates and trusts. Identity thieves are displaying a sophisticated knowledge of the tax code and industry filing practices as they attempt to obtain valuable data to enable them to file fraudulent returns.

Identity thieves have long made use of stolen Employer Identification Numbers (EINs) to create fake Forms W-2 that they file with fraudulent individual tax returns seeking refunds. Fraudsters also used EINs to open new lines of credit or obtain credit cards. Now, they are using company names and EINs to file fraudulent returns for the businesses themselves.

As with fraudulent individual returns, there are certain signs that may indicate identity theft. Those filing returns for corporations, partnerships, estates or trusts should be alert to potential identity theft and contact the IRS if they experience any of these issues:

  • Extension to file requests are rejected because a return with the Employer Identification Number or Social Security number is already on file;
  • An e-filed return is rejected because a duplicate EIN/SSN is already on file with the IRS;
  • An unexpected receipt of a tax transcript or IRS notice that doesn’t correspond to anything submitted by the filer;
  • Failure to receive expected and routine correspondence from the IRS because the thief has changed the taxpayer’s address.

New Procedures to Protect Businesses in 2018

The Division of Revenue, the IRS, and software providers share certain data points from returns, including business returns, which help identify a suspicious filing. Delaware and the IRS are asking that businesses and tax practitioners provide additional information that will help verify the legitimacy of the tax returns they file.

For 2018, the “know your customer” procedures that are being put in place include the following questions:

  • Authorized signer – Confirm the name and SSN of the company executive authorized to sign the corporate tax return;
  • Payment history – were estimated tax payments made? If yes, when were they made, how were they made, and how much was paid?
  • Parent company information – is there a parent company? If yes, what is the name of the parent company?
  • Deduction information – Provide additional information based on deductions claimed;
  • Filing history – has the business filed Form(s) 940, 941 or other business-related tax forms?

Individuals operating as sole proprietorships who file Schedule C with Form 1040 and partnerships that file Schedule K-1 with Form 1065 also will be asked to provide additional information items, such as a driver’s license number. Providing this information will help Delaware and the IRS identify suspicious business-related returns.

For small businesses looking for a place to start on security, the National Institute of Standards and Technology (NIST) has produced Small Business Information Security: The Fundamentals. NIST is the branch of the U.S. Commerce Department that sets information security frameworks followed by federal agencies. The United States Computer Emergency Readiness Team (US-CERT) has created Resources for Small and Midsize Businesses.

Take the steps recommended by cyber experts to protect your business, and visit the Identity Protection: Prevention, Detection and Victim Assistance for more information about business-related identity theft.


Seven Steps to Keep Your Tax Information Secure Online

During the online holiday shopping season, the Delaware Division of Revenue is joining with the IRS, other state tax agencies and the tax industry to mark “National Tax Security Awareness Week.” From November 27 through December 1, we’d like to remind people to be vigilant with their personal information. While you are shopping for gifts, criminals are shopping for credit card numbers, financial account information, Social Security numbers and other sensitive data that could help them file a fraudulent tax return.

Cyber criminals seek to turn stolen data into quick cash, either by draining financial accounts, charging credit cards, creating new credit accounts or even using stolen identities to file a fraudulent tax return for a refund. Anyone who has an online presence should take a few simple steps that could go a long way to protecting their identity and personal information.

Here are seven steps to help with online safety and protecting tax returns and refunds in 2018:

  • Shop at familiar online retailers. Generally, sites using the “s” designation in “https” at the start of the URL are secure. Look for the “lock” icon in the browser’s URL bar. But remember, even bad actors may obtain a security certificate so the “s” may not vouch for the site’s legitimacy.
  • Avoid unprotected Wi-Fi. Beware of making purchases at unfamiliar sites or clicking on links from pop-up ads. Unprotected public Wi-Fi hotspots also may allow thieves to view transactions. Do not engage in online financial transactions if using unprotected public Wi-Fi.
  • Learn to recognize and avoid phishing emails that pose as a trusted source such as those from financial institutions or the IRS. These emails may suggest a password is expiring or an account update is needed. The criminal’s goal is to entice users to open a link or attachment. The link may take users to a fake website that will steal usernames and passwords or an attachment may download malware that tracks keystrokes.
  • Keep a clean machine. This applies to all devices — computers, phones and tablets. Use security software to protect against malware that may steal data and viruses that may damage files. Set it to update automatically so that it always has the latest security defenses. Make sure firewalls and browser defenses are always active. Avoid “free” security scans or pop-up advertisements for security software.
  • Use passwords that are strong, long and unique. Experts suggest a minimum of 10 characters, but longer is better. Avoid using a specific word; longer phrases are better. Use a combination of letters, numbers and special characters. Use a different password for each account. If you can’t remember all your passwords, use a password manager, which securely stores the passwords for you.
  • Use multi-factor authentication. Some financial institutions, email providers and social media sites allow users to set accounts for multi-factor authentication, meaning users may need a security code, usually sent as a text to a mobile phone, in addition to usernames and passwords. For added protection, some financial institutions also will send email or text alerts when there is a withdrawal or change to the account. Generally, users can check account profiles at these locations to see what added protections may be available.
  • Encrypt and password-protect sensitive data. If keeping financial records, tax returns or any personally identifiable information on computers, this data should be encrypted and protected by a strong password. Also, back-up important data to an external source such as an external hard drive. When disposing of computers, mobile phones or tablets, make sure to wipe the hard drive of all information before throwing it away.

There are also a few additional steps people can take a few times a year to make sure they have not become an identity theft victim. Receive a free credit report from each of the three major credit bureaus once a year. Check it to make sure there are no credit changes that don’t look familiar. Create a “My Social Security” account online with the Social Security Administration which can be used to see how much income is attributed to your SSN annually. This can help determine if someone else is using your SSN for employment purposes.

The Division of Revenue, the IRS, and the tax industry are committed to working together to fight against tax-related identity theft and to protect taxpayers. Visit the “Taxes. Security. Together.” awareness campaign, or review IRS Publication 4524, Security Awareness for Taxpayers for additional information.


Governor Carney Announces Launch of GEAR Website to Identify Cost Savings

State employees, members of the public can submit ideas for cost savings, improvements across state government

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WILMINGTON, Del. – Governor Carney on Thursday announced the launch of a website for the Government Efficiency and Accountability Review Board, gear.delaware.gov, to identify opportunities for cost savings and system improvements across state government.

In February, Governor Carney signed Executive Order #4 establishing the Government Efficiency and Accountability Review (GEAR) Board to help identify, on an ongoing basis and over the long-term, opportunities for cost savings and efficiencies that will improve the delivery of state services.

“We have an obligation to spend taxpayer dollars wisely, find ways to more efficiently allocate state resources, and direct investments where they are most needed,” said Governor Carney. “GEAR is a long-term effort committed to those goals. This website will help us solicit ideas from state employees, and Delawareans across our state, to improve the way our state government does business. Delawareans expect us to responsibly manage their money, and we’re committed to doing just that.”

The GEAR Board, which started meeting earlier this year, will develop recommendations for increasing efficiency and effectiveness across state government. Its members will explore ways to improve Delaware’s strategic financial planning process, and expand the use of metrics in determining how to allocate state resources.

By December 1 of each year, the board will submit a report to the Governor, including recommendations that may be included in the recommended state budget. Recommendations could include ways that state government agencies can share services, and new methods for improving the recruitment, development, and retention of state employees.

GEAR’s recommendations will be intended to consistently improve the way the state delivers services, and to improve the quality of those services.

Delawareans can visit the new GEAR website to learn more about the group’s mission and areas of focus, and to submit ideas for improvement.

“We are appreciative of the continuing input that GEAR has received to date from State employees and the public,” said James Myran, Director of GEAR, and Bryan Sullivan, OMB Director of Management Efficiency. “The new website offers an additional means to share new ideas for sustainable improvements to the efficiency of government operations and demonstrates a commitment to creating a culture of continuous improvement statewide.”

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Related:
Governor Carney Creates Government Efficiency and Accountability Review Board

 

 

 

 


Revenue Announces Threshold Updates Under the Delaware Competes Act

The Division of Revenue announced the annual adjustments to filing thresholds for small businesses and employers under the Delaware Competes Act. These threshold adjustments are intended to ensure that small businesses continue to reap the benefits of the Delaware Competes Act for years to come.

As noted last year, the safe harbor provision for small businesses had been enacted in 1984, but because the original qualification thresholds had not been adjusted, many small businesses had stopped qualifying for the reduced reporting obligations. “Updating thresholds throughout Delaware’s tax code reduces administrative and compliance costs for small businesses and the Division of Revenue alike,” said Division of Revenue Director, Jennifer Noel. “These adjustments will continue to ensure that the tax code is predictable and fair for small businesses and will maintain the reduced filing frequencies that small businesses benefited from last year.”

This notification is part of the Division of Revenue’s annual notification process, in which businesses and employers receive updates regarding their filing responsibilities for the upcoming year. The Delaware Competes Act mandates that thresholds are subject to an annual inflation adjustment, meaning that the thresholds’ future effectiveness will not erode over time.

New threshold information can be found by visiting the Division of Revenue web site at http://revenue.delaware.gov/services/Business_Tax/Threshold_Update_102017.pdf.


New Director Appointed to the Division of Revenue

Delaware Department of Finance Secretary Rick Geisenberger has announced the appointment of Jennifer Noel, Esq. as the new Director for the Division of Revenue, effective October 1, 2017.

Ms. Noel has represented the Department of Finance, the Division of Revenue, and the Division of Accounting as a Deputy Attorney General since 2012. In this role, she helped draft major legislation reforming corporate income tax laws (the Delaware Competes Act) as well as updates to tobacco, alcohol, personal income, and estate tax laws. She has worked with taxpayers and their representatives to ensure cases are managed fairly and transparently, while working with the Department in diverse matters, including statutory interpretation, audit management, and contractual obligations.

“Jenn is well known to tax practitioners throughout the State,” said Secretary Geisenberger. “With two and half decades of experience in tax law – mostly as an advocate for taxpayers, but also as the Division of Revenue’s lawyer – she is uniquely equipped to fairly administer Delaware’s tax system while driving forward the Carney Administration’s efforts to continuously improve customer service to our citizens and businesses.” Ms. Noel will also serve as Delaware’s State Escheator, with responsibility for unclaimed property administration.

Prior to joining state government, Ms. Noel was a tax attorney in private practice for 12 years at one of Wilmington’s largest law firms, Young Conaway Stargatt & Taylor, LLP. While completing her undergraduate and law degrees, she worked as a law clerk, tax paralegal and legal assistant. Ms. Noel earned her J.D. and B.S. degrees from Widener University, and is currently pursuing an LLM in Tax from Georgetown University, with a certificate in state and local tax. She is active in the Delaware tax community, having chaired the Delaware State Bar Association’s Tax Section and served on the planning committee for the Delaware Tax Institute.

“I look forward to the opportunity to continue working with the outstanding team at the Division of Revenue to serve the taxpayers of the State of Delaware. Customer service will be a priority as we look for ways to improve our effectiveness and create greater efficiencies in our processes,” said Director Noel.