Tax identity theft and related fraud are putting high net worth individuals, executives and other business professionals at great risk. With more than $4 billion in potential damage tallied through fraudulent returns in 2016 alone, tax identity theft is a serious problem affluent families and corporate leaders must confront in order to avoid life disrupting events.
Why scammers continue to thrive
While financial institutions and government agencies have put a number of anti-fraud measures in place, they are subject to endless attacks by extremely sophisticated, clever and persistent hackers. As defenders, they must get everything right. Intruders need only find one point of vulnerability—a momentary crack or crevasse—and suddenly the personal information of thousands, if not millions, of consumers and employees can be compromised. No system is stronger than its weakest link and unfortunately people are the weakest link. That’s why breaches have become the third certainty in life. This is further compounded by the tendency of pretty much everyone to overshare on social media.
Incredibly, most consumers aren’t aware of the risks they face, with many clinging to the mistaken belief that they aren’t important enough to be targets. Only 42 percent of Americans reported that they were worried about becoming victims of tax identity theft in a recent survey sponsored by CyberScout.
People have a tendency to only think about tax fraud during tax season. Scammers, however, work year round. That’s why it’s critical that high net worth business professionals avoid the temptation to let their guard down.
Increased risks for business executives and high net worth individuals
Wealthy victims are delicious targets. Stolen tax information is useful to criminals on several fronts. The personal data essential to file false tax returns includes names, birthdates, home addresses and social security numbers—useful identifiers for all sorts of other criminal adventures. By leveraging those pieces of information, thieves may be able to access everything from retirement and investment accounts to lines of credit—even medical treatment. The potential for financial and health-related harm to high net worth individuals when criminals build on even the most basic tax fraud is ever-present and enormous.
For executives, there’s way more than just personal assets at stake. Think about how many accounts are tied to your social security number. That personal identifier may unlock not only your personal checking account, but your firm’s bank accounts as well. With such information in hand, many cyber criminals view tax fraud as simply the first stop. They have the ammunition they need to drain an account you share with your business partners or family members. What will happen to your company’s reputation when checks written to your vendors bounce or you can’t fulfill your payroll obligations?
Protect yourself against tax ID theft and fraud
There are steps you should take to make fraud protection a normal part of your life. Some measures can be automated, such as the use of an identity management service to monitor your personal identity and flag potentially suspicious activity. Other actions may need to happen only once to provide ongoing protection. Buying a locked mailbox is one option that is quick and will help to keep incoming documents safe from identity thieves.
Additional measures can also help affluent consumers protect their identities. Boost security by requiring your tax preparer to use two-factor authentication to better protect your personal information. When the documents—tax worksheets, W-2 forms, etc.—are returned to you for storage, be sure to use an encrypted USB drive for the most secure protection.
Filing early is another way to help reduce your risk profile. The majority of Americans (57 percent) wait until March or later to file their returns. This gives thieves a head start on filing fraudulent returns, allowing them to steal refunds months before anyone will ever know what happened. And when it comes time to file, only 48 percent of people trust online tax services. By asking your preparer to file your return online using a reputable service, you lower the risk of exposure.
Too busy to pay attention to your cyber security? Ask your financial institution or insurance provider about their coverages. You trust them with your assets already, and many offer concierge level services that protect your digital home and social profile, as well as helping you recover from any tax fraud that takes place.
Business professionals should also practice good cyber hygiene. Use long and strong passwords, change them regularly, never share them across multiple sites or systems. Consider using a password management system or at least a passphrase. Your personal data is too important to hand over without a fight.