Taxes are inevitable. As the saying goes, taxes are literally one of the two guarantees we can always count on in life. Unfortunately, what we can also count on are ill-willed identity thieves eagerly awaiting the opportunity to take advantage of all the sensitive data passed around during tax season. Identity thieves love tax season for a variety of reasons – here are just a few:

• Sensitive documents will be exchanged, sent, and shared between employers, employees, and tax preparers.
• They know large amounts of money will be moving across accounts, especially online.
• Scams are easy to pull off during this busy time – people are quick to react to mail (or e-mail) from the IRS because they want to get their returns. This gives fraudsters the opportunity to act maliciously.

Tax filing is already a complicated process and security is just another risk filers have to consider, not the least of which is choosing the right tax preparer. The good news is there are several important steps consumers can take to help keep their data safe.

Here are some tips to keep in mind as you safely file your taxes this season:

Top Tips for a Safe & Secure Tax Season:

1. Be suspicious of any calls or emails purporting to be from the IRS, no matter what the issue. For example, some scams claim that someone else has already filed tax returns in your name or with your SSN. The IRS will always write to you first, will rarely call, and will never email you.

2. Never confirm your SSN or bank account details by email or over the phone unless you are the one placing the call.

3. If you plan to use an online tax preparation service, make sure you stick with a reputable one that has adequate security measures in place. And be careful when typing in the URL or web address of an online service in case you misspell the name and end up on a fraudulent site that looks like the real one.

4. If you plan to use online tax preparation software and intend to keep a copy of your return on your computer, you should immediately rename your return with a different file extension. It is also highly recommended you use a USB external drive to save your information instead of storing it directly on your computer.

5. Make sure your computer is free of malware like computer viruses and spyware that can steal a copy of your SSN or bank account password.

6. Choose your tax preparer carefully and don’t be afraid to ask them important security questions, such as how your information is protected at their offices during and after preparation, how long they will keep a copy of your tax return, and whether they conduct background checks on their employees.

7. If you owe money to the IRS, try to pay online through their system. If you have to pay by check, spell out the name “Internal Revenue Service” because it’s harder to forge than the letters IRS.

8. If you make copies of your return on a photocopying machine, be aware that many machines keep a copy of your pages in short term memory! Using photocopiers in public locations is not recommended.

9. Don’t forget to shred any unnecessary documents or copies when tax season is over. Dumpster divers will be on the prowl to get your banking account details and SSNs.

10. Use a credit and public monitoring service. Services like IDENTITY GUARD® TOTAL PROTECTION(SM) provide the most comprehensive identity and credit protection solution; including, three credit scores, credit monitoring, credit report updates, ID monitoring with alerts, SSN and address monitoring, and more.

Join the discussion! Learn about the latest tips to protect your identity during tax season, and join our Twitter Party with Resourceful Mommy on Thursday, March 8th from 8:00 to 9:00 p.m. ET.

The IRS recently released its annual list of the “Dirty Dozen”, the top twelve most common scams the IRS detects each year. And it is no surprise that identity theft and fraud take the top three places.

According to the IRS, many of these schemes hit a peak during filing season as people prepare their tax returns. “Taxpayers should be careful and avoid falling into a trap with the Dirty Dozen,” said IRS Commissioner Doug Shulman. “Scam artists will tempt people in-person, on-line and by e-mail with misleading promises about lost refunds and free money. Don’t be fooled by these scams.”

The following is the Dirty Dozen list of the tax scams to watch out for in 2012:

1. Identity Theft

2. Phishing

3. Return Preparer Fraud

4. Hiding Offshore Income

5. “Free Money” from the IRS & Tax Scams Involving Social Security

6. False/Inflated Income and Expenses

7. False Form 1099 Refund Claims

8. Frivolous Arguments

9. Falsely Claiming Zero Wages

10. Abuse of Charitable Organizations and Deductions

11. Disguised Corporate Ownership

12. Misuse of Trusts

As you can see from the list, many of those threats are actually scams faced by the IRS and not consumers. And while anything that costs the IRS money costs taxpayers money too, many of these scams will not apply directly to you. But the top three are always something to worry about. And of course we have seen an increase in identity theft and fraud committed by tax preparers.

Dishonest tax preparers can be a very dangerous threat because they can possess so much personal and financial information about you, and perhaps hundreds or even thousands of others. The IRS offers some advice on the things a dishonest tax preparer might not do that should be a red flag:

• They don’t sign the return or place a Preparer Tax identification Number on it.

• They don’t give you a copy of your tax return.

• They promise larger than normal tax refunds.

• They charge a percentage of the refund amount as preparation fee.

• They require you to split the refund to pay the preparation fee.

• They add forms to the return you have never filed before.

• They encourage you to place false information on your return, such as false income, expenses and/or credits.

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It’s that time of the year when we get to polish our crystal ball and take a look at what might happen in 2012. Intersections’ Consumer Security Adviser and master predictor of all things security Neal O’Farrell, dusts off his magic wand, adjusts his turban and takes a peek into the future with his 2012 security predictions.

Christmas is a time for tradition, and in the security world one of those traditions is predicting what’s in store for us next year from hackers, scammers and all the other things that go bump on the net.

Perhaps the best way to summarize next year’s threats is more of the same, and here are just a few of my predictions:

• More friends and family fraud, as continued economic hard times force otherwise honest individuals to exploit family credit to pay bills.

• An increase in existing account fraud as financial institutions get better at preventing new account fraud and force thieves to focus on low hanging fruit.

• An increase in child identity theft as thieves become more aware of how hard it is to stop it, and a similar increase in elder financial exploitation as social services for the elderly are cut back.

• An increase in skimming, especially in supermarkets, as thieves rush to take advantage of this vulnerability before chip-and-pin is more widely adopted and makes skimming more difficult.

• A shift from street-level drug dealing to identity theft. This is a worrying trend because it could fuel the growth in identity theft for another decade. The recent Operation Rainmaker in Florida, where local drug dealers joined forces to learn about identity theft and defraud the IRS out of more than $130 million using stolen identities, is a perfect example of this trend.

• A growth in super thieves – low level thieves, like those involved in mail theft or check washing – who are never arrested or investigated, stay off law enforcement’s radar, and only become better, more sophisticated, and able to steal larger amounts without being caught. They take advantage of the fact that law enforcement has largely given up on identity theft.

• An increase in attacks against small businesses because of the wealth of identity information they possess with little protection.

• An increase in tax-related identity theft, as crooks realize how lax IRS security controls are and how easy it is to get a refund using a stolen or “deceased” identity.

• An increase in identity theft malware especially banking Trojans, keyloggers, and Android malware.

• An increase in legislation to protect consumers, and especially data breach legislation.

• Lots of opportunities for hackers to poison search results and take advantage of some big events next year, especially the 2012 Olympic Games starting in July in London, and of course the Presidential election. Both events will provide hackers and scammers with endless opportunities to trick unwary users into falling for some scam or another.

• More hactivisim, but much of it by copycat hackers rather than by the original Anonymous or Lulz crew.

• More infrastructure attacks, targeted at everything from power stations to water treatment plants. Most of the attacks will be probes to test the resilience of these systems to attack.

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Intersections’ Consume Security Adviser Neal O’Farrell reports on an inventive identity theft scam that was recently uncovered in Florida.

It was addictive. Just like the dope they once sold on the streets, if not more, according to the story in the Seminole Heights newspaper. “The scheme is extremely simple but extremely lucrative,” said the U.S. Secret Service Special Agent in Charge.

They were talking about Operation Rainmaker, an identity theft scheme that was so easy and so lucrative it persuaded drug dealers to abandon their age-old trade and turn instead to identity theft instead. The operation got its name from law enforcement simply because of the vast amounts of money thieves were able to rain down on themselves – about $130 million in fact.

Authorities were only tipped off to the scheme when tax payers began to file complaints that when they went to file their own taxes, they found someone else had filed using their name. And that was the core of the scam.

Here’s what they discovered. The thieves were using public sites like Ancestry.com to assemble the identities of the living and the dead, and were also buying complete identities on the black market – something that’s surprisingly easy for anyone to do.

Once the thieves had assembled enough information about an individual, they used off-the-shelf tax return software like Turbo Tax to file fraudulent tax returns. And that was probably the easiest part of the entire scam. The IRS is unable to thoroughly review or cross-reference every single tax return they receive, or spot any red flags like a sudden change of a taxpayer’s address. And if the amount of the return is under $10,000, it rarely gets scrutinized.

So naturally the thieves kept their returns under the $10,000 threshold and then sat back and watched the IRS rain money down on them. That money came in credit cards or checks issued by the Treasury and sent to a variety of homes, some of them vacant, or deposited electronically into bogus accounts.

Once they had their hands on the funds, the thieves would go on spending sprees. The scheme was so lucrative and widespread, authorities in the area said they noticed a significant reduction in street-level drug dealing. According to the story, informants told police that local drug dealers quickly realized that identity theft was a much more lucrative and safe line of business.

As soon as authorities got wind of the scheme, they assembled a task force that included police and Sheriff’s departments, the United States Secret Service, the United States Postal Inspection Service, State Attorney’s Office, and the United States Attorney’s Office.

But in spite of all the evidence they had gathered, authorities had trouble in filing charges of tax fraud because the IRS refused to share the records they had – apparently the IRS protects the personal information of thieves who are caught committing tax fraud.

Nearly fifty people have been arrested so far, and here’s exactly how law enforcement laid out the multiple steps in this bizarre criminal enterprise:

• Create Fake Identity

• Suspects search the web to find identities of deceased or living victims.

• Defendants buy large volume of identities from suspects who are stealing names and social security numbers from businesses, medical facilities or prisons.

• File Fraudulent Tax Return Online

• Suspects use multiple electronic filing programs including, Turbo Tax, Tax Hawk and Tax Slayer. Turbo Tax is the most commonly used.

• Suspects refer to this tax scam as “doing drops.”

• Request Refund on Green Dot Card, Treasury Check or Direct Deposit

• Suspects have refunds sent to vacant homes, another suspect’s home or an innocent bystander’s home and then intercept the mail.

• Defendants open fraudulent bank accounts to receive direct deposits.

• Cashing in the Refund

• Suspects withdraw money from ATM’s.

• Buy large ticket items or money orders at legitimate businesses.

• Suspects launder the money through illegal businesses.

And apart from how easy it was to pull of the scam – if they’d stuck to victimizing dead people they might never have been caught – the most worrying part of the story is how drug dealers and other criminals are turning away from traditional crimes and to identity theft. And with so few investigations, arrests and prosecutions for identity theft, what have these crooks to worry about?

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