Protect Yourself This Tax Season: Top 5 Tips for Information Security
Protecting sensitive tax information has always had its challenges, but the pandemic has made things even more difficult. Between disrupted business operations, confusion around stimulus checks, a volatile job market, and overworked Internal Revenue Service (IRS) staff, there are more opportunities for criminals to commit identity theft and tax fraud.
Identity theft was a problem even before the start of COVID-19. According to a 2020 Survey from Javelin Strategy & Research, total identity fraud reached $16.9 billion (USD) in 2019, with slightly more than 5% of consumers being affected by this type of crime.
At the same time, businesses have seen an uptick in data breaches in recent years. Shred-it’s 2020 Data Protection Report reveals that 43% of C-suite leaders work at a company that has experienced a data breach, and 65% believe their organizations will experience one in the next five years.
Given the perfect storm of a turbulent tax year and rising cybercrime, individuals and businesses should be especially vigilant about their tax preparation this year. Here are 5 tips to keep your confidential information safe:
1. File taxes early. Although the pandemic may cause some delays in sending and receiving tax information, taxpayers should still file as early as possible to reduce the risk of identity theft-related tax fraud. The earlier you file, the less likely a nefarious character can claim your tax refund with a stolen Social Security Number and other personal information.
2. Learn to spot fake communications from the IRS. Phishing is again the number one scam on the IRS’s 2020 Dirty Dozen List of Tax Scams. And there has been a significant increase in these kinds of schemes due to the pandemic. Criminals are playing on the fears and distractions surrounding the virus and stimulus payments. Phishing can take the form of fake emails, texts, or website links that seem legitimate but actually are designed to steal personal information. The important thing to remember is that the IRS would never initiate contact with taxpayers about a tax bill, refund, or Economic Impact Payment via email, text, or link to a website. Likewise, the agency would never demand immediate payment or ask for financial information over the phone. Should you have any doubt about an IRS request, it is critical to reach out to the agency directly for clarification—before sharing any information.
3. Do your research before selecting a potential tax preparer. With many tax professionals impacted by COVID-19 and their offices potentially closed, taxpayers should take particular care in selecting a credible preparer. Make sure to check their credentials and ask about their processes for data security. By law, anyone who is involved in preparing federal tax returns must have a Preparer Tax Identification Number (PTIN). They also must sign and include their PTIN on all returns. A tax preparer should also have defined policies and procedures aimed at preventing data breaches and ensuring the secure disposal of confidential papers that are no longer needed.
4. Be aware of phishing email scams in the workplace. Some workplace phishing scams target payroll or human resources in an attempt to obtain employee tax forms and other information. For example, the IRS has detected a direct deposit scam in which a fraudster impersonates an employee and asks the employer to change the employee's direct deposit information to an account the fraudster controls. Companies that train staff to recognize these deceitful emails can better prevent a data breach and safeguard sensitive information.
5. Don’t keep paper lying around. Although some tax processes have gone digital, there is still a lot of paper used in tax preparation. Make sure you have safe and secure ways to store any confidential paper documents and dispose of any paper or digital files that are no longer needed.
Learn more about how Shred-it’s prepaid drop off, one time shredding, and regular shredding services can help you protect your sensitive information during and after tax season this year.
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