Tax Season Leads to Increased Risk for Identity Theft

Each year consumers spend many hours preparing taxes hoping they don't owe the government money. But what many fail to realize is that the government isn't the only one who may collect their hard earned cash -- so may identity thieves.

In a time where one man's trash is another man's treasure, it's important to ensure that tax-related documents used to prepare taxes are appropriately stored or destroyed. In 2006, consumers lost more than $1.1 billion to criminals who stole their identities. Although this statistic is alarming, there are ways to protect yourself from the crime, especially during tax season.

While it may appear easier to file everything, paper trails are still an identity thief's dream. Recent research conducted by Fellowes shows nearly 40 percent of Americans believe identity theft is most likely to occur through online exchanges. In reality, online exchanges represent only 9 percent of the crime. The majority of identity theft crimes occur through paper documents and stolen information, making it crucial to properly store or destroy the sensitive documents used during tax season.

"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. "Although shredding is one of the easiest ways to ensure your information doesn't end up in the wrong hands, consumers also need to be conscious about what documents are important to keep."
Simply knowing what needs to be filed or shred will quickly alleviate potential problems:

• Tax returns: The IRS has three years to challenge information in your return and six years to conduct an audit based on unreported income. Keep tax returns and supporting records, like W-2s and 1099s for at least seven years.
• Investment statements for taxable accounts: Most brokerage firms and mutual fund companies send annual statements summarizing the year's transactions. Once you have these, you should shred your monthly and/or quarterly statements.
• Bank statements: Keep statements that back up information on your tax returns for up to seven years. Other bank statements can be shredded after reviewing for errors.
• Credit card statements: Keep statements for big purchases, like jewelry or large appliances. You might need them for warranties. If you put charitable contributions on your credit card, 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 say to save these, it's a huge mistake. They contain everything an identity thief needs to open an account. Keep three months of history only if you are applying for a mortgage.
• ATM receipts: Shred all receipts after you balance your bank statement.
• Canceled checks: With no significance for tax or other purposes, these should be destroyed after one year.
• Retirement plan contributions: Keep records of contributions to non- deductible individual retirement accounts, such as a Roth IRA, indefinitely. Without them, you may find yourself paying taxes again when the money is withdrawn. Some financial institutions keep records of IRA contributions, but it's best not to count on it.
• Insurance policies, wills and other legal documents: These documents should be kept indefinitely.

For documents you need to keep, consider storing them in a safe and accessible place, such as a fireproof box that is well hidden in your home. When destroying records, it's best to use a confetti-cut shredder that can slice credit cards and CDs and has confetti-cut capabilities, which ensures that private information is reduced to small, unidentifiable pieces.