Beware Tax Time Identity Theft

The taxman cometh again. The IRS has opened the filing season, sending tens of thousands of filers to their computers to pull the band-aid off quickly. Last year a study by the Government Accountability Office found that as of Sept. 30, 2012, the IRS had identified almost 642,000 incidents of identity theft. Want the bad news now? The IRS doesn’t have a clue as to the true extent of tax-filing identity theft. Since the IRS is missing so many incidents of identity theft, most of the perpetrators are getting away with their crime.

Good News

In general, the identity theft does not occur from the e-file process. According to Denis G. Kelly, president of IDCuffs.com, ”For the most part, there is not substantially more risk for e-filing. In fact, when the check-clearing process was changed from physical checks to digital checks, the percentage of fraud decreased. The consensus for this decrease is the number of eyes that see checks in the process was significantly reduced.” That means the the identity thieves are getting their eyes and hands on your personal information some other way.

Where The Problem Lies

One of the most common ways that identity thieves get hold of your personal information is from your tax preparer. Not directly, but because former tax preparers steal client data either by design or as a parting act when fired. Other problems areas are if you e-file from a public wi-fi connection or use a public computer and do not delete your history.

What To Do

• Always use a reputable tax professional or well known tax prep software. Heavily discounted services from a brand new company in town could very well be trouble.
• Remember, the IRS will never initiate communication with a taxpayer by email or phone. If you receive either, it is most likely a scam.
• Keep your malware, spyware, and firewall up to date.

Your best defense is to file as early in the tax season as possible. The quicker you file, the less time a thief has to file a false claim for your return.