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11:06 AM

Busted: 3 Myths About Stealing Identify From Electronic Tax Returns

No one (accountants excepted) looks forward to the quarterly and annual scrambles to pay taxes. And though electronic filing has made the process easier, it creates an opening for identify theft that could put you and your business at risk.

No one (accountants excepted) looks forward to the quarterly and annual scrambles to pay taxes. And though electronic filing has made the process easier, it creates an opening for identify theft that could put you and your business at risk.Identity theft is on the rise -- the number of victims was up 22% in 2008 to almost 10 million according to an annual study from Javelin Strategy & Research. Electronic tax filing creates an opportunity for identity thieves to grab identity data -- which puts sole proprietors filing pass-through taxes at particular risk to have both personal and business data compromised.

Todd Feinman, CEO of Identity Finder, a privacy and security application vendor, set out to bust 3 myths related to tax returns and offer tips about how to protect your confidential information when filing taxes electronically.

Myth #1 -- Documents, PDFs and personal information used in the creation of your tax returns are safe just sitting on your computer. Truth -- Hackers may access your computer in various ways at ANY time via viruses, Trojans, and Botnets. Confidential information on PDFs is NOT safe.

  • Password-protect all tax returns that you print to PDF from your tax software so that Social Security Numbers are secure. Permanently shred unsecured documents on your computer that contain personal information used to prepare your tax return.
  • Configure all peer-to-peer file-sharing programs to disable the sharing of your personal folders so identity thieves can't download your tax return.
  • Install the latest updates to your operating system to prevent known Windows or Mac vulnerabilities from being exploited by hackers.
  • Don't save your password in your Web browser when accessing payroll services, employers, banks, and other institutions that keep your personal information because it could easily be stolen.
Myth #2 -- It's safe to electronically transmit confidential data to an accountant, employer, or the IRS. Truth -- Your personal information is at the greatest risk when it is en route from one location to another. Hackers and thieves have the ability to eavesdrop or spy on it when it is unprotected.
  • Encrypt supporting tax documents you plan to email to your accountant to prevent anyone from snooping on your network and gaining access to your financial information.
  • Create strong passwords when registering to download your IRS W2 forms, 1099s, and other personal tax documents from your employer so that they are not easily guessed by strangers.
Myth #3 -- Paper copies of your important tax documentation are always safe since they are in your control and are not accessible to electronic hackers. Truth -- Identity thieves are incredibly creative and will attempt to access your confidential information for their own personal gain however and wherever possible, especially when you least expect it.
  • When you postal mail your tax return to the IRS, send it from a secured location, like the post office or an official USPS collection box; do not let it sit in a box overnight as it could be stolen. For added security use certified mail.
  • If making photocopies of your financial documents, make sure the photocopier does not store images of them in memory.
  • Using a traditional paper shredder, destroy the printed documents used during tax preparation that you no longer need.

More From bMighty: Q&A With Kevin Reeth Of Outright: Using SaaS For Bookkeeping And Tracking Tax Deductions

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