ID theft a factor in tax filing

Personal Finance

Your Money

April 10, 2007|By Eileen AMbrose | Eileen AMbrose,Sun Columnist

If some in Congress have their way, the Internal Revenue Service will have to notify you if it discovers during an investigation that your identity has been stolen.

This is one part of the Taxpayer Protection Act of 2007, which the House is expected to vote on next week just as taxpayers are rushing to beat the filing deadline.

The vote is timely for another reason.

The IRS inspector general reported this month that at least 490 agency laptops were stolen or lost over 3 1/2 years from employees' cars, residences and offices. The inspector general says that in many cases the information on the laptops wasn't properly encrypted, leaving taxpayers vulnerable to identity theft and fraud.

Having your credit-card number fall into the wrong hands is bad enough. But tax returns bearing Social Security numbers are the mother lode for identity thieves. "Tax forms are right up there at the top of the most sensitive records," says Evan Hendricks, editor of the Privacy Times newsletter.

Of course, if government workers are going to leave laptops around for the taking, there's not much consumers can do to protect themselves, other than be vigilant for unusual activity on their credit reports. But here are some steps you can take so an identity thief doesn't get tax information from you:

Don't give out your Social Security number if you don't have to - and realize that, often, you don't.

Audrey, a Timonium resident, pays quarterly taxes. She says she's uneasy that state and federal government instruct taxpayers to put their Social Security numbers on their checks. Her checks already contain her name and address. "What more do [thieves] need?" she asks.

Officials at the IRS and Maryland comptroller's office say they only request - not require - Social Security numbers on checks in case a check gets separated from a return.

Theresa Bandell, manager of Towson accounting firm Stegman & Co., says she's noticed that clients will put five X's and the last four-digits of their Social Security number on their checks. That gives the government just enough information to match a wayward check with a return.

The payments have been accepted, she says.

Lock up sensitive documents and keep them in a secure spot. Shred papers that you don't need but contain information that thieves can use to open accounts.

Choose a tax preparer with care. This includes checking the person's background with the Better Business Bureau, says Linda Foley, founder of the Identity Theft Resource Center. Ask your preparer what safety precautions he or she takes to keep your information confidential. It's a bad sign if you can see other people's tax returns on the tax preparer's desk.

Avoid tax preparers who set up booths in stores and other public areas where it's easy for a thief to overhear Social Security numbers and vital information, Foley says.

Don't put your tax return in the mailbox after the last pickup for the day, even if the box is sitting outside the post office. "All [thieves] have to do is put sticky gum on the end of a hangar, stick it in the mailbox and pull out the mail," Foley says.

Instead, mail your return at the post office when it's open, she says.

Better yet, she says, file electronically. "Any time you can take away the human element, there is an added benefit," Foley says.

Still, there is a risk, particularly if you're not filing from a safe computer, she says. Update security programs on your computer to protect against viruses or spyware that tracks what you're doing.

Beware of so-called phishing schemes, where thieves send e-mail pretending to be the IRS. The IRS doesn't conduct electronic audits and won't contact you to get personal financial information so it can send you a refund, experts say.

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