Citing security needs, the IRS May 13 changed its requirements for any business seeking an employer identification number.

Only individuals with tax identification numbers—either a Social Security number or an individual taxpayer identification number—may request an employer identification number.

The agency says the new requirement improves transparency and provides greater security to the employer identification number process by requiring an individual to be the responsible party.

An EIN is a nine-digit tax identification number assigned to sole proprietors, corporations, partnerships, estates, trusts, employee retirement plans, and other entities for tax-filing and reporting purposes.

The change prohibits entities from using their own EINs to obtain additional EINs.

The new requirement applies to both the paper Form SS-4, Application for Employer Identification Number, and online EIN applications.

Data Security

Individuals aren't the only ones who need to protect their identities, the IRS advised.

Businesses and other organizations, especially trusts, estates, and partnerships, can fall victim to identity theft.

For example, criminals may file Forms 1120 (corporations), 1120S (S corporations), or Schedules K-1 in their names.

Last year, 2,450 businesses reported that they were victims of tax-related identity theft, a 10% increase over 2017.

Businesses and other organizations can help combat identity theft by educating their employees, clients, and customers.

The IRS suggests they share Publication 4524, Taxes. Security. Together: Security Awareness for Taxpayers, or create their own messages urging employees, clients, or customers to protect their data and beware of phishing emails, the most common tactic used by criminals to steal data.

Phishing Scam

Businesses should also educate their payroll and human resources employees about a dangerous phishing scam.

The Form W-2 scam tricks payroll and human resources employees into sharing employee wage and income information by posing as a company executive. See Form W-2/SSN Data Theft: Information for Businesses and Payroll Service Providers.

Businesses that retain sensitive financial data should review and update their security plan. Publication 4557, Safeguarding Taxpayer Data, provides a good starting point and includes helpful recommendations.

For more information, contact CBIA's Mark Soycher (860.244.1138) | @HRHotline