How Safe Are Your Tax Secrets?
By Jim Glass, JD
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Tax return information is confidential. As the April 17th tax filing date approaches, pay attention to keeping your tax return information out of the hands of those who could cause you harm.
Protecting Information on Your Tax Return
Your tax return is full of private facts about you and your family. It includes names, Social Security numbers, income, investments, family relationships, business information, and more.
This makes tax returns a prime target of scammers and identity thieves. If information on your return is stolen, tax season may prove costly in more ways than one.
Congress knows this and has made improper disclosure of tax return information a felony. Government employees can't disclose return information even to other government employees without authorization. The same prohibition applies to others who reveal return information. The penalty can be five years in jail and a $5,000 fine; civil fines, damages, and punitive damages can result as well.
In fact, the IRS and your tax advisor can't even deal with each other without your authorization. If you wish to name someone to receive information in your tax file from the IRS, file IRS Form 8821, Tax Information Authorization. To authorize someone to act on your behalf with the IRS, file IRS Form 2848, Power of Attorney.
Yet most leaks of tax return information start "close to home." Beware of these potential sources of lost tax information:
- Your tax return preparer. Because their files hold so many returns, professional return preparers are a natural target of information thieves. These can range from a clerk using a photocopier to sophisticated hackers. When considering hiring a professional return preparer, ask about the firm's privacy and security policies.
- Your own records. If you keep your tax records in a desk drawer or a personal computer, they aren't secure from anyone. Curious family members, nosy guests, outright intruders may get to them. Keep your tax records secured under "lock and key."
- Distributing your return. Increasingly, organizations are requesting copies of tax returns on applications of various kinds -- such as when applying for financial aid for school, children's programs, YMCAs and so on. How will these organizations protect your information? Ask! Don't provide a full return if less information will serve. Ask to have the return sent back to you after the information on it is processed.
Remember the penalties. You can collect them if your information is revealed, and you may be liable for them if you are a member of an organization that loses control of tax return information collected from others!
For help on how to prevent tax return related identity theft, visit the IRS web page on Identity Protection: Prevention, Detection and Victim Assistance.