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Tax hackers put more states on guard

Every day we become more reliant on technology.

Americans spent nearly $1.47 billion on Cyber Monday, a 17 percent increase over last year's Monday after Thanksgiving shopping spree. It also was the biggest online spending day in history, according to research by ComScore Inc.

It looks like more states collecting online sales taxes was no match for the ease of electronic purchasing.

Increasing online taxes, too: More of us each year also are turning to our computers to file our taxes, both with the Internal Revenue Service and state tax departments.

But recent theft of state tax information by computer hackers has put us, and state tax officials, on alert.

It's also cost the head of the South Carolina tax department his job.

Jim Etter, director of the S.C. Department of Revenue, will step down at the end of the year. His resignation comes after criticism of how the state handled a security breach of its online tax data.

Computer criminal illustration by elhombredenegro via Flickr Illustration by elhombredenegro via Flickr

South Carolina officials discovered that in August hackers had broken into Revenue Department computer files and gained access to about 3.6 million tax returns, along with around 387,000 credit and debit card numbers.

However, the hack and possible identity theft dangers to South Carolina taxpayers wasn't announced until October.

Other state tax departments on guard: The Palmetto State tax hacking has had ramifications beyond its borders.

Now every state that collects or maintains tax information from its citizens electronically, and that basically means every state, is taking another look at its security systems.

A computer security firm hired by South Carolina told a special state senate hearing this week that the tax hackers would have been thwarted if a $25,000 dual password system had been in place.

You can bet tax officials in the 49 other states and the District of Columbia are now looking into that double password protocol.

More fearful e-filers? While the South Carolina tax hack wasn't connected to electronic filing, you can bet that some folks will now have second or more thoughts about doing tax business online.

That's probably an over reaction. Even if you send your information to the tax collector on paper, it gets entered into the system's computer database.

So while you might avoid the highly unlikely prospect of theft during transmission of your return, you have no control over what happens once your info is put into the state's electronic tax system.

Still it's worth it to ask your state tax office what kind of cyber security precautions it has in place. I suspect most of them will be much tougher now.

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