Home > Identity Theft > How to Avoid Getting Scammed if You Get a 1099

Comments 0 Comments

Working as a freelancer, gig worker or 1099 employee over the internet can sometimes be tricky. You want the work, but never want to fall for a scam or work for a company that won’t pay you.

When I started working as a freelance writer, I crafted what I hoped would be the ultimate writer’s profile on LinkedIn (we all can dream, right?) and began interacting with potential clients online, through groups and over email. Most were strangers I had never met. But as I posted more and more of my work samples online, clients began emailing me, asking if I could work for them.

The problem was, many would send me tax forms that I’d have to fill out before I started the work.

Again, I didn’t know these people. I didn’t know if they legitimately worked for who they said they worked for. Some of their company names weren’t familiar. So I worried about sending tax forms with my Social Security number to perfect online strangers. I didn’t want to set myself up for possible identity theft.

“It’s so easy for identity thieves to create a false profile online,” Dominick Miserandino, CEO of the marketing and website consulting business Dysleximedia, said.

Once they get your Social Security number, thieves can apply for loans, apply for credit cards, get medical treatment, order utilities, get your tax refunds, steal your benefits and even commit crimes using your identity — which could entangle you in their criminal history.

During the period from February 2011 to December 2015, the IRS identified almost 1.1 million taxpayers who were victims of employment-related identity theft, according to an August report from the Treasury Inspector General for Tax Administration. The problem is, unless you’re monitoring your credit report or looking for signs that your identity has been stolen, you might never know someone is using your number.

“An individual should be careful about sharing his or her number, even when asked for it,” Darren Lutz, a spokesperson for the Social Security Administration, said. “People should ask why their number is needed, how it will be used, and what will happen if they refuse to provide the number. The answers to these questions can help people decide if they want to give out their Social Security number.”

Your Sleuth Toolkit

You want to be careful, but you need the work, right? And you don’t want to aggravate what could be a very legitimate, well-paying company by treating them suspiciously. So you need a toolbox to do your own sleuthing.

Ask For Their Business Information: This is a reasonable ask if it’s not already on the email they sent you or on their LinkedIn profile. You’ll need to know their name, company name, email address, physical address and phone number to verify they’re legitimate.

Consider Using an EIN Number: I’ve since learned that many freelancers sidestep giving their Social Security number by establishing an “employee identification number,” which can be obtained within minutes through the IRS website. Once generated, it is a permanent number that links your business with your Social Security number. It might not leave you as vulnerable as if you gave your Social Security number to a scammer.

“Security-wise, using an EIN would be safer because it’s not linking to you as a person. In theory, if your identity was stolen, your company would take the hit, not you,” Miserando said. But keep in mind that scammers can still use your EIN to get lines of credit and apply for loans.

Nix the Tax Form for Small Gigs: Some companies require 1099s, but if it’s a job that pays less than $600 total, it’s not needed. “You could tell a client to forgo it until your accumulated pay is more than $600,” Miserando said. “It’s unnecessary paperwork for them. There’s no benefit.”

Do the D&B: “If it is over $600 and you’re dealing with a sizable contract, do your research,” Miserando said. You can head to Dun & Bradstreet’s website, which should tell you if the business exists. (For deeper research, a subscription to the program is available and free at some public libraries.) “But it’s not the be-all, end-all search,” Miserando said.

Search Through the State: If it’s a business in the U.S., find out where it is incorporated, then do a Department of State, Division of Corporations search to find out if the business truly exists. “You can look up any company, wherever it’s incorporated,” Miserando said. (To find the right website, Google the state name with the term “Division of Corporations.” Once you’re on the website, enter the name of the business into the search feature.)

Do They Pay Their Bills?: You’ll want to spend a few more minutes on Google to see if the client is known to actually pay its freelancers, Miserando said, so Google your company and the phrase “non payment.” You can also ask about them on freelance websites used by people in your profession, such as LinkedIn or Facebook groups. Be sure to copy and paste the email you received directly into Google to see if a scam alert has been issued about it. Googling the business name combined with “and scam” can also turn up interesting information.

WHOIS Search: This can give you information about a company’s domain and online presence.

Company Reputation: If you want to learn if the company approaching you has a good or bad reputation, you can check with the Better Business Bureau to see any registered complaints. Yelp! is another resource, but keep in mind that people are able to Yelp! about places and services they’ve actually never experienced.

If the Company is International: Reach out to the American embassy or consulate general in that country for information, explain your situation and ask for data — such as the age of the company, number of employees, revenues and reputation. Banks might also be able to tell you if there has been a series of transactions over time, which a more established company should have. Also see if there is a travel alert to the country you’re about to do business with, especially if you intend to travel there.

If You Do Get a Scam Email: If it’s over LinkedIn, the site wants to know about it. “When this type of activity is detected, we work to quickly remove it and prevent future reoccurrences,” May Chow, a spokesperson for LinkedIn, said. “We encourage our members to report any messages or postings they believe are scams and utilize our member help center as a resource to educate and protect themselves from frauds online.”

Signs Your Digits Have Been Tapped

If you want to check to see if people are working under your number and you’re over the age of 18, you can also review earnings posted to your record on your Social Security statement, through the Social Security website, Lutz said.

So, let’s say you accidentally give your numbers to the wrong person. Watch out for these signs of taxpayer identity theft, per the IRS’ website:

You’ve attempted to file a tax return and it’s rejected.

You receive one or more notices stating:

  • More than one tax return was filed using your Social Security number.
  • You have a balance due, refund offset or a collection action taken for a year in which you did not file a tax return.
  • IRS records indicate you received wages from an unknown employer.
  • You receive an IRS letter about an amended tax return, fictitious employees or about a defunct, closed or dormant business.

You can check your free annual credit report from the major credit bureaus — Equifax, Experian and TransUnion — and get two free credit scores on Credit.com. If you’re working over the internet, it’s a good idea to keep a sharp eye on your credit, because even if your employer is legit, the email that used to send the tax forms can be hacked. (If that happens, you can see more on what to do here.) When you work hard stringing together freelance jobs in the gig economy, the last thing you need is for someone to mess with your credit or claim your tax return.

Image: Geber86

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team