Identity theft has become an enormous problem. Many of us have been victims. Identity thieves obtain
data from all sorts of places—employer records, credit cards used at restaurants, stolen mail, etc. Even tax
preparers have come under fire for improperly using client data. Identity thieves have also posed as representatives
of the IRS in “phishing” expeditions online. A common phishing scheme involves the con artist informing
the recipient of an e-mail purporting to be from the IRS that the recipient is either under investigation
by the IRS or due a refund. The links contained within the e-mail take the recipient to a page that very
closely resembles the IRS website. There, the recipient is asked to input personal data, including their name,
social security number, bank account information, and credit card information.
Not only are thieves using stolen personal data to access bank accounts or open lines of credit, but they
are also increasingly using stolen names and social security numbers to file falsified returns with the IRS in
order to obtain fraudulent refunds. When a fraudulent return is filed, the real taxpayer will face months of
back and forth with the IRS to resolve the matter. Not only is dealing with the matter a headache, the fraudulent
return might also result in an extensive delay of any refund due. Such delays can be a big problem for a
taxpayer who has been counting on the refund to pay expenses.
We’re advised to safeguard our personal information, especially our social security numbers, yet it seems
that every time a writer turns around he or she is being asked for a tax ID number. A writer has to provide
his or her tax ID to publishers and agents, as well as to outlets that sell self-published books. If an author has
paid $10 or more in royalties to another author or $600 or more for personal services to an assistant, cover
artist, freelance editor, accountant, or attorney, the author has to issue a 1099 to the recipient of the funds
(unless the recipient is a corporation). The 1099 form requires the author to note his or her tax ID number. It can be risky to provide your social security number to parties who may or may not safeguard your information. Also, the more times you provide your social security number, the higher the chance that some unscrupulous
person could access the information.
How can you protect yourself?
Be aware that the IRS never sends unsolicited e-mails and will never request credit card information and
PIN numbers via e-mail.
Leave your social security card in a safe place. Do not carry it with you in your purse or wallet.
Check your credit report at least once a year for fraudulent accounts.
To avoid having to give out your personal social security number, obtain an “employer identification
number” or “EIN” for your writing business. An EIN is available to any business, including a sole proprietor.
Despite its name, you are not required to have employees in order to obtain an EIN. An EIN is simply a tax
identification number for your business that is distinct from your social security number.
Although an EIN is linked to your writing business with the IRS, an identity thief will not get far if the thief
tries to use the number for other purposes such as obtaining a credit card or tries to use it on tax forms
when a social security number is required.
You can use this EIN on the 1099 forms you file. You will also list the EIN in box D at the top of your
Schedule C when you file your tax return.
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