Is Doing Your Taxes Via the Internet Safe?

Each year the number of online tax preparation sites increase, thus advertising tax preparation from no cost to a low fee for using the companies' online version of their tax software. The companies want you to use their online version and sell this by telling you that it has all the latest features, most up-to-date, etc. I wonder about the risk of using these sites. We all know that web sites can be hacked and the number of phishing sites and emails continue to grow. Therefore, do we trust that email that offers to do our taxes free by just "Clicking Here"?

First, how safe are the web sites themselves from the companies that want to provide you this service? The companies are using the standard 128-bit encryption just as you use with your other banking, Internet shopping, etc. Even though the security is there, one needs to worry about Phishing. Phishing in this case usually refers to an email that you would receive that has a link to a special offer. A good example is TurboTax by Intuit. I received an email saying that I am "just days away from the biggest refund ever," a button says "Start" wanting me to click there to begin my refund. To safeguard against phishing, I choose to open my web browser and go to the TurboTax web site by putting the name in. What this accomplishes is that I know I am at the correct web site and not a fake site made to look like the Turbo Tax site ready to steal my information.

My Second concern is more related to the amount of data that I have to enter into the tax web site in order to complete my taxes. First is my personal information, which contains my address, social security number, date of birth, etc. Then there is my work information, employer, employer's EIN number, then my wage info, etc. Next, is information containing other sources of income, other tax deductions, 401K and IRA information as well as other assets. The question that I have to consider carefully is, is this too much information for one web site to have concerning my taxes? Personally for me I think so. What then are my options?

I know that these companies are pushing hard to have people do their taxes online and to not download and use the software on their local computer. Yes, I know that cloud computing is the wave of the future. In addition, yes, the model being driven by these taxes companies is that of cloud computing. However, until there is more control exerted over the Identity Theft crime explosion, I think that I will use the version that I download to my local computer. I do not mind so much send the file electronically to the IRS, as this is a special file with higher levels of security, this is not the same as Intuit or H&R Block, or other companies having all my information on their computers.

Companies that have been helping individuals by offering their services via the Internet (Cloud) are safe. There have not been any reports of their sites being hacked or any reason not to trust them. The information in this article is just my concern of a web site having all this information in one place. The IRS does have this information as well, but the expectation of keeping our data safe I think is higher with the IRS than other companies and / or government agencies.