Administrators’ Note: With 2011′s Income Tax deadline closing in fast, we asked Cybersecurity expert Neal O’Farrell to return to his earlier posting concerning tax scams. Please comment and syndicate this 2011 edition of tax tips that will keep you safe before and after the April deadline.

Is it just me or does it feel like tax time was not that long ago? As the tax deadline looms just around the corner, one group of citizens is just giddy with excitement. No, not tax preparers. For identity thieves, tax time is one of the best and busiest times of the year as they prey on unsuspecting taxpayers caught in a whirlwind of returns, refunds and rebates.

So why is tax time so good for identity thieves? Three simple reasons:

• A lot of money will be on the move as millions of citizens send and receive billions of dollars in tax payments over a very condensed period. According to the IRS during last year’s filing season nearly 100 million taxpayers received refunds totaling $260 billion. That doesn’t include all the checks that went out to the IRS from taxpayers.
• Tax time involves a lot of documents, laws, and communications – the ideal time to trick a busy taxpayer. And of course many of these documents contain the taxpayer’s crown jewels – name, address, spouse, employer, Social Security Number, bank account number and much more.
• The letters IRS scare most people and scare tactics have always worked well for thieves (Your computer has been infected, your bank account has been suspended – any of these sound familiar?)

Tax time scams are nothing new, and the scams we’ve seen so far this year are a predictable rehash of previous years. But what you really need to watch out for are more clever variations that are more likely to catch you off guard.

Most of the scams you’ll probably encounter this year will come in an email or phone message, although you shouldn’t rule out the possibility of a snail mail scam.

Here’s a selection of the kinds of tricks the scammers will use, and most are likely to come as pretty convincing IRS communications that will prey on fear, urgency, or greed:

• Someone else has submitted a tax return using your Social Security number and in order to fix the problem you’ll have to confirm your Social Security number (or submit an online dispute or claim form that includes your SSN).
• The IRS can expedite your refund if you submit your bank account and routing information.
• If you don’t accept direct deposit of your refund directly into your bank account, you’ll face a fee or penalty.
• The IRS has your stimulus check or rebate and would like to lodge it in your account. This can be a very effective trick because there are so many stimulus programs or discussions going on.
• The IRS would like you to participate in a taxpayer satisfaction survey which will eventually either ask you for personal information, or the link in the email will lead to a malicious download.
• The IRS now offers a generous installment payment plan if you owe taxes, and you can begin by submitting your bank account information.
• You’re being audited and you must respond within 24 hours using an online form.
• The IRS already sent you a check but it has not been cashed, and you’ll need to confirm your bank account information or Social Security number in order to have the check resent.

Banking Trojans are a major threat this year, and definitely not the kind of malicious software you want on your computer. These very sophisticated programs are designed to steal your bank login and password, clean out your bank accounts, and sneak away before you know it.

And if you have a banking Trojan on your computer when you file your taxes online, there’s a good chance you’ll lose your Social Security number too.

According to security firm Panda, Trojans made up nearly two thirds of all new malicious software identified during the first quarter of 2010, and the majority of these were banking Trojans according to the company.

Consumers are not the only target. Businesses can expect to receive fake IRS emails containing attachments purporting to be changes in tax laws, a tax problem with a specific employee, or threat of an audit.

The attachment or link is likely to contain a Trojan or other malware that could easily empty the victim’s bank account, and the FBI estimates that more than 200 businesses lost more than $40 million through this scam in 2009.

These can be very effective scams because businesses expect to receive this kind of correspondence, although they shouldn’t expect them by email.

And don’t just watch for IRS scams. There are numerous scams in circulation focusing on property tax appraisals, so keep an eye out from scam emails and even letters purporting to be from your local county tax assessor.

So what should you do to avoid being scammed?

• 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.
• Never confirm your SSN or bank account details by email or over the phone.
• If your bank or employer has been taken over lately, be wary of any calls asking you to confirm your tax information or employment status.
• Guard your mail because it’s especially attractive at tax time. Ideally, have your mail delivered to a P.O. Box and mail tax returns and sensitive information directly from the post office. Better still, have your taxes filed online.
• 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.
• 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.
• Make sure, before using tax preparation software, your computer is free of malware and spyware that can steal a copy of your SSN or bank account password.
• 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.
• 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.
• Don’t email tax information or returns to your accountant.  Email is not a secure way to send any document.
• 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.
• 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.
• Finally, check your credit report immediately after tax time and again a few months later to make sure your personal information wasn’t stolen and is not being used against you.

Related posts:

1. GAME ON, SHIELDS UP: Avoiding Identity Theft in Online Gaming
2. E-Mails from the IRS…and Other Tax Scams
3. Making Gains in Fighting ID Theft
4. IN THE HEADLINES: Still Making Our Identity Too Easy for Thieves
5. Crimeware: Identity Theft as a Service