Oct 20, 2026
The IRS continues to warn small businesses to be vigilant
against the rising threat of identity theft and W-2 scams. By the time these
scams come to light, it's too late to start implementing controls. Indeed,
recent tax seasons have seen a surge in phishing emails targeting payroll
direct deposit and wire transfers. Don't wait until they return next tax season
to get yourself ready.
Let's take a closer look at these threats.
Identity theft and W-2 scams
The IRS has warned small businesses to guard against
identity theft, which the agency describes as "big business for identity
thieves" and "devastating to small businesses."
The sensitive information about employees that employers hold is highly valued
by identity thieves, and much of this data can be found on Form W-2.
Identity thieves are known to use stolen business data to
open credit card accounts or file bogus tax returns in order to fraudulently
receive refunds. For example, they may file false individual tax returns by
stealing employer identification numbers and creating fake W-2s.
One of the most dangerous types of W-2 scams involves the
fraudster posing as a company executive and directly emailing the company's HR
or payroll staff. The email may appear friendly and innocent, starting with a
simple, "Hey, you in today?" — but the fraudster's goal is to steal
employees' W-2 and identity data.
Payroll direct deposit and wire transfer scams
This type of cybercrime involves business email compromise
and business email spoofing (BEC/BES) tactics — which normally target all
employers, regardless of industry. In these scenarios, the fraudster,
pretending to be a company employee, emails someone in the HR or payroll
department and requests that they change his or her payroll direct deposit
information. However, the new direct deposit information is controlled by the
impersonator.
BEC and BES scams may also come in the form of emails that
impersonate a company executive and are sent to the employee who handles wire
transfers. Like many other email scams, BEC and BES rackets usually include
grammatical and spelling errors.
Sometimes a scammer pretends to be an employee, asking for
paychecks to be direct deposited into a new account. Make sure you are really
dealing with the employee.
Defeating the threats
If you fall prey to a W-2 scam, notify the IRS at dataloss@irs.gov. For detailed information
on how to report this scam, visit Form
W-2/SSN Data Theft: Information for Businesses and Payroll Service Providers.
Be sure to inform your staff about the potential dangers
lurking around the next tax season.
Also, tell your other employees about the perils of identity
theft and refer them to the Federal Trade Commission's website (www.identitytheft.gov) for tips on how
to protect themselves. Work closely with your payroll professionals to combat
fraud at your business.
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