Electronic Tax Preparation

Online Fraud - Spyware & Keylogger Vulnerabilities

Wednesday, March 01, 2006

Tax software and Internet use have revolutionized the process by which people around the world prepare and/or submit their taxes.

In keeping with the trend, however, that with much of the added convenience technology affords us comes the risk that one’s personal information may be compromised; malicious hackers, scam artists and identity thieves could not hope for a more lucrative opportunity than the few months preceding mid-April, when an influx of sensitive documentation provides a highly accessible, concentrated selection of personal information.

The 2004 IRS Data Book indicates that the number of Americans who file their tax returns electronically rose from about 12 million in 1995 to over 61.5 million in 2004. Furthermore, a third of all returns in North America are expected to be filed electronically this year.

Though proficient with the Internet, it would appear that the majority of those who use tax software – when considering how relatively few implement security tools to undercut its inherent risks – are under a false sense of security. A recent study by Forrester Research states that 60% of North American computer users fail to scan for spyware at least once a month, 45 % of which do not know what spyware is.

Spyware is any software that covertly gathers information about computer users while they navigate the Internet and transmits the information to an individual or company that uses it for marketing or other purposes. Most have a technology known as “keylogging,” which captures the user’s keystrokes and is the most likely method to intercept personal information from unsuspecting victims.

The personal information required of tax preparation software and electronic filings include name, home address, statement of income, name of employer, bank and credit account information, and most importantly, Social Security number. Needless to say, this treasure trove of data is highly attractive to keylogging hackers and identity thieves.

What’s more, the most popular tax-filing programs don’t include built-in security features to prevent this sort of illicit data disclosure.

Two years ago, Information Week reported that “Microsoft estimates that spyware is responsible for 50% of all PC crashes,” and “Dell reports 20% of its technical support calls involve spyware.” Indeed, the proliferation of spyware and keylogging in recent years poses the greatest threat to people using tax software – more so than computer viruses and malware.

In order to mitigate the numerous vulnerabilities associated with electronic tax preparation, one should always, above all, exercise personal diligence. It is vital that those who choose to use tax software supplement it with a quality anti-spyware program, as well as periodically check that their operating system is up-to-date. .

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