At this time of year, you’d be hard pressed to find someone who doesn’t love the idea of electronic tax filing. E-filing your annual return to the IRS offers speed and convenience and when coupled with industry-approved software that can plug in the values for you, a lot of the headaches traditionally associated with doing your taxes are eliminated.
Of course, there are bound to be some drawbacks, so keep the following in mind when deciding whether to file returns with the IRS electronically or via the old-fashioned paper and mail method.
One of the single biggest conveniences associated with tax software is that it allows you to view your previous year’s tax return, which streamlines the process. Of course, as with any situation where your information is collected and stored, you have to know what happens to that information when you’re finished.
If you prepared your own taxes on your computer, you run the risk of either losing that information to a hacker or losing it if something happens to your device. If you’re using a professional tax preparation service, be sure to inquire about their storage methods and how they plan to protect your sensitive information once you leave their offices.
And be sure to protect yourself if you are filing your taxes on a computer or device that’s connected to a public WiFi network. If you are not using a VPN to encrypt everything going into and out of your computer, then anyone on the same network can easily obtain all of your tax information, putting your at serious risk for identity theft.
In light of so many recent data breaches, it’s easy to understand why some taxpayers just aren’t ready to trust the digital system yet. The IRS still provides paper forms that individuals can prepare on their own or use at a tax preparer’s office. And even though the paper system is a tried-and-true method of filing your return—in fact, it was the only way consumers could file individually for decades—there are a few ways that electronic filing far outshines the paper version.
When you e-file, not only will your return be received and processed faster and lead to a faster payment of your refund, but you’ll get an immediate confirmation that the IRS has received your return.
However you choose to file, it’s important to know that tax refund fraud is on the rise. Recently, TurboTax suspended state filings because of an increase in suspicious activity, and hackers are selling tax prep account credentials in record numbers. Phishing attempts are also on the rise as scammers trick taxpayers into either making payments over the phone, or logging into their accounts via a phishing email. Consumers should know that the IRS does not send requests for data by email, text, or any method other than the traditional letter.
The best way to know you’ve protected your tax return is to file early, basically beating the criminal to it. This is one of the few races against the clock where time is the single biggest factor in preventing identity theft. No matter which method you choose, file as soon as you can to avoid having an identity thief get there first.