Taxpayers Need an ID Theft Wake-Up Call
Americans remain apathetic about identity theft protection, according to the second annual Tax Season Risk Report, from Scottsdale, Ariz.-based CyberScout, which suggested taxpayers must still take ownership to protect their filings.
While the Internal Revenue Service took steps to reduced tax ID theft a pattern of poor practices leaves much of the public vulnerable.
Most Americans (58%) are not worried about tax fraud in spite of federal reports of 787,000 confirmed identity theft returns in 2016, totaling more than $4 billion in potential fraud.
“We’ve reached an extreme level of cybercrime where identity theft has become the third certainty in life. In tax season, it is crucial that everyone remain vigilant and on high alert to avoid tax related identity theft or phishing schemes,” Adam Levin, founder and chairman of CyberScout, formerly IDT911, and author of Swiped, said.
Tax season is one of the most common times for identity fraud to take place, making it even more important for consumers to take the proper safety measures, CyberScout warned.
Having a password protected Wi-Fi connection, a protected mailbox for a physical tax return to be sent, two-factor authentication for tax preparation services and an encrypted USB drive for sensitive tax documents are four of the most basic ways to protect oneself.
“In order to reduce the risk of becoming a tax identity theft victim, consumers need to follow the 3Ms: minimize their risk of exposure, monitor your accounts and your personal identity, and know how to manage the damage,” Levin noted.
“If the worst happens, victims of identity theft should turn to organizations they trust, including their insurance provider, financial services institution, or the HR department of their employer, who offer low-cost or free cyber protection services to protect and restore stolen identities.”
CyberScout also suggested consumers and tax preparers can protect themselves by visiting the federal web site on tax scam alerts to find out about the current scams and cyber-attacks.
Taxpayers, confronted with a variety of scams, should protect themselves by always using long and strong passwords; never authenticate themselves to anyone who contacts them online or by phone, since the IRS will never contact them by those methods; using direct deposit or locked mailboxes for refunds.; and monitoring and protecting personal identity on social media.
These are some of the top tax-season risk behaviors according to CyberScout:
- Taxpayers should be more worried than they are. The majority of Americans (58%) are not worried about becoming victims of identity theft during this tax season, a 5% drop from the number of those not worried in 2015 (63%).
- Only 35% of taxpayers demand their tax preparer use two-factor authentication to protect personal tax information. The majority (56.5%) did not know if their preparer followed, offered or required this best practice. Two-factor authentication is much more secure than a single password and tax preparers should take this security approach.
- Most consumers (80%) have protected their home Wi-Fi networks with a password, but they are relying on it too heavily and need to use more secure storage methods. Only 18% utilize an encrypted USB drive, a secure way to save important documents like tax worksheets, W-2, 1099 or 1040 forms. Another 38% either store tax documents on their computer’s hard drive or in the cloud, approaches that are susceptible to a variety of hacks. Nearly a third report not being sure where they save their tax data or documents and another 14% don’t save their tax documents at all.
- One of the safest ways for consumers to file their 2016 tax return is to file online directly with the IRS. Unfortunately, only 48% rely on and trust online tax services. Nearly a quarter of respondents do not trust online tax services because they think they are unsafe, a misperception that sometimes leads to exposure.
- A majority of taxpayers have not gotten the message to file early. Nearly half (43%) file by February, but another 57% either planned to file later or didn’t know when they would file. Delaying filing gives tax scammers an opportunity to file ahead of the real taxpayer and scoop up their refund.
- Tax return checks headed to home mailboxes are at risk. According to the IRS, more than 70 million taxpayers receive refunds. Of those who expect refunds in the mail, only 29% have a locked mailbox. And while another 20 % planned to be home, 51% risk exposure from unlocked mailboxes and lack of other precautions.
- Tax preparation services continue to be a potential avenue for serious harm. Most people (62%) use a tax preparer. Of that group, 50% choose their tax preparer based on reputation or rely on an IRS declared preparer, while the rest were not sure how to judge their credibility, planned to choose someone online, or didn’t vet them at all. This is an area where consumers need to research carefully since pop-up storefronts offering tax preparation services are a common way to scam consumers.
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