4 FAQs about W-2 business email compromise attacks during tax season
Has your business been a victim of tax season cyber attacks? The most popular time of the year for W-2 related cyber attacks is during tax season. Read this blog post to learn more.
The most likely cyber attack a company will face will come in the form of an email. One of the most common forms of email attack is the business email compromise (BEC), and the most popular time of the year for the W-2 version of BEC is right now — tax season.
A BEC attack involves attackers sending emails disguised as coming from high-level executives within a company, such as the CEO, to lower level personnel. During tax season, the spoof email will often request that W-2s for employees be provided by return email.
While the email looks identical to the executive’s email, it is coming from — and then returned to — the criminal, not the executive, along with the W-2s and the personal information associated with the documents.
If an employee falls for the scam, the company now has experienced a serious data breach and must comply with certain legal requirements. Worse yet, the company’s employees’ sensitive personal information has been given to the attackers and they have this problem to worry about instead of performing their job. The disruption is substantial in their personal lives and for the company’s operations.
How do attackers use W-2 information?
In most cases, once the attackers have that W-2 information, they use it to attempt to file fraudulent tax returns for those employees and have their tax refunds sent to them instead of the employee. They also use it for traditional identity theft.
The attackers act very quickly once the information is obtained. In some cases, they have begun to fraudulently use the information on the same day they obtained the W-2 information from the company. Time is truly of the essence in responding to these attacks and legal assistance is necessary for properly responding to these data breach events.
Why do so many attacks happen during tax season?
Law enforcement officers and cybersecurity professionals report a drastic increase in these types of attacks during the beginning of each year because of tax season. This is consistent with what is seen in helping companies with these cases in past years, as well. The reason this type of attack is so common during tax season is because of the tax-related fraud aspect of this type of attack. That is, the attackers monetize their attacks by using the fraudulently obtained information to file fraudulent tax returns and obtain refunds from innocent victims.
And the sooner they can do this, the better their chances are of getting the refund before the taxpayer files and receives their tax refund.
If a company has not yet been targeted, it is likely that it will be very soon so it is important to be prepared.
What can you do to protect your company?
Educating employees is critical because they will be the ones who receive the emails from the attackers.
- Make them aware of this issue by sharing the information in this article with them so that they understand the threat, how it works and how it could affect them personally.
- Train them by having appropriate personnel discuss this threat with them and help them understand that they should be very suspicious of any requests to email out anything of this nature (or make payments, such as with the very similar wire transfer version of the BEC).
Have appropriate internal controls in place to protect against these types of attacks. These controls can include:
- Limit who has access to your company’s W-2s and other sensitive information as well as who has the authority to submit or approve wire payments.
- Have established procedures in place for sending W-2 information or other sensitive information as well as for submitting or approving wire payments so that dual approvals are required for these activities.
- Require employees to use an alternative means of confirming the identity of the person making the request. If the request is by email, the employee should talk to the requestor in-person or call and speak to the requestor using a known telephone number to get verbal confirmation. If the request is by telephone or fax (many times they are), then use email to confirm by using an email address known to be correct to confirm with the purported requestor. Never reply to one of these emails or call using a telephone number that is provided in one of these emails, faxes, or telephone calls.
What to do if your company is hit by an attack
- Immediately contact experienced legal counsel who understands how to guide a company through these incidents and, ideally, has appropriate contacts with law enforcement and the IRS to assist in reporting this incident quickly.
- Report the incident to the FBI or Secret Service and appropriate IRS investigators so that the IRS can implement appropriate procedures to protect the employees whose information was exposed in the W-2s.
- Prepare appropriate notifications to the people whose information was exposed and comply with all legal and regulatory reporting requirements. This should be a part of an existing incident response plan. Companies should have such a procedure in place to be better prepared if and when a security breach occurs.
- Inform employees that the IRS will never contact them directly, for the first time, via email, telephone, text message, social media or any way other than through a written “snail mail” letter.
SOURCE: Tuma, S. (19 February 2019) "4 FAQs about W-2 business email compromise attacks during tax season" (Web Blog Post). Retrieved from https://www.benefitspro.com/2019/02/19/4-faqs-about-w-2-business-email-compromise-attacks-during-tax-season/
IRS Confirms W-2 Safe Harbor to Determine Plan Affordability
Originally posted by assuredskcg.com.
The employer mandate, effective beginning in 2014, requires employers with 50 or more employees to pay a penalty if certain conditions are not met. One of these conditions is to provide affordable coverage. Coverage is considered to be affordable if an employee’s required contribution does not exceed 9.5% of the employee’s household income – something that is not readily accessible by employers. As previously reported, the IRS proposed a safe harbor that would allow employers to use the W-2 wages of an employee to determine whether coverage is affordable for purposes of the employer mandate, instead of using household income. In Notice 2012-58, The IRS confirms that the Form W-2 safe harbor will be available to employers to determine affordability with respect to the employer penalty provisions, at least through 2014. To take advantage of the safe harbor, employers must offer full-time employees and their dependents the opportunity to enroll in minimum essential coverage under an employer-sponsored plan, and ensure that the employee portion of the self-only premium for the employer’s lowest cost coverage that provides minimum value does not exceed 9.5% for the employee’s W-2 wages. Application of the safe harbor would be determined after the end of the calendar year and on an employee-byemployee basis, taking into account the employee’s particular W-2 wages and contribution. The safe harbor can also be used prospectively, at the beginning of the year, by structuring the plan to set the employee contribution at a level that would not exceed 9.5% of the employee’s W-2 wages. It is important to note the safe harbor only applies for purposes of determining whether an employer’s coverage satisfies the affordability test for purposes of the employer mandate – it would not affect an employee’s eligibility for a premium tax credit, which continues to be based on the affordability of employer-sponsored coverage relative to an employee’s household income. Thus, in some cases, this means that an employer’s offer of coverage to an employee could be considered affordable based on W-2 wages for purposes of determining whether the employer is subject to a penalty under the employer mandate, and the same offer could be treated as unaffordable based on household income for purposes of determining whether the employee is eligible for a premium tax credit (i.e., no penalty even though the employee receives subsidized coverage in the Exchange). Although the guidance is helpful to employers and will make it easier to look at contribution structures for benefit programs in 2014, further guidance is still needed in several areas, including what constitutes a “minimum value” plan, and what constitutes providing coverage to “substantially all” full-time employees in order to avoid the application of the penalty that applies with respect to not offering coverage.
How the Affordable Care Act affects your 2013 tax returns
Originally posted September 16, 2013 by Roger Prince on https://www.mainebiz.biz
As Affordable Care Act deadlines approach, most of the discussion heard on the street concerns the individual health insurance mandate and the expected opening of the state and federal insurance marketplaces this fall. Lost in the shuffle are the tax increases related to the ACA. Most of these changes impact high earners, but thresholds differ depending upon the tax provision in question. For anyone in the affected income categories — and there are many in Maine — the increases are significant.
Which taxpayers will be affected?
The accompanying chart outlines some of the important tax increases imposed as a result of the ACA and more recent legislation. The increases generally affect single filers with an adjusted gross income (AGI) above $200,000 and married couples filing jointly above $250,000. Some of the tax increases don't kick in until single AGI hits $400,000 and married filing jointly AGI hits $450,000.
How to mitigate the impact
As with any increase in marginal tax rates, a focus on income deferral and upfront tax planning can help soften the blow by reducing the amount of income that qualifies for the new tax rates. There are a number of strategies for income deferral, some of them employer-initiated and some handled by the individual. For example, employers might decide to redesign their 401(k) or 403(b) plans to provide for greater employer non-elective contributions (such as profit-sharing allocations) for certain types or groups of employees. A company might also decide to offer deferred compensation as part of an incentive program using so-called "synthetic" equity tools such as Phantom Stock or Stock Appreciation Rights. In these forms of compensation, the benefit is tied in various ways to the value of hypothetical shares of stock set to be paid out on a specified later date.
Individuals can defer or eliminate taxes in a higher-tax environment with various retirement savings strategies as well as tax-effective investment strategies. Individuals should get advice from both investment advisers and tax professionals to make sure their investment strategies coincide with a prudent tax strategy. The key is to be sure that the current income and investment structure maximizes the after-tax return.
Changes in the medical expense deduction
Regardless of income level, the unreimbursed medical expense deduction will now be available only for those medical expenses in excess of 10% of AGI, compared to 7.5% before. There is a temporary exemption from this requirement for individuals ages 65 and older and their spouses from 2013 through 2016. Individuals and their spouses who are 65 years or older are still allowed to deduct unreimbursed medical care expenses that exceed 7.5% of their AGI.
Other ACA steps
Employers have other compliance steps and opportunities under the ACA for this tax year. Among them:
- Employers that have employees who earn more than $200,000 will have to look at the potential for additional Medicare withholding.
- Employers that issued 250 or more W-2 forms in 2012 must report the cost of employer-sponsored health coverage for 2013 on the 2013 W-2 forms.
- Small employers (those with 25 or fewer full-time equivalent employees) that offer group health insurance might be eligible for the small business health care tax credit. The credit can be as much as 35% of employer premiums (25% for not-for-profits.) The maximum credit will increase to 50% in 2014 (35% for not-for-profits.) The credit is only available if the employer is paying at least 50% of the total premiums.
As always, everyone's particular tax situation is different. It is safe to say that tax planning for 2013 and thereafter will be more important than ever given the potential loss of tax adjustments and higher marginal tax rates imposed by the ACA and more recent legislation.
To Open Eyes, W-2s List Cost of Providing a Health Plan
Source: https://www.nytimes.com
By Robert Pear
As workers open their W-2 forms this month, many will see a new box with information on the total cost of employer-sponsored health insurance coverage. To some, it will be a surprise, perhaps even a shock.
Workers often have little idea how much they and their employers are paying for coverage. In many cases, economists say, workers give up cash compensation to get and keep health benefits.
The disclosures, required by the 2010 health care law, are meant to make workers more cost-conscious. Health benefits are still tax-free. But labor unions and employer groups say it could be easier to tax them in the future, now that employers must report their value to the government.
The new information appears in Box 12 of the standard W-2 form, with a two-letter code, DD. The box shows the “cost of employer-sponsored health coverage.” And that amount is not taxable, the Internal Revenue Service says on the back of the form.
Jay J. Makled, a union steward for the United Automobile Workers at the Ford plant in Dearborn, Mich., described his reaction after seeing that his health coverage cost nearly $16,000 last year: “It’s quite expensive. I was surprised to see how much the company was paying for that benefit.”
Hourly employees represented by the union there said they generally did not pay any of the premium.
The number on the W-2 form is supposed to reflect the part of the cost paid by the employer and the part paid by the employee.
Prof. Nicole Huberfeld, an expert on health law at the University of Kentucky, who received her W-2 form on Monday, said, “Most people who get health insurance from their employers have no idea how much it costs.”
“People are often shocked when they see the cost, $12,000 to $16,000 a year,” Ms. Huberfeld said. “Many Americans believe this is something they get free. But employers pay lower wages because they provide insurance.”
In 2012, according to an annual survey by the Kaiser Family Foundation, premiums for employer-sponsored health insurance averaged $5,615 a year for single coverage and $15,745 for family coverage. Over five years, the costs have increased 25 percent for individual coverage and 30 percent for family coverage.
“Health coverage is a big piece of people’s income and a large part of the social welfare budget,” said C. Eugene Steuerle, a tax economist at the Urban Institute. “But the benefits are not taxable, and most of the spending is hidden, so we don’t consider the trade-offs. If we want to get control of health care costs, people have to be aware of them.”
That is the goal of the disclosure requirement, which was proposed by a bipartisan group of senators: two Republicans, Charles E. Grassley of Iowa and Michael B. Enzi of Wyoming, and two Democrats, Max Baucus of Montana and Ron Wyden of Oregon.
Congress acted after Peter R. Orszag, then the director of the Congressional Budget Office, told lawmakers: “The economic evidence is overwhelming, the theory is overwhelming, that when your firm pays for your health insurance, you actually pay through reduced take-home pay. The firm is not giving that to you for free.”
The tax-free treatment of employer-provided health benefits is the largest tax break in the tax code, costing the government roughly $180 billion a year in lost revenue, or 80 percent more than the home mortgage interest deduction, according to the administration.
Katie W. Mahoney, the executive director of health policy at the U.S. Chamber of Commerce, said, “It’s useful for employees to know the value of coverage their employers provide.” But she said some employers worried that reporting the benefit on the W-2 form could lead to taxing the benefit.
“That’s not the intent of the current requirement,” Ms. Mahoney said. “But once the information is collected by the government, it’s very easy for another administration to have a different intent.”
An employee of the A.F.L.-C.I.O. whose health coverage was listed as costing more than $20,000 said: “That knocks my socks off. When I saw the number, my eyes popped out. I appreciate my employer all the more.”
The employee said he had been told not to discuss the cost publicly because the union did not want to suggest that some employees had “Cadillac coverage.”
An employer that fails to comply with the reporting requirement could be subject to penalties of $200 per W-2 form, up to a maximum of $3 million, tax lawyers said.
Employers are exempt from the reporting obligation if they are required to file fewer than 250 W-2 forms, the I.R.S. said. That could change, but the agency said employers would be given at least six months’ notice.
Five payroll tax tips for small businesses
Source: Benefitspro.com
By: Amanda McGrory-Dixon
As small business and their accountants and other advisers are preparing for year-end tax preparation, ADP’s Small Business Services division offers five tips for payroll taxes.
Verify tax IDs
A small-business owner should collaborate with his or her accountant or payroll service provider to ensure each tax ID number on payroll reports are correct and current. Any mistake should be fixed prior to processing the company’s last payroll of 2012.
Confirm W-2 and 1099 information with employees
Before the end of the year, employees should review and confirm their W-2 and 1099 information. Small-business owners are responsible for providing accountants with updated employee W-2 information before the last payroll report in 2012. If a W-2c form must be filed with the IRS to correct information on a W-2, the accountant should be notified immediately.
Know your filing responsibilities
Depending on the situation, the small-business owner or the company's accountant must file the company's taxes, and that responsibility should be confirmed with the accountant or tax advisor.
Submit payroll adjustments
All employee payroll adjustments, including voided or manually issued employee checks, are to be submitted to the accountant or payroll service provider prior to the final 2012 payroll report. The deadline for this is Dec. 28.
Report all missing wages or miscellaneous income and tax credits
Missing wages and miscellaneous income and tax credits are required to be reported to the accountant or payroll service provider before the final 2012 payroll report. These wages, income and tax credits include fringe benefits, tips, COBRA payments, employee moving expenses and unsubstantiated employee expense reimbursements.
"Small-business owners are responsible for every aspect of their business, including hiring and managing employees, servicing their clients and adhering to complex tax regulations,” says Anish Rajparia, president of ADP's Small Business Services Division. “That's why as we approach year end, it is especially helpful for small-business owners together with their advisors to proactively take steps that help reduce risks to their business.”