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Did you know that almost 1,000 Americans could become victims of identity theft when they file their taxes? According to the Wall Street Journal, the U.S. Justice Department charged nearly 900 individuals with claiming bogus refunds in 2013. In fact, the IRS's identity theft investigations jumped 66% on the whole, with the agency initiating 1,492 probes of identity-theft related crimes in fiscal 2013, compared to 898 in 2012 and 276 in 2011.
The good news here is that common sense and strategic measures can help cut the chances of ever becoming a victim of identity theft. Not only does the Federal Trade Commission offer a basic primer on tax-related identity theft but we spoke with Kelley C. Long, a member of the National CPA Financial Literacy Commission at the American Institute of Certified Public Accountants to uncover some tips for making sure your Tax Day doesn't result identity theft.
That email from the IRS most definitely isn't from the IRS. "The IRS never sends unsolicited, tax-account related email and does not collect personal or financial information, PINs, or passwords via email," says Long. "If you receive such an email and have reason to believe it may be legitimate, pick up the phone and call the IRS to verify or Google the subject line of the email; chances are you will find a source on the Internet that debunks the message as a phishing scheme." And if that turns out to be the case, mark that message and spam right away.
While filing your taxes online is fast and easy, it can also be dangerous. "Your local coffee shop with free WiFi is not the place to take care of this arduous task," Long says. "If you use a WiFi connection at home, make sure that it is password protected, or even better, consider [hardwiring] your computer to your modem when submitting your tax information to the software."
A shredder is your best friend when it comes to tax documents, Long says. "Make sure that you're destroying any drafts of your tax return or other tax documents; if you don't have a shredder at home, your library or even local copy shop may have a secure shred bin where you can put sensitive information for shredding." Also try to use a cross-cut or confetti-cut shredder, she adds; "If you've seen the movie Argo you know that straight shreds are not safe."
It's hard to believe that a 9-digit number can be the gateway to so much identity theft, but it's a main target for identity thieves. "Protect your Social Security number the same way you'd protect a $100 bill," Long advises. "Keep your Social Security card locked at home in a safe and try to mask it on any documents you carry with you." Don't text or email your number, ever, and only give it out when absolutely necessary. "Many businesses ask as a matter of course, but they may not need that information. Ask before providing it."
Paperwork that stays out on your desk might have sensitive information on it, including that all-important Social Security number! "Once you're done preparing and filing your tax return, make sure you store your return and supporting documentation securely," Long says. "Scanning it and saving it to your hard drive or a CD-ROM is a wise way to reduce clutter. Just make sure that your hard drive is secure or that you're locking that CD in a safe, or another secure location in your home."
Who doesn't love the speed and expediency of email? But, "if you must email your tax return or other documentation to your tax preparer or other party that needs it, make sure you password-protect the file or use a secure data portal to transmit the information," Long says. "As we all know now from Edward Snowden's work, email is not private. You don't want to risk your information being intercepted by the wrong person."
As electronic filing becomes more the norm these days, it has many advantages other than convenience. "E-file your return if at all possible to avoid your information falling into the wrong hands through the USPS," Long says. "If you must paper file, then pay the extra [fee] to send the return via Certified Mail to ensure it gets there."
The watchword for filing your taxes this year might as well be "caution." Think about how careful you are in your tax return calculations and apply that same diligence in filing your taxes with the state and federal governments. Taking that same kind of care with the security of your documents and digits can go a long way towards making sure your financial information stays just as private as you want it to be.