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The Race to File - Cybersecurity Risks Involving Tax Returns

The average American consumer has become accustomed to, and even relies upon, receiving their tax refund during this time of the year. Unfortunately, so have hackers, who use tax refund season as an opportunity to obtain data and, of course, cash from unsuspecting victims.

Not surprisingly, based on a recent survey performed by CyberScout, about six out of every ten people stated that they were not worried about tax fraud. It is tough to reconcile the findings of CyberScout’s survey with data obtained by the IRS, which estimated that it stopped more than $4 billion in refunds that were claimed by scammers on 787,000 tax returns. Clearly, this is a bigger problem than most people realize.

The average American consumer has become accustomed to, and even relies upon, receiving their tax refund during this time of the year. Unfortunately, so have hackers, who use tax refund season as an opportunity to obtain data and, of course, cash from unsuspecting victims.

Not surprisingly, based on a recent survey performed by CyberScout, about six out of every ten people stated that they were not worried about tax fraud. It is tough to reconcile the findings of CyberScout’s survey with data obtained by the IRS, which estimated that it stopped more than $4 billion in refunds that were claimed by scammers on 787,000 tax returns. Clearly, this is a bigger problem than most people realize.

Over the years, hackers have been improving their “craft,” making the basic security protections from even five years ago obsolete. Taxpayers, however, have not been as adept in improving their “craft” (i.e. protecting their data). For example, it is estimated that nearly 40 percent of taxpayers store their tax documents to their hard drive or on the cloud. Many taxpayers further fail to use encrypted USB drives.

Because cyber hackers can easily access the information they need to fraudulently file a tax return, the filing process becomes a race - whoever files their tax return first, the taxpayer or the hacker, will often times secure the financial benefits. Accordingly, during tax season, it is important that lawyers, accountants and taxpayers take added steps to protect their financial data, and file their tax returns as soon as possible. Increased protections such as encrypted USB drives, having two-factor authentication to access important documents, and constantly monitoring credit reports for abnormalities should also be employed.

  • Karen Painter  Randall
    Partner

    Karen Painter Randall, formerly Certified by the Supreme Court of New Jersey as a Civil Trial Attorney and a partner at Connell Foley LLP, where she chairs the Cybersecurity, Data Privacy, and Incident Response Group. With extensive ...

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