IRS forms can suck the joy right out of a wonderful April day. Do you prefer online tax filing? Guess what: so do cyber criminals. Also on their target list: CPAs and local tax preparer offices.
The IRS expects damages from tax refund fraud - somebody filing for a refund, using a stolen identity - to rise to $21 billion this year. This increase is in part due to the widespread use of e-filing services by taxpayers.
While such services make filing for a refund easier, some Internet tax filing platforms are also known to fuel tax fraud. Organized scamsters use them to automate their scheme online.
That tax refund you expected? The one that’s long overdue? It may have been paid out already, but to somebody else: to a tax scam artist.
As a victim of tax refund fraud, up to nine months can pass before you finally receive your money. That’s on average how long it takes the IRS to investigate and sort things out.
Your identity was stolen? You could be a target for tax refund fraud next.
Tax refund fraud was the motive behind 45 percent of all reported identity theft cases (490,000) in 2015. You can learn more about how tax refund fraud works in this blog post by Authentic8’s CEO Scott Petry.
The first and most important step you can take to protect yourself against tax refund fraud is to ensure that Personal Identifiable Information (PII) - like your Social Security Number, date of birth, or a completed W-2 form - doesn’t end up in the wrong hands.
When organizations that you trusted with your most personal information betray that trust by insufficiently protecting your data against computer criminals, here’s what’s left to do after it happens: Your Data Has Been Leaked - Now What?
To avoid becoming a victim of fraud, inquire about how your information will be handled by the companies and organizations you shared it with. This goes a long way to prevent identity theft and tax scams.
We recommend taking these steps to protect yourself better against tax refund fraud:
- Contact your organization’s HR / payroll department. Ask how your PII information is kept secure. Inquire if they a secure browser to access the web. Tip: Traditional browser like Firefox, Chrome, Internet Explorer or Edge don’t count. They have become a favorite target for cyber criminals, because they allow malicious software from the web to infiltrate the web user’s local computer.
- Track all of your tax forms.
- File early. (So if somebody fraudulently files in your name, they’ll be too late.)
- Do you file through a CPA or local tax preparer? When you visit their office and find computer screens unlocked at an empty reception desk or client documents left on the table in an unattended meeting room, start looking for a professional more deserving of your trust.
- Sharing is caring - but online it can come back to bite you. Identity thieves love Facebook or LinkedIn profiles, because such platforms make it easy for them to assemble the victim’s profile that they need not create suspicion when they pass themselves off as somebody else. For those harvesting PII from social media profiles, a wedding date here or a mother’s maiden name there can complete the picture they need.
- Have you been notified that your data may have been compromised in a security breach? As a consumer, you are entitled to free credit monitoring. For details, read this blog post.
- Use - and frequently change - complex passwords, like short sentences with random numbers and special characters mixed in. Don’t use the same password for more than one service.
- Whenever you communicate with professionals entrusted with your tax forms or other financial information (like your company’s payroll manager, your tax preparer, lawyer, investment adviser or wealth management firm), ask them if they use a secure browser like this one, which protects local computers against all web-borne threats.
Yes, submitting your tax forms through an e-filing service makes for smoother filing and can speed up the process. Or it won’t - if that same service made it easy for criminals to claim your refund.
Did you hear? Six out of 13 IRS-approved e-filing services have failed a recent cybersecurity audit, the Wall Street Journal reported.
So before entrusting an e-filing service with your tax information, find out more about the company. Run a Google search like this one, for a start.