Increased risk of identity theft in the tax season
Each year investors spend hours preparing taxes, hoping that they will not owe money to the government. But what many fail to realize is that the government is not the only one who may collect their hard earned cash. Identity thieves would like to have it as well.
One man’s trash is another man’s treasure, so it is important to ensure that the large number of documents used to prepare taxes are properly stored or destroyed. In 2005 alone, consumers lost nearly $57 billion to criminals who stole their identities. This is an alarming statistic, but there are ways to protect yourself, especially during tax season.
While it may appear easier to file everything, paper trails are an identity thief’s dream. Recent research conducted by Fellowes, Inc., the leading shredder manufacturer, indicates that nearly 40 per cent of Canadians believe identity theft is most likely to occur through online exchanges. In reality, Internet fraud represents only nine per cent of this crime. The majority of identity thefts occur through paper documents and stolen information. It is therefore crucial to store or destroy the sensitive tax-related documents in an appropriate manner.
“Tax season can leave consumers with mountains of paperwork, which makes them more vulnerable to identity theft,” says Kristen Gehrig, Director, Global Marketing for Fellowes, Inc. “Shredding is one of the easiest ways to ensure your information doesn’t end up in the wrong hands, but you also need to be conscious about what documents are important to keep”.
Knowing what needs to be filed versus shredded will alleviate potential problems.
* Tax returns: The Canada Revenue Agency has three years to challenge the information in your return and seven years to conduct an audit based on unreported income. Accordingly, you should retain tax returns and supporting records for at least seven years.
* Statements for your investment accounts: Investment Planning Counsel and mutual fund companies provide annual statements summarizing your transactions during the year. Once you receive these, you should shred your monthly or quarterly statements.
* Bank statements: Keep statements that support information on your tax returns for up to seven years. Other bank reports can be shredded after you review them for errors.
* Credit card statements: Keep statements for sizeable purchases such as jewelry or large appliances. You might need them for warranties. If you use your credit card for charitable contributions, keep the statement for your tax records. Other monthly statements can be shredded once you’ve reviewed them for errors or unauthorized purchases.
* Pay stubs: While many people save these, it is not a good idea. They contain everything an identity thief needs to open an account. Keep three months worth only if you are applying for a mortgage.
* ATM receipts: Shred all receipts after you balance your bank statement.
* Canceled checks: Since they have no significance for tax or other purposes, these should be destroyed after one year.
* Retirement plan contributions: Keep records of contributions to individual retirement accounts such as a RRSP indefinitely. Without them, you may find yourself paying taxes again when the money is withdrawn. Some financial institutions keep records of RRSP contributions, but you should not count on it.
* Insurance policies, wills and other legal documents: These documents should be kept indefinitely.
Consider storing documents you need to keep in a secure and accessible place, such as a fireproof box that is well hidden in your home. When destroying records, it is preferable to use a shredder that can slice credit cards and CDs and has confetti-cut capabilities. Confetti-cut shredders ensure that private information is reduced to small, unidentifiable pieces, making it nearly impossible for a would-be identity thief to piece the information back together.
Additional protective measures against identity theft should be taken during tax season. If you are filing your tax returns over the Internet, make sure your computer has updated anti-virus, anti-spyware and firewall software. It is also crucial to shred all paperwork such as receipts, bank records and various forms used to calculate taxes. Finally, pay particular attention to any documents showing your Social Insurance Number – this is a would-be thief’s dream.
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