Cybersecurity Alert: W-2 Scam Targeting Businesses

April 27, 2017
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IRS issues warning regarding cybercriminals and a new W-2 scam

Businesses should be vigilant about their cybersecurity this tax season. The Internal Revenue Service (IRS) issued a new warning that cybercriminals are targeting businesses with a Form W-2 phishing scam.

IRS Issues Warning On Form W-2 Scam

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W-2 Phishing Scam

On March 1, 2016, the IRS warned payroll and human resources professionals to beware of an increasingly common phishing email scheme that seeks personal information from employees under the guise of a “spoofed” email from a company executive. According to the IRS, several payroll and human resources offices have fallen for the scheme and mistakenly emailed payroll data, including W-2 forms that contain Social Security numbers and other personally identifiable information, to cybercriminals posing as company executives. The perpetrators then use the stolen personal information for monetary gain, including fraudulent tax returns for refunds.

“This is a new twist on an old scheme using the cover of the tax season and W-2 filings to try tricking people into sharing personal data. Now the criminals are focusing their schemes on company payroll departments,” said IRS Commissioner John Koskinen. “If your CEO appears to be emailing you for a list of company employees, check it out before you respond. Everyone has a responsibility to remain diligent about confirming the identity of people requesting personal information about employees.”

Cybercriminals are increasingly targeting small businesses with phishing emails, malware and other scams. To stay vigilant, companies must stay on top of emerging threats. With regard to the W-2 scam, the IRS highlights that the phishing emails share common characteristics, namely that the email purports to come from the company chief executive officer and requests a list of employees and information, including SSNs. Below are some examples of W-2 phishing scam e-mail requests:

  • “Kindly send me the individual W-2 (PDF) and earnings summary of all W-2 of our company staff for a quick review.”
  • “Can you send me the updated list of employees with full details (name, Social Security Number, date of birth, home address, salary)?”
  • “I want you to send me the list of W-2 copy of employees wage and tax statements, I need them in PDF file type, you can send it as an attachment. Kindly prepare the lists and email them to me ASAP.”

Evolving W-2 Phishing Scam

On February 2, 2017, the IRS warned that the W-2 Phishing Scam is evolving and that cybercriminals are targeting schools, restaurants, hospitals, tribal groups and others.

IRS Commissioner, John Koskinen stated that: “This is one of the most dangerous email phishing scams we’ve seen in a long time. It can result in the large-scale theft of sensitive data that criminals can use to commit various crimes, including filing fraudulent tax returns. We need everyone’s help to turn the tide against this scheme.”

The new scam includes cybercriminals who use “various spoofing techniques to disguise an email to make it appear as if it is from an organization executive. The email is sent to an employee in the payroll or human resources departments, requesting a list of all employees and their Forms W-2.  This scam is sometimes referred to as business email compromise (BEC) or business email spoofing (BES).”

The IRS advised that the latest “twist” to the W-2 scam includes a request made by the cybercriminal to the payroll or comptroller of the entity which asks that a wire transfer of funds be made to a specific account. The IRS learned that the wire transfer scam is being coupled with the W-2 phishing scam and “some companies have lost both employees’ W-2s and thousands of dollars due to the wire transfers.” 

Cybersecurity Tips to Protect Your Business

There are several steps that you can take to protect your business from the W-2 scam and other similar phishing schemes. As with any cybersecurity or data privacy measure, the key is to implement safeguards and educate staff about their importance. Below are several key tips to share with your human resources professionals:

  • Never click on links or download attachments from unknown or suspect emails.
  • Check the email, including the sender’s email address, for signs that it may be fraudulent. In many cases, the email address may contain a minor misspelling or changes in punctuation that are not apparent at first glance.
  • When in doubt, verify the request for W-2 information by placing a phone call to the requestor. Alternatively, you can forward the email to the sender’s verified email address to inquire about its authenticity.
  • To protect the sensitive information contained in W-2 forms, take steps to redact social security numbers or encrypt email messages containing tax information.

IRS Reporting Tips

The IRS urged organizations receiving a W-2 scam email to forward the suspect email to phishing@irs.gov and place “W2 Scam” in the subject line. Further, the IRS recommends organizations that receive the scams or fall victim to same to file a complaint with the Internet Crime Complaint Center (IC3,) operated by the Federal Bureau of Investigation.