Ohio Conference of Payroll Professionals

Transcription

1 Ohio Conference of Payroll Professionals Dennis Bell October 16, 2014 What is identity theft? Identity theft occurs when someone uses your personal information such as your name, Social Security Number (SSN) or other identifying information, without your permission, to commit fraud or other crimes Identity theft most often occurs from sources outside of IRS: Dumpster diving Skimming Phishing Address changes Theft of records Pre-texting Data breaches Trojan viruses Spyware 1

2 IRS s response to identity theft Stopping identity theft and refund fraud is a top priority for the IRS. The agency s work on identity theft and refund fraud continues to grow, touching nearly every part of the organization. For the 2013 filing season, the IRS expanded these efforts to better protect taxpayers and help victims. Increasing efforts to help victims In calendar year 2013, the IRS worked with victims to resolve and close more than 963,000 cases of tax-related identity theft. In calendar year 2013, the IRS suspended or rejected 5.7 million suspicious returns worth more than $17.8 billion. Types of tax-related identity theft Refund-related identity theft Identity thief uses a stolen SSN to file a forged tax return and obtain a fraudulent refund. Employment-related identity theft Identity thief uses a stolen SSN to obtain employment. Business-related identity theft Identity thief uses a business s identifying info without authority to obtain tax benefits. 2

3 Criminal investigation of identity theft Increased investigations Tax-related identity theft is a national priority for IRS Criminal Investigation. During fiscal year 2012, IRS Criminal Investigation initiated 890 identity theft investigations. During FY 2013, an additional 1,492 cases were investigated. Preventing online identity theft Don t respond to suspicious IRS s, Texts and faxes. Secure your computers (i.e., firewalls, antivirus/anti-phishing/anti-spam, etc.). Use strong passwords. Back up critical personal information Limit the personal information you provide on social media. Never answer yes to pop-up screens Visit onguardonline.gov. Suspicious IRS-related communication If you or a client receive a suspicious communication claiming to be the IRS: Go to IRS.gov, scroll to the bottom of the homepage and click on Report Phishing. Report all unsolicited claiming to be from the IRS to phishing@irs.gov. 3

4 Assisting ID theft victims Call the Identity Protection Specialized Unit at Complete the Form 14039, Identity Theft Affidavit, with all documentation. Take additional non-tax identity protection steps File police report. Place fraud alert on credit accounts by calling one of the credit bureaus. File a complaint with the Federal Trade Commission at Summary Fighting identity theft is an ongoing battle that requires a collaborative effort among the IRS, practitioners and taxpayers. Business-related identity theft Business Master File identity theft Business Master File, or BMF, identity theft is defined as creating, using or attempting to use a business s identifying information, without authority, to obtain tax benefits. The following examples represent situations that may be due to identity theft related to the fraudulent use of business information. 4

5 Examples of BMF identity theft Example 1: An identity thief files a business tax return (Form 1120, 720 etc.) using the Employer Identification number of an active or inactive business to obtain a fraudulent refund. Examples of BMF identity theft Example 2: An identity thief, using the EIN of an active or inactive business, files fraudulent Forms 941 and W-2s to support a bogus Form 1040 claiming a fraudulent refund. Examples of BMF identity theft Example 3: An identity thief obtains an EIN using the name and Social Security number of another individual as the responsible party, then files fraudulent tax returns (Form 941, 1120, 1041 etc.) to avoid paying taxes, obtain a refund, or further perpetuate individual identity theft or fraud. 5

6 Business-related identity theft Business Master File Identity Theft In January, 2014, PGLD released BMF identity theft program guidance, policy and procedures. The new BMF procedures included: Form B, and electronic form designed for employees to use when they require taxpayers to provide supporting BMF identity theft documentation. BMF identity theft tracking indicators used to mark EINs affected by identity theft. Mandatory research requirements needed in support of a BMF identity theft determination. Protecting businesses from identity theft Businesses can take practical measures to reduce the risk of tax-related identity theft: Protect the organization s federal tax identification number as you would a personal identification number. Only provide your organization s federal tax identification number and other sensitive information when necessary. Verify the security of any website through which your organization transmits sensitive data. Properly dispose of sensitive company documents (for example using a micro-cut shredder). Increase identity theft awareness within your organization to ensure everyone is protecting sensitive data. Dealing with tax-related identity theft If you suspect your organization has been compromised by business identity theft, take the following steps: File a report with local law enforcement. Contact the major business credit agencies, including Equifax, Experian, TransUnion and Dunn and Bradstreet, to report the fraudulent activity and obtain a credit report to check for additional fraudulent activity. Contact all credit card companies, financial institutions and creditors to alert them to the possibility of fraudulent activity. Respond to the IRS notice you received and provide a detailed explanation of how you believe your organization has been affected by identity theft. 6

7 Protecting your business and clients Physical safeguards: Lock rooms and cabinets. Store records in secured area. Protect against destruction and damage. Inventory hardware. Dispose of information and hardware securely. Protecting your business and clients System safeguards: Use strong passwords: Minimum of eight alphanumeric characters. Change passwords periodically. Use timed, password-activated screen savers. Don t post or share passwords. Encrypt sensitive data when: Transmitting over networks. Storing on servers or media. Encrypt entire computers, media. Protecting your business and clients More system safeguards Don t store sensitive data on a machine with an internet connection. Back up system periodically on secure media. Maintain updated firewalls, anti-virus, software updates, security patches, anti- spyware and anti-ad ware. Provide central management security tools and passwords/security protections. 7

8 Protecting your business and clients If you have a security breach: Notify law enforcement. Notify the Federal Trade Commission ( for contact information). Notify customers and business partners. Take corrective actions. Prevent other breaches. Additional information Identity theft information Individual identity theft Business identity theft Data breach information Additional resources Taxpayer Guide to Identity Theft Third Party Payers 8

9 Payroll Service Providers (PSPs) Many employers outsource their payroll and related tax duties, the 3 rd party payers will: Administer payroll and employment taxes Provide assistance in meeting filing deadlines and deposit requirements Streamline business operations Types of Third Party Payers Common third party arrangements include: Payroll Service Providers (PSPs) Reporting Agents Section 3504 Agents Professional Employer Organizations (PEOs) Reminder: Employers are ultimately responsible for the payment of income tax withheld (employer and employee portions of social security and Medicare taxes). See Fact Sheet Tips for Employers Who Outsource Payroll Duties Electronic Federal Tax Payment System The EFTPS is: Mandatory Secure, accurate and easy to use Available to be viewed online after enrollment Accessible by an Inquiry PIN The system: Provides immediate confirmation for each transaction Maintains a history for 16 months 9

10 Employment Tax Investigations Can result in: Prosecutions of individuals and companies, acting under the guise of a third party payroll service. For more information, visit IRS.gov and type in the key search words employment tax investigations. Liabilities for employers who are ultimately responsible for the payment of income tax withheld (employer and employee portions of social security and Medicare taxes). Employment Tax Issues Additional Medicare Tax (AdMT) Employers Applies to tax years beginning after 12/31/2012 Employers are required to withhold 0.9 percent AdMT on wages or compensation paid to an employee in excess of $200,000 in the calendar year A new line 5(d) for reporting AdMT withholding was added to Form 941 The amount withheld will be reported with regular Medicare tax on Form W-2 Box 6 10

11 AdMT Employee Provides for 0.9 percent AdMT on wages, compensation and self-employment income received above certain threshold amounts Thresholds amounts based on filing status Threshold amounts: Married Filing Jointly: $250,000 Married Filing Separately: $125,000 All others: $200,000 AdMT Takeaways Individuals can t request withholding specifically for AdMT, but may request additional income tax withholding on Form W-4 Individuals may also need to consider making estimated tax payments True Up Applies to tips and SE Income if in excess of the applicable threshold amount No employer match AdMT Example J and L file a joint return J has $150,000 in wages and L has $160,000 in wages Neither one s wages in excess of $200,000 thus no withholding by their employers Combined $310,000 in wages is more than the $250,000 threshold for joint filers J and L are liable to pay additional Medicare Tax on $60,000, or $540 11

12 Voluntary Classification Settlement Program Originally released 9/21/2011 Eligibility expanded January 2013 Simple application and process Audit protection for past years Taxpayer agrees to: Prospectively treat a class or classes of workers as employees Small payment required just over 1 percent of compensation VCSP Eligibility Eligible Businesses: Must have consistently treated workers as nonemployees Must have filed Forms 1099 for nonemployees for previous three years Cannot be under examination by IRS Cannot be under examination by DOL or state regarding worker classification Can be tax-exempt organization or gov entity Compliance Focus 1120S Officers Compensation Zero (or very small) wages paid and significant distributable income Officer performs significant services Employment taxes reduced or eliminated Case study: Watson 12

13 Compliance Focus Accountable Plans Business connection - Reg (d) Substantiation - Reg (e) Return of excess (f) Compliance issues: Travel reimbursements Tool reimbursements What s New on IRS.gov Topic Electronic newsletters Multimedia Center (audio, video and text) Social Media Video Portal Your Guide to an IRS Audit Small Business Taxes: The Virtual Workshop Basic tools for tax pros e-services online tools for tax pros Tax info for tax pros Search Word(s) e-news multimedia social media video portal basic tools eservice tax pros IRS Resources for Payroll Professionals 13

14 American Payroll Association Leading advocate for advancement of payroll professionals Connects payroll industry with employers and government Provides the following to payroll professionals: Education Skills Resources Search Payroll Professional IRS.gov Bullet (28 pt.) Bullet (28 pt.) Bullet (28 pt.) E-News for Payroll Professionals Legislative changes News releases and announcements Employment tax procedures Reminders and tips 14

15 Payroll Professionals Tax Center Bullet (28 pt.) Bullet (28 pt.) Bullet (28 pt.) Local Meetings and Seminars Bullet (28 pt.) Bullet (28 pt.) Bullet (28 pt.) IRS Video Portal 15

16 for Tax Pros Tab Bullet (28 pt.) Bullet (28 pt.) Bullet (28 pt.) for Tax Pros Page Information and links to: PTIN registration E-Services Tax Forums Ways to stay informed Hot Topics E-Services Conduct business with the IRS electronically Available only to approved IRS business partners Available 24/7 Register online For assistance after registering contact the e-help Desk at

17 Stay Informed with QuickAlerts Receive e-file messages affecting e-file transmitters, software developers and authorized IRS e-file providers Four categories: 1. Alerts 2. Technical 3. General Notifications 4. General IRS e-file Service Center Messages IRS Social Media IRS2Go app Tumblr Facebook Podcasts SL HQ Payroll Industry Calls Stakeholder Liaison Headquarters monthly payroll industry calls First Thursday of each month 1:00 p.m. Eastern 17

18 Thank You! Questions??? Dennis Bell Stakeholder Liaison