As a professional tax preparer who handles sensitive information for multiple clients, you’re an attractive target for identity thieves. That’s why the IRS urges all tax professionals to take identity theft security seriously and offers specific guidelines for protecting your clients from tax identity theft. Here are some steps you can take to safeguard yourself and your clients.
Create a data security plan
Did you know the IRS actually recommends having a cybersecurity professional, either in-house or a consultant, create a data security plan for your tax preparation business? However, for many small or new tax practices, hiring a professional isn’t in the budget. If that’s the case for you, read IRS Publication 4557, Safeguarding Taxpayer Data for step-by-step instructions on creating your business’s data security plan. A few of the key tips are covered below.
Follow best practices for data protection
Basic data protection best practices include using responsible passwords with a variety of characters on all devices, installing anti-malware protection on all computers, encrypting sensitive files and emails with password protection, and wiping old computers that contain client information.
Know how to spot a phishing scam (& train your employees)
Phishing emails are by far the most common way data breaches occur. So it’s vital that you and all of your employees know how to spot phishing email scams. When they target tax preparers, scammers are likely to pose as the IRS, a tax software company, a client, or colleague.
Always check the domain in the email address and be suspicious if anything seems “off” about the email. For example, phishing scams often present urgent situations that suggest you could lose your account or face legal action if you don’t click on a link immediately. Installing malware protection on your computer will provide further protection in the event that you or an employee does click on a link from a phishing scam.
Use multi-factor authentication
The IRS recommends all tax professionals use multi-factor authentication for their tax preparation software. TaxSlayer Pro offers multi factor authentication on all its products, making it easier to keep your clients’ data safe.
Watch your EFIN & PTIN activity, especially during tax season
Identity thefts might target your EFIN or PTIN numbers and use them to file fraudulent returns. You can catch this type of fraud early by keeping track of any activity happening under your PTIN or EFIN. You should receive daily acknowledgements each time you file a return, and the IRS will post the numbers of returns that were filed using your EFIN each week. You can access the weekly reports by logging into your EFIN application. The IRS also issues weekly reports for PTINs for annual filing season program participant participants who file more than 50 returns per year. If the numbers in these reports ever differ from the number of returns your practice has actually filed, contact the IRS e-help desk immediately.
Consider offering identity theft protection to your clients
Identity theft protection products are not specifically endorsed or recommended by the IRS. However, identity theft monitoring from a trusted company is an excellent way for individuals to protect themselves from tax identity theft. TaxSlayer Pro partners with Securely ID because it offers advanced identity monitoring and restoration to your clients for a competitive price and because it’s powered by Experian, a global leader in identity protection. This protection will give many of your clients peace of mind, and the fee can be deducted directly from their refund.
By taking appropriate steps, you can avoid most data breaches and protect your clients from tax identity theft. Because some attacks are highly sophisticated, you may consider protecting your business with cyber insurance in case a breach does occur. Cyber insurance will help you recoup revenue lost due to a breach, recover stolen data, and get your tax practice back to normal as quickly as possible.
This article up to date for tax year 2021 (returns filed in 2022).