Identity Theft, Tax Fraud and ID Protection PINs
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By: Steven Brewer, CPA
We hear every day that another cyberattack has exposed thousands of pieces of personal data. Just recently, it has come to light that millions of us have had our personal data, including social security numbers, exposed by a cyberattack on National Public Data.
Identity theft takes many different forms. One of the most troubling is when someone uses your personal data to file a tax return. They will file false information using your name and social security number to obtain credits and refunds that are sent to them. There is a way for you to prevent this from happening.
The Internal Revenue Service instituted a program for Identity Protection PINs. These are a series of six-digit numbers assigned to you each year. Each year, you will receive a new PIN so you must give this to your preparer to be able to file your return. You must include this PIN when you e-file your tax return to identify that YOU are filing the return. If a return is filed without the PIN, then the return is rejected.
When you set up the PIN program with the IRS, you also will set up an online account with the IRS. That account will allow you to see your records with the IRS, what has been filed, what the results are, etc. This is very helpful if you ever have a question about what the IRS has. It also will help your tax preparer. When you have an online account, the tax preparer can send you a Power of Attorney form to the account for you to e-sign. The Power of Attorney form is needed for the tax preparer to receive information from the IRS on you if there is ever a problem that you ask the preparer to help you with.
To obtain information on the Identity Theft PIN, go wot https://www.irs.gov/identity-theft-fraud-scams/get-an-identity-protection-pin. Only you can obtain the PIN. No preparer or other third party can do this so if someone is telling you they can get one for “turn and run the other direction”.
You do have the option to opt out of the program unless you are a confirmed victim of identity theft. If so, you cannot opt out.
So, for your piece of mind and to stop the “bad guys” from getting into your taxes, get your PIN today.
Why Growth Increases Employment Risk A business with two employees may feel easy to manage. A business with ten employees needs more structure. A business with twenty employees needs even more consistency. Growth creates more decisions. More decisions create more chances for confusion, conflict, or claims. As a business grows, employment practices can lag behind. The company may add people before updating job descriptions. It may promote a team member into management before training them. It may handle performance issues differently from one employee to another. These gaps are common. They do not always mean the owner is careless. They often mean the business is busy. But employment claims often focus on process. For example: Was the rule applied the same way for everyone? Was the employee warned? Was the complaint reviewed? Was the hiring process fair? Was the manager trained? Was the decision documented? A clear process is easier to defend than memory. The Equal Employment Opportunty Commission advises employers to train managers and employees on equal employment opportunity laws, establish neutral and objective criteria for employment decisions, and monitor practices for consistency. It also recommends fostering open communication and early dispute resolution to keep small issues from becoming legal claims. [4] That is why Employment Practices Liability Insurance works best when it is paired with good workplace habits. Insurance helps protect the business financially. Documentation helps explain what happened. How Small Businesses Can Reduce EPLI Risk Employment Practices Liability Insurance is one layer of protection. Strong employment practices are another. Small businesses can reduce risk by making workplace decisions more consistent. This does not require a large HR department. It does require a simple system. Start with these steps: Use written job descriptions. Create a basic employee handbook. Document performance concerns. Use consistent interview questions. Keep hiring notes professional and job-related. Train managers on harassment, discrimination, and retaliation. Respond to employee complaints promptly. Apply workplace policies consistently. Review termination decisions before acting. Keep payroll and worker classification practices current. These steps help create a better workplace. They also help the business if a claim appears later. The EEOC offers a Small Business Resource Center with free guidance on hiring, training, evaluating, disciplining, and terminating employees. The agency notes that small business owners often do not have legal or HR experts on staff, and the resources are designed to help fill that gap. [5] Owners should be especially careful with terminations. A termination may be valid, but it should still be documented. The business should be able to explain why the decision was made and show that similar situations were handled in a similar way. Good records do not remove all risk. They make the business more prepared.
What EPLI Is Not Employment Practices Liability Insurance is not the same as general liability insurance. General liability usually focuses on third-party bodily injury, property damage, and certain personal injury claims. For example, it may apply if a customer slips and falls at your office. EPLI is different. It focuses on workplace claims. Employment Practices Liability Insurance is also not the same as workers' compensation. Workers' compensation helps cover employees who are injured or become ill because of their work. EPLI helps with certain claims about how employees or applicants were treated. That distinction matters. Many owners assume their business insurance will cover an employee lawsuit. It may not. A claim involving wrongful termination, discrimination, harassment, or retaliation may fall outside general liability or workers' compensation. EPLI is designed to help fill that gap. EPLI also has limits. The Insurance Information Institute notes that EPLI policies may reimburse companies for defense costs, settlements, and judgments. But they generally do not cover punitive damages or civil or criminal fines. [1] Common exclusions may include: Criminal acts Intentional wrongdoing Bodily injury Property damage Workers' compensation claims Certain wage and hour claims Claims known before the policy began Some contract disputes Wage and hour claims deserve extra attention. Some policies exclude them. Others may offer limited defense coverage or an endorsement. The best question is not, "Do we have EPLI?" The better question is, "What does our Employment Practices Liability Insurance actually cover?"
What Employment Practices Liability Insurance Covers Employment Practices Liability Insurance is built around the employment relationship. It may help cover legal defense costs, settlements, or judgments tied to covered workplace claims. A policy may respond to claims involving: Wrongful termination Discrimination Sexual harassment Retaliation Failure to hire Failure to promote Wrongful discipline Negligent evaluation Employment-related defamation Invasion of privacy The International Risk Management Institute identifies wrongful termination, discrimination, sexual harassment, and retaliation as common EPLI claim types. It also notes that policies may cover other employment-related conduct, such as defamation, invasion of privacy, failure to promote, and negligent evaluation. [3] Here is a simple example. An employee is fired after repeated performance issues. The owner knows the decision was based on the work. But the former employee claims the firing was discriminatory or retaliatory. Even if the business did nothing wrong, it may still need to respond. That could mean attorney fees, agency filings, a demand letter, or a lawsuit. That is one of the most important parts of EPLI. A claim does not have to be successful to be expensive. IRMI notes that EPLI policies contain shrinking limits provisions. That means defense costs, which are often a substantial part of a claim, reduce the policy's available limits. [3] Some EPLI policies also cover claims from job applicants. This matters if someone says they were not hired because of age, disability, pregnancy, race, gender, religion, or another protected category. Some policies include third-party coverage too. This may help if a customer, client, or vendor claims harassment or discrimination by someone at the business. Not every policy includes it, so owners should ask.