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  • Kimberly Stone

W-2 Tax-Season Swindle

Scammers were very successful last year with a scheme to pry W-2 pay stub data away from employers. Employee's payroll information is being phished and then used to file false returns in the employee's name. The IRS warns that it may be one of several techniques they use again this year.

How the W-2 Phishing Scam Works

Fraudsters identify employees with access to company payroll data and pretend to be a fellow employee emailing from an outside address. “Hi, I work in accounting. Do you think you could send me the payroll data on file? I’m traveling today and working on preparing my tax return.”

The IRS said this surprisingly simple tactic worked on more than 200 employers last year and compromised the W-2 information of hundreds of thousands of employees. The stolen data included names, addresses, Social Security numbers, income, and withholdings.

Scammers then used the phished data to file fake returns and claim refunds from the employees' tax withholdings.

If you’re an employee, it’s hard to defend against this kind of scam because the breach happens to your employer. If you file and get an IRS notice that a return has already been filed in your name, you’ll know you’re a victim.

How to Reduce Your Risk

If your refund was nabbed by a scammer, the good news is that the IRS will eventually send you a replacement refund. The bad news is it can take a very long time – six months to a year or longer – for the IRS to investigate your case.

However, there are a few things you can do to minimize your risk:

File early. By filing your tax return as early as possible, you close the window of opportunity for scammers to file their false tax return.

Request an IRS PIN. This one-time-use number provided by the IRS is entered on your 1040 forms as an added measure of security. Those whose identities have been stolen are automatically placed in the PIN program, but you may also opt-in to it yourself. Apply for an Identity Protection Personal Information Number (IP PIN).

Minimize excess withholdings. If you had your withholdings calculated properly during the year, you can minimize the amount available for scammers to steal. Check your withholdings throughout the year using the IRS web tool.

If you have any questions regarding your withholding or W-2 situation, don't hesitate to contact us.

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