Tax season is once again upon us, with millions of Americans rushing to gather their W-2s, 1099s and piles of receipts. Once you have all of your documents together, how do you make sure they don’t fall into the wrong hands? The IRS suggests that you hold on to your tax records for at least three years, with some experts suggesting that business owners and freelancers hold on to their records indefinitely. With that much documentation, securing financial data can seem like an albatross — but with a bit of precaution and a few best practices, you can secure your tax data without losing your mind. Here’s how:
1. Stay organized and use secure storage.
The easiest way to leave sensitive tax documents vulnerable to theft is to lose track of them in the first place. Leaving documents lying around in your inbox or Dropbox isn’t just a logistics issue when you need to gather your documents for Tax Day or dig up info for an IRS audit — it’s also a security issue.
More and more, we’re using digital documents to do our taxes. Rather than physically handing out your W-2 form or sending it via snail mail, your boss may have you access your documents securely via an online human resources portal, where you can download them as PDFs. If you’re a contractor, your clients may send you I-9 and 1099 forms via email. Where once, securing financial data meant locking up your filing cabinet or shredding old documents, now it means keeping track of digital files delivered in a variety of both secure and insecure ways.
Use an ounce of prevention when securing financial data: as soon as you receive a document, transfer it to a secure method of storage, like an encrypted, password-protected folder on your personal computer. The longer you leave documents lying around, the longer hackers have to gain access to them (and the more likely you are to forget an important deduction come Tax Day.) While public cloud security is improving, the recent iCloud hack and Dropbox password leak should give you pause before you consider storing your sensitive financial documents there.
2. Choose your team wisely.
You may have all of your security ducks in a row, but as soon as you trust a third party with your sensitive data, you have another person’s practices to worry about. If you’re preparing your own taxes, have you researched the software you’re using to ensure your data is kept private? If you’re consulting an accountant, tax preparer, lawyer or financial advisor, are they trained in digitally securing financial data?
Whoever is helping you prepare your taxes should be open about the types of software they use. It also helps to ask them how they store digital documents, what their methods of securing financial data are and whether they use encryption. Finally, educate yourself on GLBA compliance, which requires financial institutions (that is, any business that deals in loans, debt collecting or financial advice) to abide by certain data privacy standards.
3. Encrypt all digital documents, including your email.
Think of all the information someone can find out about you just by looking at your W-2 — there’s your social security number, your address, your employer’s information and pretty much a smorgasbord of enticing data for a cybercriminal who wants to steal your identity. Now think of all the ways someone can gain unauthorized access to that document. In a lot of cases, the only thing standing between you and the bad guy is your email password. Even if you use the longest, most complex password you could think of, do you really trust that combination of characters to protect your most sensitive data?
Securing financial data should always involve encryption. By rendering your financial data and documents unreadable to anyone who doesn’t have the key to unlock them, encryption adds another layer of protection to your most sensitive information. When you encrypt your email, you keep your files safe as soon as they land in your inbox — even if you do lose track of a document or two, you’re protected.
Encryption might sound like it’s difficult to take advantage of, especially for an individual user. It’s true that in the past, email encryption required quite a bit of tech know-how to employ. However, with Virtru, encrypting your sensitive email as simple as the click of a button.
This isn’t just important during tax season, but all year long. Any email you don’t want falling in the wrong hands, from important business documents to drafts of your screenplay, can benefit from the added protection that email encryption provides. After all, privacy goes beyond securing financial data — it means that your communications stay between you and your recipients.