Tax season, Part IV: Data breach risks

IdentityTheft — Fri, 16 Jan 2009 18:06:00 GMT

The first three installments focused on identity theft risks over which you have considerable control: your mail, your household and your email. This final installment pertains to the risk of a computer data breach that exposes your personal and financial information and leaves you vulnerable to identity theft, and that’s entirely out of your control.

The smattering of fearful Luddites who don’t file their taxes electronically can be reassured. Since Turbo Tax became available for paperless tax filing in 2001 there has been only one report of information exposure. A Nebraska woman searching for her past tax records in 2007 discovered she could view the records of other taxpayers with similar names. (The woman’s name has never been revealed because of security reasons. We can only pray that her last name wasn’t Smith or Jones.) Turbo Tax immediately fixed the glitch, and there were never any resultant identity theft cases.

If you are involved in a tax-related data breach this year, it will most likely occur at the Internal Revenue Service. In 2007, the Treasury Inspector General reported that the IRS lost track of almost 500 laptops in 387 separate security breaches affecting an untold number of taxpayers. Also in 2007, 26 IRS computer tapes went missing after they were delivered to City Hall in Kansas City. Again, an untold number of taxpayers’ personal and financial information was exposed.

Though the common perception is that hackers are the biggest threat to our electronic information, the Identity Theft Resource Center just reported that of the 110 federal, state and local government data breaches in 2008, hackers executed only 5%. Employees and subcontractors are to blame for the rest.

Conclusion

You know what they say about death and taxes: You can't avoid either of them. Unfortunately, they could say the same about data breaches. But you can significantly decrease your chances of becoming a tax season identity theft statistic. Protect your mail. Secure your personal finance records. Beware of phishing. Enroll in a comprehensive identity theft protection service because, like death and taxes, data breaches happen. Research and compare the most popular identity theft services. Be sure to look for one that monitors the websites, chat rooms and online forums where stolen identities are bought, sold and traded. To my knowledge LifeLock is the only one that provides this, but there may be others.

Happy filing.

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Tax season, Part IV: Data breach risks