Safeguarding Taxpayer Data

Cybercriminals want sensitive client data that tax professionals have, so the tax preparation community is a target. As a tax professional, you can take the initial step to safeguard taxpayer data by assessing your risks and making a security plan.

It’s more important than ever that tax professionals take aggressive steps to protect taxpayer information. Developing a good security plan not only makes you think about areas where you could be vulnerable to intrusions, it also helps you focus on prevention. How do you get started on developing a plan that is workable for your business?

Here are some initial steps:

Step 1: Complete a risk assessment
This means identifying the risks and potential impacts of unauthorized access, use or disclosure of information. It also means looking at what happens if someone modifies or destroys that information or the computer systems that can be used to access taxpayer data. Ask yourself these questions:

How vulnerable is your customer’s data to theft, disclosure, alteration or unrecoverable loss?
What can you do to reduce the impact to your customers and your business in such an event?
What can you do to reduce vulnerability?
Step 2: Write and follow an Information Security Plan
The plan should:

Address every item identified in the risk assessment.
Define safeguards you want staff, affiliates and service providers to follow.
Require a responsible person to review and approve the Information Security Plan
Require a responsible person to monitor, revise and test the Information Security Plan on a periodic (annual) basis to address any system or business changes or problems identified.

Step 3: At least once a year, if not more, perform an internal assessment

Evaluate and test the security plan and other safeguards you have in place.
Document any deficiencies. Create and execute a plan to address them.
Learn more about these and other steps by reviewing IRS Publication 4557, Safeguarding Taxpayer Data.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999

New Safeguard for 2017

Building on the successes of last year, the IRS, state tax agencies and the tax industry are enacting a series of new initiatives for 2017. These initiatives will better protect you from identity theft and refund fraud. However, we need your help. Everyone has a role to play in protecting data.

In the tax community, we’ve been working together since 2015 to put in place improved safeguards. These safeguards make it harder for identity thieves to file fraudulent returns successfully. That means identity thieves try to steal even more data to impersonate taxpayers.

Many of the changes will be invisible to taxpayers but will be invaluable to helping keep you safer from identity thieves. Our focus is on “trusted customer” features that help us authenticate both the taxpayer and tax return. Here are a few things we’re doing for 2017:

Sharing new data elements from tax returns. This helps us validate the return and the taxpayer. These elements include items such as the time it takes to complete the return. This helps us guard against mechanized computer fraud.
Sharing new data elements from business tax returns. This extends more identity theft protections to business filers as well as individuals.
Creating a new program between states and the financial industry. This allows banks and others to flag suspicious refunds.
Expanding the Form W-2 Verification Code initiative.  This initiative, started by the IRS last year, expands to 50 million forms in 2017 from 2 million in 2016. When completing a tax return, users enter a 16-digit verification code when prompted by the tax software. Both individuals and tax professionals use this code to validate the information on the Form W-2. The IRS anticipates in future years that the initiative will impact all Forms W-2.
Continuing to enhance software password requirements for individuals and tax professional users. This provides additional safety prior to filing.

Courtesy of IRS

For more information contact Neikirk, Mahoney and Smith at 502-896-2999