The IRS refunded $43.5 billion to tax filers last year, 72% of whom filed electronically (GAO report here). That much money and sensitive information flowing over the network attracts the attention of online thieves who move in like grizzly bears during a salmon run. Today I will share a few tips on how you can avoid being snatched up by the bad guys while you do your annual patriotic duty to help fund Uncle Sam.
First it is worth noting that dollars lost to Internet crime doubled from 2008 to 2009, topping half a billion dollars in the US. The 2009 Internet Crime Report released on Friday listed average losses at over $5,000 per incident with a mean loss closer to $500. The report pointed out that prosecution of online crimes is difficult because the victim and perpetrator "may be located anywhere in the world."
The same convenience that electronic tax preparation and filing presents to the tax payer can also work for the criminal. Simply having an electronic copy of your tax return on your computer can expose you to risk. Last August a Seattle man was convicted of fraud when a lucky break allowed authorities to catch him with tax returns, financial aid applications and other documents pilfered over the Internet from family computers across the country. Frederick Wood used file-sharing programs to search for keywords like "tax return" and find documents on personal computers thousands of miles away. He used information in these documents to commit financial fraud.
Tips for Safe Tax Filing
- Start with a clean machine: don't use the same computer to prepare your taxes that you use for social networking like Facebook and Twitter. Online criminals use these services to spread malware via links that appear to come from friends, or even through display ads that can infect your computer even if you don't click on them.
- Turn on WiFi Encryption: if your home network uses WiFi, make sure it is encrypted with WPA or at least WEP. Consult your wireless router manual or the manufacturer's website for setup instructions. Unencrypted wireless networks can allow thieves to connect to your network and gain access to sensitive documents on your computer even when you are not at home.
- Run a full antivirus scan: antivirus can't catch everything, but running a full scan before performing sensitive work like tax filing will give you the best chance for privacy. These scans can take an hour or more to run, so plan ahead and let the scan run overnight before your marathon tax session.
- Use unique passwords: if you are signing up for a new online tax filing service, resist the impulse to use that same password you use for everything else. Create a password that is memorable only to you--use something you can see from your computer, like "Green Vase" but mix it up with some punctuation and other characters: "Green--Vase:)" Just don't break the vase!
- Remove dangerous programs: if you have a file-sharing program like LimeWire, remove it or carefully review the files it is sharing. Latest versions of LimeWire will no longer share documents by default, but many users do not update software and may be running with an older version. If you want to keep your file sharing program but be really sure you are not sharing sensitive files, ask a friend to connect to your library and see what you are sharing (see LimeWire's "Direct Connect" feature). You should know, however, that file sharing programs are a major source of malware infection.