Category: 2026

Beware of tax-related identity theft and fraud

Anita Byer

Tax-related identity theft occurs when a criminal uses your Social Security number to file a tax return under your name to steal your tax refund. According to the Treasury Inspector General for Tax Administration, the Internal Revenue Service stopped nearly $2 billion in fraudulent refunds last year. In 2023, the IRS identified over a million tax returns as potentially fraudulent, with associated refunds exceeding $6 billion. Since victims of tax-related identity theft and fraud are typically unaware until it is too late, staying alert and knowing the signs of fraud is key.

According to the IRS, you should be alert to possible tax-related identity theft and fraud if:

  • You get a letter from the IRS about a suspicious tax return.
  • You can’t e-file your tax return because of a duplicate Social Security number.
  • You get a tax transcript in the mail that you did not request.
  • You get an IRS notice that an online account has been created in your name or that your existing account has been accessed or disabled when you took no action.
  • You get an IRS notice that you owe additional tax or refund offset, or that you have had collection actions taken against you for a year you did not file a tax return.
  • IRS records indicate you received wages or other income from an employer you didn’t work for.

 

Since many scams begin with someone contacting you under false pretenses, knowing how and when the IRS contacts people can make it easier to identify imposters and impersonators. According to the IRS, initial contact is typically done by mail delivered by the U.S. Postal Service. The IRS may also contact you in other ways, depending on the circumstances. However, the IRS does not:

  • Direct message or take payment on social media.
  • Accept gift cards or prepaid debit cards as payment.
  • Call with automated messages that threaten or direct to websites that aren’t IRS.gov.
  • Threaten to call law enforcement or immigration officials.
  • Take your citizenship status, driver’s license or business license.
  • Mail tax debt resolution advertisements.

 

To protect against taxpayer identity theft, the IRS recommends:

  • Using current security software (firewalls, virus/malware protection, file encryption). Make sure it updates automatically.
  • Treating personal information like cash. Don’t leave it lying around.
  • Using strong, unique passwords and 2-Factor Authentication.
  • Avoiding phishing scams and malware that often come in emails that appear to come from a trusted source and emails with urgent messages.

 

When preventative measures fail, insurance is available to help victims through the often expensive and time-consuming process of recovery. Please contact us if you would like more information about insurance specifically designed to protect against identity theft.

Using indemnification agreements to allocate risk

By Anita Byer

Indemnification agreements are commonly used in business transactions to allocate risk. Risk allocation involves identifying who is responsible for what and for how much. In some cases, a contract requires one party to assume the liability of another party. These risk transfers are commonly found in construction and landlord/tenant agreements, and are becoming common practice in other industries as well.

Assuming responsibility for the acts of another is obviously a big deal. So, it’s important to know the nature and extent of the risk being assumed, and to have a plan to pay in the event of a loss. At a minimum, this requires an understanding of indemnification and Additional Insured status.

Indemnification

An indemnification agreement generally requires one party (the indemnitor) to assume the liability of another party (the indemnitee). In the event of a loss that is specified in the contract, the indemnitor agrees to compensate the indemnitee for their loss. It is important to understand that these provisions commonly require the indemnitor to assume liability that would not otherwise exist.

For example, construction contracts routinely include broad indemnification provisions that transfer liability for not only bodily injury or property damage, but also for pollution, design flaws, delays and other perils not typically understood or contemplated by the indemnitor. Therefore, the indemnitor must understand all the risks being assumed.

Additional Insured Status

Fortunately, insurance coverage is available to cover assumed (or transferred) risks, so indemnitors can use insurance to finance some of their assumed risks. But indemnitees often request or require their indemnitors to not only purchase insurance, but to also name them as an Additional Insured so they can directly access benefits under the indemnitor’s policy.

Though Additional Insured status can be used to finance indemnification obligations, it is important to know that there are limitations. For example,

  • Additional Insured status only protects against losses covered by the insurance policy, regardless of what the indemnification agreement requires.
  • Indemnitees must satisfy the policy’s conditions, such as meeting the definition of an Additional Insured or having a written contract, if required.
  • An indemnitee’s protection may be compromised by shared coverage limits and a lack of control over the terms and conditions of an indemnitor’s policy.
  • Certificates of Insurance cannot be used to create or modify coverage under an insurance policy, regardless of what they say.

Perhaps the most common and potentially costly problem occurs when an indemnitor assumes a risk that is not covered by their insurance. For example, a plumber agrees to indemnify a general contractor for economic damages caused by the plumber’s delay in completing the work. The plumber takes a week longer than expected to finish the job. The general contractor hires additional workers to make up for the lost week and sends the bill for the extra labor to the plumber. Under the indemnification agreement, the plumber must pay for the extra workers. Unfortunately, since there was no bodily injury or property damage to trigger coverage under the plumber’s general liability insurance policy, the plumber must pay the cost himself. Remember that Additional Insured status cannot be used to cover indemnification obligations that are broader than the insurance coverage.

Before signing on the dotted line, ask the following questions:

  1. What are the terms and implications of the indemnification provision?
  2. Is the indemnitor required to obtain additional insured status for another?
  3. Is the language of the additional insured endorsement adequate, covering the indemnitor’s responsibilities or must additional measures be taken to ensure that contractual obligations are properly financed?

When used properly, indemnification agreements and various insurance coverages can be combined to effectively allocate and finance assumed risks. Since the process of allocating and transferring risk in any business transaction is always significant and often complex, businesses should consult an experienced and licensed professional before signing on the dotted line. Please contact us to learn more about allocating and transferring risk effectively and affordably.