Let’s talk about the security of your tax-related financial documents while living abroad. It will be very helpful for you if you are wondering how long you should keep your tax returns, or how to store tax returns securely, or how to send documents securely over the internet or by mail.
How long to keep tax returns?
If you’re like many Americans, you may have tax returns from a decade ago languishing in your filing cabinet. But you don’t need to hold on to tax documents for as long as you might think. Since federal tax returns can generally be audited for up to three years after filing and up to six years if the IRS suspects underreported income, it is wise to keep tax records for at least seven years after a return is filed. Requirements for records kept electronically are the same as for paper records.
How and where to store tax returns?
When it comes to storing documents, The best way to store hard copies of tax documents is in a fire-proof safe. Along with your tax records, you can keep other important documents like the deed to your house, mortgage and insurance information, your will or trust documents, and passwords to bank and brokerage accounts. It’s also a good idea to tell one other person where you keep the key to the safe (e.g., a spouse or other trusted family member). This way, if an emergency arises, that individual will know how to access any documents they may need to keep your affairs in order.
Finally, if you plan on keeping your records for a long time but also don’t want your home to be cluttered with paper, consider scanning your documents and keeping a backup of the files on an encrypted hard drive or in the cloud. The IRS accepts digital copies of documents as long as they are legible. This method takes up far less space and is easier to organize than a stack of papers. The IRS has also issued guidelines for the electronic storage of tax records. Any electronic system needs to be:
- Secure – it should guarantee the accuracy, reliability, and integrity of the records
- Able to produce legible and readable hard copies
- Organized or indexed so the material can be easily located
Choose passwords that can’t be easily guessed. Make sure your computer has all the necessary updates and security patches. Use anti-virus software. The list goes on – literally – here’s a top 10 list from the University of Santa Cruz.
How to send tax documents securely over the internet?
In the age of the Internet, and especially if you’re a U.S. expat, it’s becoming more and more common at tax time to enlist the remote help of professionals and accountants. It can be tempting to simply email the necessary information, but that’s not the best idea.
You’ll want to make sure that your tax documents are delivered to your CPA, enrolled agent, or another tax professional in the most secure and reliable way possible. Tax documents contain highly sensitive information like your name, address, Social Security numbers for you and your dependents, how much money you earn, and where you bank. If that data falls into the wrong hands, you could end up being a victim of identity theft.
Here are some tips for making sure your documents and data arrive at their destination intact and secure.
Hand Deliver, If possible
For the sake of security, it’s hard to beat the old-school, in-person hand-off. Although it’ll be difficult as a U.S. expat, still it is the most secure way of passing along documents. This eliminates any risk that they’ll get lost in transmission or be intercepted by hackers and scammers.
Use a Secure Portal
As a US expat, the most efficient and second-best way (after in-person hand-off) to transmit documents is to use a secure portal to upload tax documents. These servers offer a secure way for clients and their tax pro to view documents and minimize risk.
At 1040 abroad, we have a highly secured ecosystem. Our sites and servers are guarded and insured with world-class Internet security providers. All our emails are encrypted and since we are working with sensitive information, we have created a secure and user-friendly portal where our clients can safely upload their information. Moreover, all our tax preparers must comply with Cyber-data breach laws mandated by the IRS. You can rest assured your information is safe and secure with us. Furthermore, we do not share their information with anybody.
Use Encryption if you must use Email
Email is convenient and fast, but it also poses some security risks. Unless you take precautions, such as the use of encrypted communication, your emails and attachments are likely vulnerable.
Luckily, there are many encrypted services that security-minded consumers can use.
At the very least, place your tax documents inside an encrypted wrapper such as a password-protected DOC, PDF, or ZIP file. Scan everything to a PDF and then password protect it.
Never send information you want to keep private, such as your Social Security number, as plain text in the body of your email message. This poses significant risks if you were to accidentally send the message to the wrong address, or if prying eyes manage to access your email account. Taking simple precautionary steps to secure your tax documents goes a long way in helping to protect your finances.
Dispose of documents properly.
When it’s time to get rid of tax or financial documents, don’t just rip them in half and throw them in the trash. Properly shred and dispose of them to make it very difficult for a criminal to glean any sensitive information from them. Use a cross-cut shredder if possible.
While it’s difficult to protect your personal information 100% of the time, these simple steps will go a long way toward making sure you aren’t carelessly exposing personal details to potential thieves.
If Worse Comes to Worst
Reach out to the Internal Revenue Service (IRS) immediately if you find that you’ve been compromised. In fact, you can (and probably should) contact the IRS whenever you suspect that you may have been compromised. The IRS will investigate. If fraud is preventing you from properly filing your taxes, use Form 10439 to let the IRS know that something is awry.