“Should 5% appear too small, be thankful I don’t take it all. Cause I’m the taxman.”
Fifty years ago, when the Beatles sang those lyrics in their hit song ‘Taxman,’ they probably never imagined all the new ways that tax season could be a bummer. And if they did, they probably wouldn’t have done much about it.
Like most American taxpayers, John, Paul, George & Ringo probably wouldn’t think much about tax fraud, identity theft, and financial account security despite fairly regular news coverage of highly publicized hacks. Too bad, because incidences of identity theft skyrocket at tax time, and while the Internal Revenue Service take steps to reduce criminal activity, a pattern of poor practices leaves many online users vulnerable.
In the most recent Tax Season Risk Report by data security firm CyberScout, taxpayer ignorance of necessary safeguards is leading to a false sense of security. Here are some report highlights:
- 58% of US taxpayers aren’t worried about tax fraud, despite nearly 800,000 confirmed identity theft returns in 2016, totaling over $4 billion in potential fraud.
- Only 35% demand that their tax preparers use 2FA to protect their info.
- Only 18% encrypt important documents like tax worksheets, W-2s, 1099s or 1040s.
- 38% store tax unprotected documents on their computer’s hard drive, leaving them susceptible to even the simplest of hacks.
- 57% file taxes very close to the tax deadline, giving hackers more time to impersonate them online and steal their refunds.
So what can average tax-paying citizens do to protect themselves? Here are some tips:
- Always use complex passwords. And don’t reuse them on multiple accounts. Fraudsters know that data retrieved from one hack is likely to be used elsewhere, and check stolen credentials on all the major financial institutions.
- Enable two-factor authentication on every account that matters. And only work with tax preparers who also use 2FA to protect their client’s data.
- Be wary of pop-up storefronts offering tax preparation services. Many are elaborate scams.
- Moving sensitive tax documents to encrypted USB drives.
- File taxes early.
- Password protect your private Wi-Fi connection. Stay off public Wi-Fi.
- If someone contacts you online or by phone asking you to authenticate your ID, don’t do it. The IRS never reaches out this way.
- Refund checks delivered to home mailboxes are at risk, as only 29% of those receiving refunds have a have a locked mailbox. If you’re lucky enough to be getting a refund, ask for it to be sent electronically via direct deposit.
- Consider filing your taxes with a an online service that offers 2FA, such as TaxACT.
- And finally, don’t bake those personal elements into your passwords and answers to online security questions. Things like zip codes and pet names can be easily gleaned from social media and used to attack your accounts. If you share it on social media, don’t use it in a password.
It takes no time at all to secure your important accounts with two-factor authentication. Twilio’s Authy 2FA has been rated “Excellent” by PC Magazine, and it’s easy to download and install:
And, to find out about the current tax scams and cyber-attacks, visit the federal website on consumer alerts.