IRS steps up data security expectations for tax preparers

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The Internal Revenue Service expects tax professionals to safeguard their clients’ financial and personal data this tax season.

The agency held a Security Summit in December to remind firms and individuals doing tax returns to take steps to protect client tax data. The effort seeks to prevent identity fraud – and fraudulent returns – especially those getting refunds.

The agency has a free PDF download called “Safeguarding Taxpayer Data: A Guide for Your Business” (Form 4557.) It contains recommendations for good data security measures, and we have it available here.

“Data security is now a necessity for every tax professional, whether a partner in a large firm or a sole practitioner and every Authorized IRS e-File Provider,” the IRS says. “Every employee, both professional and administrative staff, should be educated about security threats and safeguards. Everyone has a role to play in protecting taxpayer information.”

The publication then reminds tax professionals that “protecting taxpayer data is the law.” Under Federal Trade Commission regulations, “tax return preparers must create and enact security plans to protect client data. Failure to do so may result in an FTC investigation.”

There are also tips on how to spot data theft, starting with tax returns getting rejected because the Social Security numbers already have returns filed.

Other clues include:

  • The tax professional’s Electronic Filing Identification Number (EFIN) account has more returns filed than the practitioner has clients.
  • Network computers are running slower than usual.
  • Tax clients are receiving IRS communications – or refunds – they weren’t expecting.

Tax professionals who need help with their data security plans should to talk with security professionals (including vendors such as ImageQuest) or discuss their cyber liability with their insurance agent.

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