Understanding W-2 Phishing and Its Impact During Tax Season

• 15 January 2024
• by: Earl Johnson
• in: Cybersecurity,Fraud
• note: no comments

As W-2’s are due to employees by the end of January, businesses face not only the annual task of filing tax statements for employees but also an increasing threat from cybercriminals targeting sensitive employee information through W-2 phishing scams. Understanding the risks and implementing preventive measures is crucial to safeguarding your business, ensuring the protection of the personal information of your employees, and protecting employees from potential financial and reputational damage.

What is W-2 Phishing?

W-2 phishing is a type of cyber attack where scammers impersonate company executives or human resources personnel to trick employees into providing copies of W-2 forms or other sensitive personal information. These forms contain valuable data such as Social Security numbers, earnings, and tax withholdings, which are essential for filing tax returns.

How Does W-2 Phishing Work?

1. Email Spoofing: Cybercriminals send emails that appear to come from company executives or HR departments. These emails typically request that employees provide W-2 forms or other sensitive information urgently. The emails also can target HR departments from other departments, such as finance, to gather the information of multiple employees at once.
2. Social Engineering: The emails often use urgency or authority to manipulate employees into complying with the request. They may also contain links to fake websites where employees are prompted to enter their login credentials or sensitive information.
3. Data Theft: Once scammers obtain W-2 forms or personal information, they can use it for various fraudulent activities, including filing false tax returns, identity theft, or selling the data on the DarkWeb.

Impact on Business

W-2 phishing can have serious consequences for businesses such as:

• Financial Loss: Businesses may incur financial losses due to fraudulent tax filings or legal expenses resulting from identity theft claims.
• Reputational Damage: A data breach can damage trust and reputation with employees, customers, and stakeholders.
• Regulatory Penalties: Businesses may face penalties and legal consequences for failing to protect employee information adequately.

Preventive Measures

Protecting your business against W-2 phishing requires a proactive approach:

1. Employee Training: Educate all employees about phishing scams, emphasizing the importance of verifying email requests for sensitive information before responding. Also make sure that your Finance and HR departments are fully aware of the threat of W-2 phishing during tax season. An annual reminder does not hurt.
2. Verification Procedures: Establish clear procedures for verifying requests for sensitive information, such as W-2 forms, particularly when received via email or phone.
3. Multi-Factor Authentication (MFA): Require MFA for accessing systems that contain sensitive employee information to prevent unauthorized access.
4. Vendor Due Diligence: Verify the security measures of third-party vendors who have access to employee data, such as payroll service providers.

Conclusion

As tax season approaches, businesses must remain vigilant against W-2 phishing scams. By educating employees, enhancing email security measures, and implementing robust verification procedures, you can significantly reduce the risk of falling victim to these cyber threats. Protecting sensitive employee information not only safeguards your business from financial losses and legal liabilities but also preserves trust and credibility with your workforce. Stay informed, stay proactive, and prioritize cybersecurity to defend against W-2 phishing and other evolving cyber threats. Your diligence today can prevent potential disruptions and protect your business’s future.