What's a shredder? (Photo: Shutterstock)

Four in 10 taxpayers in a new study said they were worried about falling victim to tax fraud or tax identity theft during tax season, but 45% admitted that they stored tax paperwork in a box, desk drawer or unlocked cabinet at home or at work.

Not only that, one in five said they did not shred tax paperwork or physical documents containing sensitive information before throwing them away.

Shred-it, an information security service provided by Stericycle, commissioned the mobile survey, which was conducted by Pollfish on Feb. 5 among 1,200 respondents 18 and older.

Forty-eight percent of survey respondents said they would file their own taxes online via tax preparation software, while 37% said they would file with a certified tax preparer.

Forty-four percent in the latter group said they did not know how the person preparing their tax returns would store or dispose of documents containing their personal information. This finding underscores the need for conversations around data protection during tax season, according to Shred-it.

“The Tax Season and Fraud Prevention Report reveals how common these risky tax filing habits are and how they put taxpayers in jeopardy for fraud or identity theft,” Monu Kalsi, vice president of marketing for Stericycle, said in a statement.

“As we near the April 15 tax filing deadline, we encourage everyone to reassess how they are handling their own tax documents that contain sensitive information and also question how those preparing taxes for us are doing the same.”

Risky security habits could be contributing to tax identity theft and tax fraud, according to the report, which found that 26% of respondents knew someone who had been a victim of tax fraud.

Tax fraud fears hit millennials hardest, with 43% saying they were worried about becoming a victim of tax fraud or tax identity theft, compared with 34% of baby boomers and 33% of Gen Z taxpayers.

Sources of Fraud Susceptibility

According to the survey, 54% of taxpayers thought tax documents, such as W-2 and 1099 forms, were the most susceptible source of information fraud or identity theft. This compared with 15% who worried about auto loan documents and 6% who were concerned about mortgage documents.

Fifty-seven percent of women expressed concern about information fraud or identity theft from tax documents, versus 49% of men.

And two-thirds of millennials and more than half of Gen Zers considered tax documents most susceptible to information fraud or identity theft, compared with fewer than four in 10 boomers.

Thirty-five percent of taxpayers thought the greatest risk of becoming a victim of tax fraud or tax identity theft came from filing taxes online with tax preparation software.

This compared with one in four who thought filing taxes with a friend or family member put them at the greatest risk, and one in 10 who worried about doing so with a certified tax preparer.

Despite concerns around filing taxes online, 54% of millennials said they would file their taxes online with tax preparation software, followed by 45% of boomers and 43% of Gen Zers.

Forty-two percent of taxpayers in the survey said they kept tax documents for more than seven years before disposing of them, 26% kept them for four to seven years, 22% did so for one to three years and 5% kept documents for less than a year.

Men were slightly more likely than women to keep tax documents (e.g. W-2 and 1099 forms) for less than a year before disposing of them. About four in 10 Gen Zers and millennials said they held on to tax documents for one to three years.

— Check out IRS’ Top 12 Tax Scams to Avoid: 2019 on ThinkAdvisor.