Be on guard for tax-related ID theft

SAN FRANCISCO (3/30/09)--Tax documents are teeming with personal information for crooks to capture and use to compromise your identity. Whether you file taxes electronically or prefer traditional pen and paper, take steps to prevent personal data from reaching the wrong hands (MarketWatch March 24).

While millions of taxpayers safely file with the Internal Revenue Service (IRS) every year, the security of your personal information is never guaranteed. Thieves can capture data in a number of ways, including swiping tax papers from your mailbox, hacking in to your computer, or confiscating your information from a tax preparer who unknowingly--or intentionally--leaks your information. Also, the upsurge in online filing--up 20% from last year--can give crooks easier access to personal information unless you take the proper precautions.

However you file, you can help protect yourself by taking the proper precautions:

Filing electronically:

Don't file-share. File-sharing software that has access to your hard drive can share anything stored on it—including your tax return and other sensitive documents. Also, downloads from file-sharing sites may be infected with keylogging viruses or malware, detailing your every stroke to thieves.

Secure your computer. Install a firewall and update anti-virus and anti-spyware software often.

Create strong passwords. Use a combination of capital and lowercase letters, numbers and symbols when creating passwords to download your W2 forms, 1099s, and other personal tax documents from your employer. Don't save these passwords in your web browser (smallbiztechnology March 16). Better yet, think of a sentence you won't forget, and create a password from that sentence; for example, "My #1 dog is a Lab the color of night," becomes "M#1diaLtcon." You won't need to write down the password as long as you remember the sentence.

Using a tax preparer:

Check out the preparer's reputation. Check with the Better Business Bureau (bbb.org) to ensure you are working with a reputable tax preparation firm.

Ask about security policies. How many people have access to your information? Do they encrypt electronic transmissions? How do they keep data safe?

Pen-and-paper filer:

Cover your tracks. When making photocopies of any financial document, be sure the copier does not save images in memory. Shred any documents used in tax preparation you no longer need.

Secure your mail. Don't let tax documents sit in your unlocked mailbox. Instead, mail your tax return from a secure location such as the post office or an official U.S. Postal Service collection box.

For more information, read "How to Be 'Spywary': It's More Software Than You Bargained For" in Home & Family Finance Resource Center.

courtesy of cuna.org