The Internal Revenue Service has boasted significant progress against identity theft with regard to tax returns. However, taxpayers’ sensitive data is still under threat due to new tactics being used by cybercriminals.
The IRS contacted tax industry professionals and state officials in 2015 to provide safety tips and suggestions to help them prevent individuals from filing phony tax returns. For the next three years, there was a 71% drop in filers reporting identity theft to the IRS. Over the same three year period, the number of fraudulent tax returns discovered and blocked by the IRS dropped from 1.4 million to just under 650,000, a decrease of approximately 54 percent.
Although this is good news, our tax attorneys caution filers that there are other types of fraud that are far more challenging to detect. These fraudulent techniques include acquiring the data needed to file counterfeit tax returns from information stolen from accountants and other tax professionals, rather than from the individuals themselves.
Cybercriminals Embrace New Theft Techniques
Cybercriminals are now turning to this new method of targeting the offices of tax professionals’ to pilfer information from filers’ documents. Internal Revenue Service Commissioner, Chuck Rettig, stated that major steps have been taken to protect taxpayers, but those who work in accounting firms or as sole tax practitioners remain at risk.
Recently, the IRS generated a checklist of recommended ways for accountants and similar individuals to protect personal information. This checklist included the following:
- Drive encryption
- Establishing an encrypted Virtual Private Network–VPN
- Backup software
- The installation of antivirus software
- Configuring firewalls
- The use two-tier authentication
The Internal Revenue Service recommends that tax professionals begin with using standard computer security measures in order to build a good foundation for overall data protection. They also state that it is wise to establish a data security plan, especially since federal law states that all tax preparers have such a plan in place to protect filers’ information. Tax professionals are asked to center on proper employee management and training, as well as information systems that allow them to identify and manage breaches.
Recognizing Red Flags
Tax professionals should also learn to identify signs of stolen client data. For instance, receiving unrequested tax transcripts, having more than one return filed with a person’s electronic filing ID number, and correspondence from the IRS about questionable returns filed in their client’s name. If data theft is detected, the tax preparer should immediately reach out to a local stakeholder liaison and contact an expert in cybersecurity to ensure that future data thefts do not occur.
Joint Effort to Prevent Data Theft
Federation of Tax Administrators board of trustees president, Sharonne Bonardi, stated that IRS officials need tax professionals nationwide to join them in their fight against cybercriminals and their attempts at tax related data theft. Bonardi stated that such criminals are highly skilled with regard to technology, and have an extensive foundation of knowledge concerning federal and state tax processes. She adds that they are also very well funded, and therefore have a significant amount of money to invest in their illegal activity.
Anyone who has concerns about the safety of their data should contact one of our qualified tax attorneys in San Jose for more information about keeping such information safe.