The 2022 tax season is here, and individuals and businesses are starting to file their 2021 returns. Although the Internal Revenue Service (IRS) hasn’t indicated that tax season will be extended, it does anticipate some delays due to higher than usual backlogs, staffing shortages, and new tax laws that may slow the time it takes to review a return.
In addition to the potential IRS-related snags, there are ever-present fraud risks that may complicate this tax season. Although tax-related fraud is not new, the pandemic has presented a prime opportunity for fraudsters to take advantage of others.
Given that fraud risks may be amplified this tax season, individuals and businesses should take a careful approach to preparing and filing their returns. Here are 5 tips to help ensure a safe and efficient experience.
- File taxes early. Consider collecting tax materials now, so you and your business can submit returns as soon as possible. Filing well before the April 15 deadline will give the IRS more time to review your filing, and you may be able to avoid some of the potential return delays mentioned above.
- Safely store any information you use as you prepare the return. Tax records and documents are a minefield of personal information, and they shouldn’t be left lying around where anyone could access them. Although some tax information is now digital, there can still be a lot of paper documents involved. Make sure you have secure ways to store any confidential documents, including receipts, credit card information, and forms that include a social security number (SSN) or federal tax ID number. To keep documents safe, you may want to consider storing them in a locked drawer until you need them. If files are electronic, be sure they are housed in a password-protected computer that has the appropriate firewalls and other cybersecurity measures in place. Following a clean desk policy—securely storing sensitive paper and electronic information whenever you leave your workspace—can reduce the likelihood that confidential documents end up in the wrong hands.
- Watch out for tax scams. The IRS continues to see fraudulent schemes, where dishonest people prey on individuals and businesses by tricking them into sharing information they shouldn’t or doing something illegal. Tax fraud happens so frequently that the IRS has created a list of the “dirty dozen” schemes you should watch out for, and the agency updates the list every year.
Some example scams in 2021 include fraudsters: promoting fake charities, impersonating IRS authorities, engaging in unemployment insurance fraud, and preparing unscrupulous tax returns. One common scheme involves fraudsters calling an individual, pretending to be a tax agent, and threatening the person with fines, arrest, or even deportation if they fail to pay a (fake) tax bill. You can recognize this scheme because the IRS would never demand immediate payment or ask for financial information over the phone. Likewise, the agency would never initiate contact with taxpayers about a tax bill, refund, or payment via email, text, or link to a website. If the IRS wants to contact you, they will usually start with a mailed letter. Should there be any doubt about an IRS request, it is critical to reach out to the agency directly for clarification—before sharing any personal information.
Fraudsters also target businesses to try and gain access to their confidential information. For example, phishing scams may target payroll or human resources, attempting to obtain employee tax forms and other information. 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 fraudulent emails can better prevent data breaches and safeguard sensitive information.
- Determine what you need to keep once taxes are filed. After you submit your taxes, certain materials should be kept in case there are any questions about your return. The IRS recommends retaining tax documents for three years. Some documents to keep include:
- Any ‘evidence’ that supports income or deductions/credits on the tax return, such as receipts, bank and credit card statements, canceled checks, or other proof of payment
- Copies of tax returns from previous years.
- Essential records, such as birth and death certificates, citizenship papers, marriage licenses, etc.
- Dispose of old tax records and items you no longer need. Individuals and businesses do not need to keep tax information forever and, in fact, holding on to documents you no longer need can increase the risk of them getting lost or stolen. Going through your old tax documents and determining what you can throw away is a valuable exercise. Some things to consider getting rid of include old tax forms, credit card statements, and receipts, as well as any notes or scraps of paper you may have used to prepare your taxes that contain account information or passwords.
Once you decide what to throw away, it’s essential to dispose of it safely and securely. Tossing these items in the garbage or recycling bin can increase the risk that someone will steal the information and use it for identity theft or other illegal purposes. Shredding is one of the best ways to securely dispose of paper documents. Working with a NAID certified document destruction service like Shred-it can help ensure that the shredding process is thorough, reliable, and consistent with applicable data protection laws. In addition to paper, old hard drives can also be destroyed by Shred-it via shearing or crushing, which obliterates the device and prevents information thieves from accessing the data.
Learn more about how Shred-it can help you protect your sensitive information during and after this year’s tax season.