Tax returns are a tempting treat in a time of data breaches and identity theft. Names, social security numbers, bank account information--it's all right there.
If cybercrime makes filing taxes electronically (also called 'e-filing') seem risky, however, printing out your tax returns and putting them in the mail exposes them to far more risks, says Sean Sullivan, Security Advisor at F-Secure Labs. Instead, there are plenty of steps you can take to secure your personal information and make e-filing easier at the same time.
E-filing is readily available through tax-preparation software or an online service, or by filing via the IRS or state websites. To e-file safely, experts recommend several common-sense precautions. "There are basic principles you need to follow," says William Pelgrin, President and CEO of the Center for Internet Security.
"If you're doing your taxes at home, make sure your computer is secure," says Pelgrin. "Nothing is 100 percent secure, but you can take steps to make sure you're as secure as you can be."
That means keeping your computer and all of its software completely patched and up-to-date, and running reliable and updated security software. You also should uninstall any old, unused applications, as they may be vulnerable to malware.
Secure your personal information
It's also important to store your tax data carefully. "The biggest problem with e-filing is not e-filing itself, it's the records that your taxes create," F-Secure's Sullivan says.
If those records were to get into the wrong hands, criminals could later use your social security number in a variety of ways. They could use it to gain employment, in which case their wages would be reported as earned by you, affecting the amount of taxes you owe in future years. Identity thieves also can use your information to file false tax returns in your name, which allows them to claim your refund.
This practice, known as SIRF for Stolen Income Refund Fraud, is becoming increasingly widespread, says Jane Carpenter of Maine Identity Services, which helps victims of identity fraud. Hundreds of thousands of dollars have been stolen via fraudulent refunds, says Carpenter. Legitimate taxpayers usually don't realize there's a problem until they file their own taxes, and the IRS informs them multiple returns have been received.
Carpenter notes that while the federal IRS website for e-filing offers the highest level of security, not all state websites are comparably safe. She suggests contacting your state's Department of Revenue if you have any concerns. The website for the state of California offers a very detailed rundown of its privacy and security measures, for instance.
In addition to taking the security measures noted above, experts also advise separating your financial life from your personal life on your PC to the greatest extent possible. Pelgrin says to be sure your kids haven't been playing around on your computer before you use it to prepare your taxes or conduct any financial transactions. They're more likely to visit sites that may unknowingly plant malware on your system.
Sullivan even suggests using one PC for your banking and financial transactions, and another device, such as a cheaper desktop, laptop, or tablet, for your personal browsing. Banking sites are typically very secure and are unlikely to put malware on your computer, he says, but the same isn't true about the rest of the Internet. If you can't afford or don't have access to separate devices, you can use separate browsers for financial and non-financial surfing. Another option is using security software that offers banking protection, which cuts off any connections other than the one to your financial institution.
All the experts we consulted advised against storing your tax and financial records on your PC once your taxes are filed. Keep them on an external hard drive or USB drive that's not constantly connected to your computer--and is therefore inaccessible by any malware that may infect your system. "You wouldn't keep your tax returns on your kitchen table, you'd put them in a filing cabinet out of sight," Sullivan says. "Treat your computer the same way."
Approach mobile apps with caution
Tax preparation and filing are going mobile--for some people, anyway. In recent years, apps from both H&R Block ($9.99) and TurboTax (free for federal, $14.99 for state) have been available for Android and iOS devices.
While the apps are convenient, they're designed primarily for folks with simple tax returns. The H&R Block and TurboTax apps are restricted to filing 1040EZs, and filing through the apps is pricier than doing so through your computer, where filing uncomplicated returns is often free. Pelgrin also says using a device with a bigger screen is preferable--if only to avoid making unnecessary errors, which can happen when trying to enter and verify information on a small display.
If you decide to file with a mobile app, standard security protocol still applies. In addition to ensuring your smartphone is patched and running the latest software, Pelgrin suggests installing security tools that allow you to wipe your device remotely if it is lost or stolen.
Also, don't file taxes while connected to public Wi-Fi networks, which are far less secure than those in your home or office. You run the risk of falling victim to a "man in the middle" attack, allowing a hacker to see everything you're transmitting over the Internet.
Don't be scared off by all these warnings. E-filing is by far the safest way to file your taxes, particularly if you follow the security measures outlined here.
"I trust computers a lot more than I trust people," Sullivan says. "A computer will do what you tell it; it's not going to try to screw you over. But a person might, whether it's an accountant or someone who comes across your personal info on a piece of paper somewhere."
And if that isn't enough to cheer you up, remember this: According to the IRS, e-filing not only reduces errors in tax returns, it also significantly speeds up the process of getting your return. Now there's something to smile about.