Cybercriminals stepped up their attacks on tax professionals during 2018, prompting the Internal Revenue Service and the Security Summit partners to urge practitioners to take steps to protect client data and their computer networks from these threats.
The IRS also reminded all professional tax preparers that they are required by federal law to create and maintain a written data security plan. Sole practitioners are just as vulnerable to data theft as practitioners in large firms.
The IRS, state tax agencies and the private-sector tax community -- partners in the Security Summit -- are marking National Tax Security Awareness Week with a series of reminders to taxpayers and tax professionals. In the fifth and final part of the special series, the Summit renewed warnings to tax professionals as the 2019 tax season approaches.
“As the IRS, the states and the tax industry improve our defenses against tax-related identity theft, cybercriminals are looking for better data sources to fill out fraudulent tax returns,” said IRS Commissioner Chuck Rettig. “This makes tax professionals and their client data a treasure trove for cybercriminals to target. Tax professionals are a critical line of defense, and we urge them to protect their data, their systems and their clients. And we want taxpayers to seek out reliable tax professionals who use the latest security features.”
During the 2018 tax filing season, the IRS received five to seven reports per week from tax firms that have experienced a data theft. Through Nov. 5, 2018, the IRS received 234 reports for the year. That’s a 29 percent increase from the 182 reports received during the same time in 2017. Generally, these are reports filed by firms, which means hundreds more tax practitioners and tens of thousands of clients are affected. This increase represents a significant trend in tax-related identity theft, and it’s a sign that tax professionals must take stronger measures to safeguard their clients and their business.
Thieves search for client data so they can create a fraudulent tax return that looks legitimate and might bypass IRS filters. They also impersonate tax professionals, using stolen Electronic Filing Identification Numbers (EFINS), Preparer Tax Identification Numbers (PTINs) and Centralized Authorization File (CAF) numbers.
The Gramm-Leach-Bliley Act of 1999 requires all financial institutions, which it also defines as professional tax preparers, to create and maintain information security plans. The Federal Trade Commission, not the IRS, administers this law and created a Safeguards Rule to administer it. Information about the FTC requirements can be found in IRS Publication 4557, Safeguarding Taxpayer Data. The IRS also created a new Publication 5293, Data Security Resources Guide for Tax
Professionals, which compiles numerous resources from IRS.gov.
The Security Summit urges tax professionals to seek out cyber experts for assistance with security but at a minimum, they should take certain safeguards.
For the 2019 filing season, many tax software vendors will offer two-factor or even three-factor authentication protections for software access. Tax professionals should opt for multi-factor authentication protections whenever it is available. Multi-factor authentication helps prevent cybercriminals from accessing accounts, even if they steal passwords.
Source: IRS
Alfredo Gaxiola has worked on numerous IRS problem cases and has successfully settled with the IRS to release liens on houses, bank accounts and wages and, if needed, setting a payment installment plan that is not burdensome for the client. He has conducted appeals before the U.S. Tax Court and obtained favorable resolutions in reducing the tax debt of his clients. Mr. Gaxiola served as Treasurer of Camara de Empresarios Latinos, one of the largest and strongest Hispanic organizations in the city of Houston. He has conducted financial and accounting seminars for the Houston Small Business Development Corporation, as well.
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