Protecting W-2 Filers From Vendor Data Fraud: A Compliance & AP Perspective

As businesses head into the 2026 filing season, W-2 scams are becoming more aggressive with attackers shifting their focus to bigger payouts. W-2 data remains one of the most valuable forms of identity information — and scammers are increasingly targeting the business systems that store and move IT rather than chasing refund checks one by one.

The core vulnerability is unverified or unmonitored data. Attackers can exploit it through impersonation, fake updates, and falsified records that look legitimate until someone checks them closely. As a result, verification must now be a core layer of fraud prevention that strengthens data integrity before scams have room to take root.

With that shift in mind, it becomes easier to see how tools like Sovos TINCheck fit into the broader picture by supporting cleaner records, more reliable validation steps, and a stronger defense against the types of attacks emerging for the 2026 season.

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Scam pattern #1: Social engineering targeting HR, payroll and finance

Social engineering attacks pick up during filing season because teams are handling higher volumes of updates, login requests, and payroll adjustments. Scammers take advantage of that pressure by mimicking trusted senders and slipping into existing workflows. 

Common examples include CEO-style emails demanding W-2 files, lookalike payroll portals designed to capture logins, and smishing messages pushing “verification” links. Malware also arrives disguised as onboarding documents or payroll corrections. Each tactic aims to trigger quick action in the middle of a busy season when employees expect more activity than usual.

How social engineering attacks work

Several recurring patterns appear in this category. CEO fraud and BEC emails pressure HR or payroll teams into sending employee W-2 lists. Fake payroll provider portals mimic platforms such as ADP, Paychex, or Workday to capture login credentials. Smishing messages urge quick “account verification,” while malware-laced attachments arrive disguised as onboarding documents. Each tactic aims to trigger fast action before anyone confirms authenticity.

Why businesses fall for it

These scams land because they blend into the noise of peak-season workloads, where teams face tight deadlines and constant requests. Here are some of the most common red flags:

High-pressure or time-sensitive requests

Email domains that differ by only a character or two

Requests routed to the one person who can release payroll data

Sudden “urgent fixes” or data updates with no prior context

During filing season, these signals feel routine, which makes them easier to miss. High-urgency messages appear plausible when teams are bracing for deadlines, and lookalike domains slip by when inboxes are already crowded. When one person owns most payroll changes, unusual requests move through quickly without the natural friction of a second review.

Where TINCheck supports defense

Verification adds a layer of friction that disrupts the assumptions upon which these attacks rely. TINCheck’s address validation helps surface suspicious change requests, especially those tied to W-2 interception attempts. Name-TIN checks make it harder for attackers to introduce falsified profiles during an urgent-sounding request, and watchlist screening adds visibility when an update involves identities linked to known fraud networks.

These verification steps create fewer openings for attackers to exploit, reducing the amount of unverified data that social engineering scams depend on to succeed.

Scam pattern #2: Fake, manipulated, or invalid tax data entering the system

This scam targets the integrity of payroll and AP data itself. Instead of stealing information, attackers feed fake W-2s, inflated withholding, or bogus vendor records into the system, knowing those entries can later be used to trigger refunds, reroute payments, or create a false compliance trail as the 2026 filing season approaches.

How these attacks work

These attacks focus on slipping altered or completely fabricated information into payroll and AP systems, often during periods when updates are expected. Examples include inflated withholding claims pushed through fake “correction” requests, forged W-2s with mismatched totals, and “new vendor” profiles built with fabricated or borrowed TINs. 

Some scammers position themselves inside AP workflows to create a false 1099 or W-2 trail that appears legitimate on the surface. Fake data often spreads unnoticed, because once it enters the system, every downstream process treats it as authentic like payroll runs — filings and reconciliations all rely on the assumption that earlier entries were vetted.

Why businesses fall for it

Manipulated data blends easily into normal year-end or pre-filing cleanup, where teams expect corrections and document resubmissions. Here are some of the most common red flags:

W-2s with math inconsistencies or totals that do not reconcile

Blurry, altered, or mismatched document formatting

EIN or SSN combinations that do not align with existing records

Requests to “update” key details during peak filing crunch

These signs are easy to misinterpret as routine fixes, especially when older records contain inconsistencies of their own. A blurry W-2 may be dismissed as a scanning issue and last-minute updates often get processed quickly to clear queues, giving falsified data room to move through unnoticed.

Where TINCheck blocks the fraud

TINCheck helps reduce the amount of fabricated or inconsistent data entering core systems. Real-time name-TIN matching immediately flags combinations that don’t match IRS records, stopping falsified W-2 corrections before they can be added to payroll. 

USPS address validation provides an additional check against nondeliverable or ghost addresses, which are often used in W-2 interception schemes or refund-driven fraud. Bulk file reviews clear out outdated or questionable records, making it harder for scammers to bury fake entries in older profiles.

Scam pattern #3: Ghost employees and identity theft inside payroll

Slipping false identities directly into payroll systems is a scam that uses ghost employees. Instead of attacking from the outside, scammers who often insiders or anyone with compromised credentials add “ghost employees,” reroute direct deposits, or use stolen SSNs to create fake hires. As the 2026 season approaches, these schemes take advantage of trust-based payroll entries and limited validation controls.

How identity theft scams work

These schemes slip fraudulent identities into payroll systems by exploiting both insider access and compromised credentials. Insiders may add “ghost employees” that receive wages no one notices, while external attackers use stolen logins to insert fake hires or reroute direct deposits. 

Some scams rely on SSNs belonging to deceased individuals because those identities do not trigger outside monitoring. Since these edits resemble normal HR or payroll maintenance, the changes often appear routine — unless someone checks the underlying identity data.

Why businesses fall for it

These scams succeed because the activity mirrors everyday tasks like new hires, profile updates or direct deposit changes, making the manipulation difficult to spot without validation controls. Here are some of the most common red flags:

New hires added without paperwork or onboarding steps

SSNs that match deceased individuals

Direct deposit changes requested without prior employee contact

Payroll records updated outside normal HR workflows

Insider access can mask fraudulent entries behind legitimate permissions, while external attackers rely on stolen logins to perform updates that look like normal administrative work. Without a checkpoint to confirm identity details, these edits can pass through unchanged.

Where TINCheck neutralizes the threat

TINCheck adds identity screening that helps expose entries that look routine on the surface. Death Master File (DMF) checks immediately flag SSNs belonging to deceased individuals, preventing those profiles from being added as employees. Name-TIN matching blocks mismatched or fabricated combinations that attackers use to create ghost hires. Watchlist screening provides an added layer of visibility when an identity is linked to known fraud activity.

These verification steps narrow the window where fraudulent profiles can be created, reducing opportunities for both insider manipulation and unauthorized external updates.

Why verification strengthens the system against fraud

Verification has become a frontline defense rather than a back-office task. Heading into the 2026 filing season, scammers are betting on rushed updates, outdated records and workflows that trust information without checking it, making stronger validation the most reliable way to shut attacks down early. The following actionable steps can help harden your system:

Validate every employee and vendor record at the point of entry: Each new record is verified before it ever touches payroll or AP, shutting down fake identities immediately. This prevents scammers from building fraud on top of bad data, giving teams confidence that every profile in the system is legitimate.

Re-check high-risk data fields before filing season (SSNs, EINs, addresses, direct deposit info): A targeted pre-season review catches the exact changes scammers tend to make under deadline pressure. This stops last-minute manipulation from turning into costly filing errors, dramatically reducing mismatches and rejections.

Automate name-TIN matching to block mismatched or fabricated identities: Automated checks run instantly and consistently, catching irregularities that busy teams might overlook. This eliminates one of the most common entry points for fraud and ensures that identity data stays accurate year-round.

Scrub dormant or outdated records that scammers can hide behind: Clearing out old profiles removes the “dead zones” where fraudulent entries are often planted. With a cleaner database, suspicious activity becomes easier to spot and much harder for attackers to mask.

Add validation steps to workflows previously based on trust or manual review: A simple approval or identity check adds friction where scammers least expect it. This makes rushed, unusual, or deceptive requests stand out immediately, strengthening the entire workflow without slowing legitimate work.

How tools like TINCheck fit into a bigger fraud prevention framework

TINCheck works best as part of a broader protection approach rather than a standalone checkbox tool. Verification layers — including identity checks, address validation, watchlist screening, and data cleanup — add structure to how information enters payroll and AP systems. Here’s how it can strengthen your framework:

It acts as a front-door filter: This helps ensure employee and vendor data is checked before becoming part of daily workflows.

It offers trackable verification activity: This helps support audit readiness and strengthen separation of duties.

It encourages consistent data hygiene: This keeps records cleaner and easier to manage throughout the year.

These elements sit alongside existing controls and give teams a clearer sense of what’s being added, updated, or reviewed across the system. Verification becomes part of the rhythm of routine work, not an extra task pushed to year-end. The overall environment feels more organized and predictable, with fewer pockets of outdated information and fewer opportunities for risky data to slip through.

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Reporting suspicious W-2 and payroll activity

When suspicious W-2 requests or possible data theft appear, reporting becomes part of the containment process. Clear escalation creates a documented trail, helps limit further exposure, and connects the issue to the agencies equipped to respond. The following internal escalation steps can help businesses stay on top of issues before they become problems:

Notify security or IT, legal and senior finance leadership as soon as a phishing attempt, unusual change request or unauthorized access is detected.

Preserve evidence by saving the full phishing message with headers, collecting system-access logs, and noting what information may have been viewed or altered.

If credentials are at risk, initiate password resets, revoke active sessions, and review access logs for unusual changes, such as new direct deposit accounts or address edits.

How to report W-2 phishing emails and data theft to the IRS

If a business receives a W-2 phishing email but nothing is compromised, the IRS directs organizations to save the message with full headers and send it as an attachment to phishing@irs.gov with the subject line “W2 Scam.”

When W-2 or SSN information has been disclosed, the IRS instructs affected employers and payroll providers to contact them immediately under the W-2/SSN data theft procedures and to coordinate with state tax agencies and law enforcement.

Reporting identity theft and tax fraud impacting employees

Employees whose SSNs may have been used in fraudulent filings can submit a report through IdentityTheft.gov, which generates an IRS Identity Theft Affidavit (Form 14039) and provides recovery steps. They are also encouraged to watch for notices such as unexpected refund letters, CP2000 underreporting notices, or W-2/1099 forms from unfamiliar employers.

Reporting financial loss and business email compromise

When funds are diverted or payroll is rerouted, organizations are advised to contact their financial institution immediately to request a recall or freeze. Businesses can also file a complaint with the FBI’s Internet Crime Complaint Center (IC3), which documents BEC and W-2-related fraud patterns.

When to involve the FTC and other consumer authorities

If W-2 or SSN exposure leads to broader identity misuse, victims can file a report with the Federal Trade Commission (FTC) through IdentityTheft.gov or related complaint channels. USAGov guidance also points individuals toward the three major credit bureaus to place fraud alerts and monitor credit files after a tax-related identity theft event.
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