Keep Your E-Filing Safe and Avoid Tax Identity Theft

Consumer protection, Money, Taxes

According to a report by the independent IRS Oversight Board, 81 percent tax-return-imageof Americans filed their taxes electronically last year. While this may be more convenient than filing on paper or visiting a tax accountant, using the internet to file taxes may seem scary if you’re worried about identity theft.

Tax Identity Theft: A Growing Epidemic

Tax fraud is the third largest theft of federal funds after Medicare/Medicaid and unemployment insurance fraud — and it could happen to you more easily than you think. A tax preparer could modify the bank routing on your return so your refund is instead deposited to his own bank account — which you’ll never know about unless the IRS sends an audit notice. A criminal who gets a hold of your social security number can e-file a phony W-2 form and cash in on your refund via an anonymous Visa or MasterCard bought at a drugstore. Fraudulent tax returns are difficult to prosecute since evidence of fraud is often difficult to find. When taxpayers use e-filing, there are no fingerprints or signatures.

The Risk of Filing Your Taxes Electronically

E-filing your taxes means direct deposit refunds and getting them about seven days after filing. The IRS encourages e-filing since it saves them loads of money, but it also makes it easier for someone who isn’t you to file a fake tax return in your name. Ironically, experts say the safest way to file your taxes is electronically; this way only you and the IRS see your tax information — just be sure to keep your computer secure. The URL of secure sites should begin with an “S” after the “http;” if a site does not begin with “https://” and have a lock symbol designating encryption, you cannot be sure your information is secure. Make sure your computer has a secure firewall, spam filter, and antivirus and antispyware software installed.

Protecting Yourself Against Identity Theft

Avoiding stolen identity tax refund fraud can be tough. Your social security number is easier to get ahold of than you might think — so shred documents containing any personal information when you can. The IRS doesn’t initiate contact with taxpayers by email to ask for personal or financial information, so don’t respond to emails that claim to be from the IRS – and especially don’t respond with any personal information. One of the best ways to make sure no one is using your personal or financial information is by monitoring your credit report and reporting anything suspicious immediately.

While taking standard internet safety precautions is always important — especially when it comes to your taxes — filing your taxes online is probably the safest way to go. Just make sure you file as early as possible –before someone else tries to do so fraudulently.