5 Tips to Keep Your Tax Records Secure -
How You Can Help Prevent Tax-Related Identity Theft -
Consolidate Accounts And Simplify Your Financial Life
Tips to Keep Your Tax Records Secure
If you're still keeping old tax returns and receipts
stuffed in a shoe box stuck in the back of the closet, you
might want to rethink that approach.
The IRS has teamed up with state revenue departments and the
tax industry to make sure you understand the dangers to your
personal and financial data. Taxes. Security. Together.
Working in partnership with you, we can make a difference.
You should keep your tax records safe and secure, whether they
are stored on paper or kept electronically. The same is true
for any financial or health records you store, especially any
document bearing Social Security numbers.
You should keep always keep copies of your tax returns and
supporting documents for several years to support claims for
tax credits and deductions.
Because of the sensitive data, the loss or theft of these
documents could lead to identity theft and have an economic
impact. These documents contain the Social Security numbers of
you, your spouse and dependents, old W-2 income and bank
account information. A burglar could easily turn your old shoe
box full of documents into a tax-related identity theft crime.
Here are just a few of the easy and practical steps to better
protect your tax records:
Always retain a copy of your
completed federal and state tax returns and their supporting
materials. These prior-year returns will help you
prepare your next year's taxes, and receipts will document any
credits or deductions you claim should question arise later.
If you retain paper records, you should keep them in a
secure location, preferably under
lock and key, such as a secure desk drawer or a
If you retain you records electronically on your computer, you
should always have an electronic
back-up, in case your hard drive crashes. You
should encrypt the files both on your computer and any back-up
drives you use. You may have to purchase encryption software
to ensure the files' security.
Dispose of old tax records properly.
Never toss paper tax returns and supporting documents into the
trash. Your federal and state tax records, as well as any
financial or health records should be shredded before
If you are disposing of an old computer or back-up hard drive,
keep in mind there is sensitive data on these. Deleting stored
tax files will not remove them from your computer.
You should wipe the drives of any
electronic product you trash or sell, including
tablets and mobile phones, to ensure you remove all personal
data. Again, this may require special disk utility software.
The IRS recommends retaining copies of your tax returns and
supporting documents for a minimum of three years to a maximum
of seven years. Remember to keep records relating to property
you own for three to seven years after the year in which you
dispose of the property. Three years is a timeframe that
allows you to file amended returns, or if questions arise on
your tax return, and seven years is a timeframe that allows
filing a claim for adjustment in a case of bad debt deduction
or a loss from worthless securities.
To learn additional steps you can take to protect your
personal and financial data, visit Taxes. Security. Together.
You also can read Publication 4524, Security Awareness for
Each and every taxpayer has a set of fundamental rights they
should be aware of when dealing with the IRS. These are your
Taxpayer Bill of Rights. Explore your rights and our
obligations to protect them on IRS.gov.
How You Can Help Prevent Tax-Related Identity Theft
fraud isn't a new crime, but tax preparation software, e-filing and
increased availability of personal data have made tax-related identity
theft increasingly easy to perpetrate. The IRS is taking steps to reduce
such fraud, but taxpayers must play their part, too.
How they do it
Criminals perpetrate tax identity theft by using
stolen Social Security numbers and other personal information to file
tax returns in their victims' names. Naturally, the fake returns claim that
the filer is owed a refund - and the bigger, the better.
To ensure they're a step ahead of taxpayers filing legitimate returns and
employers submitting W-2 and 1099 forms, the thieves file early in the tax
season. They usually request that refunds be made to debit cards, which are
hard for the IRS to trace once they're distributed.
IRS takes action
The increasing rate of tax-related fraud — not to mention the
well-publicized 2015 IRS data breach — has spurred government agencies and
private sector businesses to act. This past June, a coalition made up of the
IRS, state tax administrators, tax preparation services and payroll and tax
product processors announced a new program with five initiatives:
identification. Coalition members will review transmission data such as
Internet Protocol numbers.
identification. Members will share fraud leads and aggregated tax return
Information assessment. The Refund Fraud Information Sharing and
Assessment Center will help public and private sector members share
Cybersecurity framework. Members will be required to adopt the National
Institute of Standards and Technology cybersecurity framework.
awareness and communication. Members will increase efforts to inform the
public about identity theft and protecting personal data.
Your role in preventing fraud
But the IRS and tax preparation professionals can't fight fraud without your
help. Be sure to keep your Social Security card secure, and if businesses
(including financial institutions and medical providers) request your Social
Security number, ensure they need it for a legitimate purpose and have taken
precautions to keep your data safe. Also regularly review your credit
report. You can obtain free copies from all three credit bureaus once a year.
Accounts And Simplify Your Financial Life
you've accumulated many bank, investment and other financial accounts over
the years, you might consider consolidating some of them.
Having multiple accounts requires you to spend
more time tracking and reconciling financial activities and can make it
harder to keep a handle on how much you have and whether your money is being
by identifying the accounts that offer you the best combination of
excellent customer service, convenience, lower fees and higher returns.
Hold on to these and consider closing the rest, keeping in mind the bank
account amounts you'll be consolidating.
Federal Deposit Insurance Corporation generally insures $250,000 per
depositor, per insured bank. So if consolidation means that your balance
might exceed that amount, it's better to keep multiple accounts. You should
also keep accounts with different beneficiaries separate.
closing accounts, make sure you stop automatic
payments or deposits and destroy checks and cards associated with them.
To prevent any future disputes, obtain letters from the financial
institutions stating that your accounts have been closed. Closing an account
generally takes several weeks.
Remember you can
call our offices if you have any questions about these or any
other accounting, tax, financial planning or insurance related
issues, at 313-388-0300 or our other area offices listed
Regards, Philip Schreiber, CPA
Schreiber Advisors, PC