Five Helpful Tips for Dallas Taxpayers to Avoid Becoming a Victim of Tax-Related Cybercrime

ThreatMetrix, a leading provider of cybercrime prevention solutions, has identified five precautions Dallas taxpayers can take to safeguard their accounts and information while e-filing:

1. Make Security Part of the Decision Process. Choose a tax preparation service or website that provides bank level security, such as two-factor authentication and anti-malware protection.

2. Keep Your Eye on the Address Bar. Make sure any Web form you submit is HTTP Secure. An easy indicator is the «s» found after «http» in a Web address or the padlock icon typically found to the left of the Web address. In addition, make sure the address of each page is a valid IRS or tax preparation website.

3. Watch for Suspicious Emails and Pop-ups. If a cybercriminal suspects you are filing taxes online, they may send you a «phishing» email asking for additional personal information. Although these may look like authentic requests, do not respond. No legitimate bank or tax preparation service would ask a user to enter sensitive information into a pop-up screen or into a link provided via email.

4. Safeguard Your Password. If you set up a username and password on an e-filing website, make sure your password is unique from that of any other personal accounts – especially social networks such as Facebook and Twitter. If your password is the same across multiple profiles and one gets compromised, all your accounts will be at risk.

5. Update Your Devices. Even if you know the tax fraud facts and are cautious while e-filing, malware might still be on your computer to intercept data from legitimate websites. Update the anti-virus and malware detection software on any device on which you will enter tax information before you get started.

* New Statistics Regarding E-Filing in Texas *

As mentioned above, ThreatMetrix reports that 8,923,200 individual tax documents will be filed electronically this year by Texas residents. That estimate comprises 1040, 1040-A, and 1040-EZ forms. This year is projected to be a record high for electronic tax filings in Texas, heightening the cybersecurity threat of e-file tax data being intercepted or otherwise stolen.

ThreatMetrix also reports that the statistic above represents 72% of the total number of individual tax filings for Texas, estimated to be 12,386,000 individual filings statewide this year.

ThreatMetrix has analyzed the data to determine how Texas e-filing rates compare to other states.

Of the 50 states and including the District of Columbia, Texas is ranked #50 in its adoption of e-filing for individual tax filings, just behind Washington DC and just ahead of Hawaii.

These statistics are based on an analysis of data provided to ThreatMetrix by Michelle Chu, an economist at the IRS’s Office of Research. I can send you the raw data files, which are not publicly available, if you are interested in doing your own number crunching.

As a side note, one of the reasons that e-filing will be up in Texas this year is that starting in January 2012, any paid tax preparer must e-file their clients’ tax returns if they will file individual taxes for 10 or more clients. In 2011, the e-file mandate only applied to tax preparation firms that were filing 100 or more returns.

* New Internet Security Threats Heightening the Risk of Tax-Related Cybercrimes *

Malware and viruses have existed for decades, but 2012 is likely to be an especially active year for cybercriminals.

Security flaws in Java, installed on most computers, have opened up a big gaping hole in computer security, coinciding with the start of the tax season and putting individuals’ tax forms at greater risk than ever before. Alisdair Faulkner of ThreatMetrix can talk more to this issue – and to other cybersecurity threats – but suffice it to say that the Department of Homeland Security believes the Java exploit threat is so serious that it has taken the unprecedented step of recommending that consumers deactivate Java on their home and work computers (see http://www.us-cert.gov/cas/techalerts/TA13-010A.html for details).

* Inspector General Findings on Identity Fraud Crime Relating To Tax Refunds *

It’s difficult to find good data on cybercrime and tax fraud. However, a report by the tax services’ inspector general estimates that more than 1.5 bogus returns claiming $5.2 billion in refunds were detected last year. The inspector general estimates that the IRS could issue as much as $21 billion in fraudulent tax refunds over the next five years. You can find the full report here:

http://www.treasury.gov/tigta/auditreports/2012reports/201242080fr.html