SKR+Co Alert: E-filing is Safe, but Beware: Identity Thieves are Prowling

April 10, 2012

Last year, nearly 100 million taxpayers opted for the safest, fastest and easiest way to submit their individual tax returns IRS efile. E-file is the norm for individual taxpayers and more and more businesses are also submitting their forms electronically.

But a question we continue to hear is, “Is it safe?” We live in a time where more and more of our interactions, including those involving our finances, are conducted over the internet. This is no secret to identity thieves. But according to the IRS, e-filing is very safe. The IRS e-file system has never had a security breach. In fact, over 400 million returns have been electronically filed since 1986 without a security incident.

Here are some of the facts about the IRS e-file System. The system: 

• is not done over email
• has many built-in security features
• employs multiple firewalls
• uses state of the art virus and worm detection
• meets or exceeds all government security standards
• is constantly tested for weaknesses by penetration testing
• has never had a security breach
• All internet transmissions use SSL (Secure Sockets Layer) encrypted security measures

IRS e-file transmissions are very secure because the IRS has been extremely diligent in the design, development, analysis and testing of the current infrastructure and system.  IRS e-file meets or exceeds all government security standards and includes multiple firewalls.

Most e-filed online tax returns are transmitted over phone lines from the return preparer to a third-party transmitter. From there, the returns are forwarded over secured lines to the IRS.  Intercepting telephone transmissions is quite difficult and requires access to phone company major transmission lines.  Also, to transmit data like tax returns over telecommunications lines means that the information gets converted into digital format which could not be easily read even if it were intercepted.

As you can see, the IRS has instituted safeguards to ensure that e-filing your tax return is a safe process.

Could your tax records be susceptible to identity theft?

Identity theft occurs when someone uses your personal information such as your name, Social Security number (SSN) or other identifying information, without your permission, to commit fraud or other crimes. You could be vulnerable if this information is not properly protected.

The IRS suggests the following to minimize the risk of becoming a victim:

• Don't carry your Social Security card or any other document(s) with your SSN on it.

• Don’t give a business your SSN just because they ask. Give it only when required.

• Protect your financial information.

• Check your credit report every 12 months.

• Secure personal information in your home.

• Protect your personal computers by using firewalls, anti-spam/virus software, update security patches, and change passwords for Internet accounts.

• Don’t give personal information over the phone, through the mail or on the Internet unless you have initiated the contact or you are sure you know who you are dealing with.

If you have any concerns or questions or think you may be a victim of identity theft, we can assist you in resolving the issues, if you wish.

How do you know if your tax records have been affected by identity theft?

Usually, an identity thief uses a legitimate taxpayer’s identity to fraudulently file a tax return and claim a refund. Generally, the identity thief will use a stolen SSN to file a forged tax return and attempt to get a fraudulent refund early in the filing season. 

You may be unaware that this has happened until you file your return later in the filing season and discover that two returns have been filed using the same SSN. 

Be alert to possible identity theft if you receive an IRS notice or letter that states that:

• More than one tax return for you was filed,

• You have a balance due, refund offset or have had collection actions taken against you for a year you did not file a tax return, or 

• IRS records indicate you received wages from an employer unknown to you. 

What to do if your tax records were affected

If you receive a notice from the IRS, respond immediately. If you believe someone may have used your SSN fraudulently, notify the IRS immediately by responding to the name and number printed on the notice or letter. You will need to fill out the IRS Identity Theft Affidavit, Form 14039.  

Keep in mind, The IRS does not initiate contact with taxpayers by email to request personal or financial information.